Iran is to launch an oil trading market for Middle East and Opec producers that could threaten the supremacy of London’s International Petroleum Exchange.
A contract to design and establish a new platform for crude, natural gas and petrochemical trades is expected to be signed with an international consortium within days.
Top oil producing countries are determined to seize more control of trading after being advised that existing markets such as the IPE and Nymex in New York are not working in their favour.
Three years ago a former compliance director accused the IPE of manipulating prices, although these allegations were dismissed after an investigation.
The Tehran oil bourse is scheduled to open in 2005, according to its architect, Mohammad Javad Asemipour, who is a personal adviser to the Iranian energy minister.
“We are in the final stage of choosing a concession for what is going to be a very big development for us and the region,” he said.
The expected winner of the contract is a consortium of Iranian and international companies known as Wimpole, which is understood to include PA Consulting and a former director of Nymex.
Mr Asemipour has been in London in the last few weeks visiting commodity traders to encourage them to participate in his new venture.
He played down the dangers that the new exchange could eventually pose for the IPE or Nymex, saying he hoped they might be able to cooperate in some way.
Some industry experts have warned the Iranians and other Opec producers that western exchanges are controlled by big financial and oil corporations, which have a vested interest in market volatility.
The IPE, bought in 2001 by a consortium that includes BP, Goldman Sachs and Morgan Stanley, was unwilling to discuss the Iranian move yesterday. “We would not have any comment to make on it at this stage,” said an IPE spokeswoman.
Many of the contracts for crude oil being exported from producers such as Iran and Saudi Arabia are linked to prices for the UK North Sea Brent blend.
The Middle East producers would like to establish a rival Persian Gulf blend contract alongside hedging mechanisms that could operate around the new bourse.
The regional initiative is significant but not entirely new. The Dubai Mercantile Exchange recently tried to develop an oil trading market with the help of Nymex but it collapsed through lack of interest.
The Tehran bourse is considered to be more likely to succeed because Iran exports 2.7m barrels a day and produces 13m tonnes of petrochemicals every year. The country has the second biggest oil reserves in the world behind Saudi Arabia.
But Adam Sieminski, oil analyst with Deutsche Bank in London, questioned whether it would succeed. “The IPE and Nymex work because there are many sellers and many buyers. They are regulated markets based on well-established systems for trading and I think the Iranians will struggle to duplicate that.”
Mr Asemipour said the new project is in tune with both Islamic and local constitutional law and has been given the go-ahead by government and parliament as part of the country’s five-year plan.
· The world is not short of oil and reserves should last 40 years at today’s rates of consumption, according to BP chief executive John Browne.
There was “considerable scope” for proven reserves and production levels to keep on rising in Russia and elsewhere, he said in BP’s statistical review of world energy.
Production in some areas such as the North Sea might have peaked but “this is no reason for current high prices,” said BP chief economist Peter Davies. Oil prices during 2003 were the highest for 20 years despite world oil production growing by 3.8%, higher than the 2.1% increase in demand, BP noted.
