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Malaysia Petronas proposes new Asian crude benchmark -sources

* Petronas moots idea of platform to trade basket of crudes

* New Asia crude price marker aim at reflecting fundamentals in region (Adds plan for Asia crude futures, quotes)

By Florence Tan and Jessica Jaganathan

SINGAPORE/KUALA LUMPUR, Sept 11 (Reuters) - Malaysia state energy firm Petronas is in talks with producers, buyers and traders on setting up a new mechanism to price oil produced in the Asia-Pacific to better reflect regional supply and demand, sources familiar with the matter said.

The plan comes two years after the second largest oil producer in Southeast Asia switched to dated Brent pricing after dropping a more volatile Asian price marker. That move also prompted Vietnam and Brunei to change to the dated Brent benchmark published by pricing agency Platts.

Petronas is studying several options including working with an exchange in Singapore to start a futures contract based on four Malaysian crude grades - Labuan, Miri, Kikeh and Kimanis, one source said.

"It's more to reflect regional supply and demand more accurately," a second source said. "Dated Brent sometimes can be detached from the regional market."

The four Malaysian grades will have a total capacity of just over 300,000 barrels per day (bpd) next year when Kimanis comes onstream and this could rise to nearly 400,000 bpd in 2016 when a new field starts operation.

Petronas officials were not available to comment on any talks about a new regional price benchmark.

Dated Brent is underpinned by a dwindling pool of four North Sea crudes - Brent, Forties, Oseberg and Ekofisk (BFOE) - and often spikes whenever the main crude stream Forties suffers an outage. The marker weakens whenever demand falls in Europe such as during refinery maintenance seasons.

Petronas has mooted the idea of the new price marker to other producers in the Asia Pacific as well as refiners and traders, the sources said on the sidelines of a major oil gathering in Singapore.

"They want to move away from dated Brent pricing as they feel it doesn't accurately reflect the quality of their crudes," said a source with an Asian oil firm involved in the talks.

Brent has a higher sulphur content than most Malaysian grades.

Petronas' renewed interest in a new crude marker could also stem from a potential rise in its output when its new oil terminal in Sabah starts operation later this year, a fourth source said.


Petronas has started talks with regional producers such as Indonesia and Vietnam to get them involved and provide a bigger basket of crudes to attract participants, another source said.

A source from one of the regional oil producers said his company was waiting for more details from Petronas on the pricing mechanism.

The Indonesia Crude Price (ICP) remains the only regional marker after Petronas dropped the Asia Petroleum Price Index (APPI) in 2011, two years after Australian producers moved to dated Brent.

Asian crude markers suffer from low liquidity due to production declines at mature fields, with prices frequently diverging from global benchmarks.

Petronas' move to the Brent benchmark at the time was to boost transparency by putting Asian crude on a common platform with growing imports of rival Brent-linked sweet grades from the Atlantic Basin, Central Asia and Latin America.

But Brent is still viewed as a European benchmark for oil produced thousands of miles away from Asia.

Buyers and producers remained cautious. Several exchanges have launched crude and oil products futures in Asia that have failed to attract traders.

"It'll be an uphill climb because so many other people also want to do their own benchmarks," the second source said.

In China, the Shanghai Futures Exchange has announced plans to launch crude oil futures, while Russia also nursed the ambition of making its ESPO crude the Asia benchmark. (Reporting by Jessica Jaganathan and Florence Tan in SINGAPORE, and Niluksi Koswanage in KUALA LUMPUR; Editing by William Hardy and Tom Hogue)