Presentation on theme: "Price reporting in a changing marketplace"— Presentation transcript:
1Price reporting in a changing marketplace Euan Craik, CEO Americas
2Outline Who is Argus? Why is Argus growing so fast? Politics & price-reporting agenciesHow does Argus report a market?What’s new?
3Who is Argus? “The up and coming vendor” — major investment bank LondonHoustonWashingtonNew YorkPortland, ORCalgarySantiagoSingaporeTokyoBeijingSydneyDubaiMoscowKievAstana“The up and coming vendor”— major investment bankAll energy commodities, all energy marketsOver 275 employeesOver 60 publicationsFounded in 1970US crude & products since 1986Owned by family of founder & employeesUK limited company
4Energy price reporting agencies Global/universalPlattsArgusRegionalOpisRIMSpecialistICISMcCloskeyNatural Gas IntelligenceExchangesICENymex
5What does Argus do? Shed light on non-transparent markets Market data vendor
7What has changed? (Why has Argus grown?) Politics: A raft of issues have impacted on the business of price-reportingSarbanes-Oxley, FERC price reporting guidelines, CFTC and FERC investigationsPrice-reporting agencies have changed methodologies in responseTechnologyEasier to gather comprehensive transactional data
8The challenge of regulation Post-Enron, regulatory bodies on warpath against market manipulation:CFTC: Prosecutes false reporting to index publishersFTC: Prosecutes distribution of knowingly misleading information or intentional omissionsEfforts redoubled since $147 oil, financial crisis and election of ObamaHow to report prices in opaque markets in a way that is transparent and replicable?How to guard against manipulation?
9ComplianceOur clients care about compliance, about staying out of trouble, so we do tooEthics policyEnforced editorial policiesMonitoring and audit controlsCompliance officerConfidentiality
10Methodology wars Intelligent assessments Transaction-based prices: Market-on-closeAll day transactionsVolume-weighted averageHigh, low, mean
12Volume-weighted indices DateCrudeTrade MonthBasisDifferential Price ($/bl)Volume (b/d)(Price)*(Volume)/Total Volume19-Oct-09MarsNovemberNovember WTI-3.802,000-3.751,000-3.703,733Total Volume:19,733Argus Mars Differential:-3.74November WTI Formula Basis:79.61Argus Mars Price:75.8712
13How does Argus get the deals? Refiners, producers, traders submit lists of deals including price, volume, counterpartyBrokers cooperate on the request of their customers.Companies cooperate because they need a total market index that is reputable and reflects actual tradeEven though voluntary, Argus gets about 95% of all transactions in crude13
14How does Argus ensure the accuracy of the deals? Deals are analyzed, scrubbed, and confirmedArgus reserves the right to throw out deals if they cannot be confirmed, or seem anomalousEscalating review processArgus compliance programWritten procedures and regular internal audit14
15Argus includes the entire market Argus is a total market index. All bona fide deals done on all platforms, and all done in the open marketPlatts windowHoustonStreetCannot game Argus by trading on one system to the exclusion of another15
18Argus new developments The Argus Sour Crude Index (ASCI™)US clean productsJet fuelCanadian crudeEuropean products and biofuelsAPI coal indicesNorth American gas and powerBiomass
19Argus Sour Crude Index (ASCI™) Adoption by Saudi Aramco and Kuwait for all exports to the US. Iraq expected to followPrompted by dislocation between inland light sweet WTI and sour crude at the US Gulf CoastASCI has potential to be used for broad sweet/sour financial hedging in the AmericasInterest in Latin America and as far away as China
21US clean productsEast of the Rockies, refiners representing about half the market are moving all internal and external pricing onto Argus for gasoline, diesel, heating oil and jet fuelA second-tier of passive firms is consolidating the shiftNew wave of sales to smaller marketers and distributorsWhy the change? Methodology:entire day of deals done, at differentials to the Nymex settlement
22Jet fuelJet fuel is a huge market for PRAs, because no refiners operate airlinesJet fuel is globally negotiated, so change in one region affects anotherLeading European airlines pushing to change contracts to Argus globallyUS refiners continue to push US airlines to use Argus with some successSpot trade in the US is frequently transacted at Argus prices
23Canadian crude Canada is the largest exporter of crude to the US Crude market indexation is in disarray with competing exchange and brokerage indicesWith support from key players, Argus is emerging as an indexation solution
24European products and biofuels Argus has long been the benchmark for gasoline swaps in northwest EuropeAdoption of Argus Eurobob (ethanol blendstock) to replace unleaded barges will broaden and deepen usage in Europe, Russia and AfricaArgus the leading benchmark for biodiesel swaps in Europe
25CoalAPI 2 (fob northwest Europe) is the benchmark for most Atlantic Basin tradeAPI 4 (fob South Africa) is benchmark for coal moving east to AsiaAPI 6 (for Australia) recently launchedUS domestic coal
26North American Natural Gas & Power Argus strong in European gas & powerMajor gap in North American portfolioSeptember ’09Launched natural gas serviceAcquired power market serviceFerc compliant in both marketsMajor sales and marketing offensive
27What does the future hold? Filling gapsAsia-PacificLatin AmericaBeyond petroleumNatural gasCoalRenewablesBeyond energy?Metals, agriculture, chemicalsBeyond the spot marketForward curves?