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34

Hub Opens Up Oil Bidding

Russia-based Tyumen Oil Co., or TNK, last week delivered the first shipment of oil from a transaction on the Oilspace online trading platform. The most important aspect of the online bidding process was its transparency, said Mikhail Kouvykov, the head of TNK's crude oil export department, in a telephone interview from his Moscow office.


Russia-based Tyumen Oil Co., or TNK, last week delivered the first shipment of oil from a transaction on the Oilspace online trading platform.
The most important aspect of the online bidding process was its transparency, said Mikhail Kouvykov, the head of TNK's crude oil export department, in a telephone interview from his Moscow office.
Whereas some Russian businesses have been accused of rigging bidding processes, offering oil for sale by sealed bid on Oilspace "helped us to show everybody in the market that we are transparent," Kouvykov said. "We openly give information about who bought, and everybody knows at what price. It's obviously no secret--everybody can check it." TNK is Russia's No. 4 oil producer.
While other online crude oil traders compete with New York-based Oilspace, each has differences. Oilspace is more like a traditional broker, which makes its money from fees, while Enron makes its money on the spread between buyer and seller. Enron is also more financially oriented; as a market maker, Enron guarantees a buyer and will buy the oil itself if need be. Another competitor, PetroVantage, emphasizes decision tools more than crude trading.
TNK officials received bids from five oil traders and refiners for 52,000 metric tons of oil through Oilspace's Nexus negotiation platform. The oil was tendered, or offered via binding contract, in mid-September and shipped last week to the Swiss trading firm Glencore.
Oilspace has 25 percent of its charter members in the United States, but all member companies, whose names Oilspace wouldn't disclose, do business in the United States. The online platform will become more widely available in the "medium-term future," said Oilspace CEO Steve Hellman.
Oilspace appears to have some advantages over rival systems. It permits trading in futures to hedge against pricing changes. Also, its agreements with news sources, including Reuters, the Platt's energy information service and the Russia-based Interfax news agency, give it an edge in the information-intensive oil and gas industry.
Oilspace's most important advantage, however, may be its application service provider approach, called ASPect. The platform can interface with the back-office operations of participating companies as well as offer accounting, scheduling, risk management and other apps for companies that lack them. Hellman said the platform can interface with back-office applications through standard platforms, such as Java 2 Enterprise Edition and XML.
There's nothing new about taking to the Internet in order to automate oil sales, but "Oilspace is applying an ASP model, and its costs should be cheaper," said analyst Peter Fusaro, president of New York-based Global Change Associates. Oilspace officials declined to detail its fees.
The future success of Oilspace isn't certain, Fusaro cautioned. "Oilspace is entering the oil trading space after the demise and consolidation of some platforms, with more to follow as they run out of money," he said.
Neftegaz.ru