The IMEX energy exchange in Qatar is set to go live by the end of this year. International Mercantile Exchange Holdings L.L.C, the promoters of the energy exchange, say that the trading platform is seeking approval from the Qatar Financial Center Regulatory Authority, which is developing the regulatory framework for the exchange.
IMEX uses Hess Energy Trading Company (HETCO), the energy trading company, as its principal consultant, while Clifford Chance is acting as its legal consultant.
The trading platform aims to become a centre for energy swaps, futures and options trading. Serving both international and regional participants, IMEX has been designed to attract a wide range of investors by launching new contracts, Sharia compliant products and mini-contracts pending regulatory approval. Furthermore, it aims at increasing the degree of price transparency and pricing autonomy in a region that is the world’s principal supplier of hydrocarbon.
“Much of the world’s hydrocarbon pricing mechanisms are based in the major consuming centres of the Atlantic Basin and the Far East,” says Esam Janahi, chairman, International Mercantile Exchange Holdings. “And at the moment, the world’s energy futures markets are dominated by two exchanges, both in the West. However, with the Middle East’s leading position in the space of proven energy reserves, now is the time for the Middle East to become an independent region for price discovery. What makes this exchange unique are its plans to launch new LNG contracts, Sharia’a compliant products and mini-contracts, provided the necessary governmental and regulatory approvals are obtained,” he adds.
The IMEX promoters argue that the Middle East is uniquely positioned to straddle the time zones and the changing demand and supply balance between the western markets and the rapidly growing markets of Asia.
They say the region is the hub of the world’s supply of key hydrocarbons and has the largest proven reserve base of petroleum and natural gas in the world. As the largest supplier of crude oil to world markets, the region will also soon be the largest source of Liquefied Natural Gas (LNG). As new export refineries are built, the region will also be the largest incremental supplier of petroleum products worldwide by 2010.
The Middle East region is also one of the fastest growing consumer areas in the world. IMEX will be based at the Qatar Financial Center in Doha and is expected to be moving to the Energy City in Qatar in 2009 to form the cornerstone of Energy City Qatar (ECQ), a new US $2.6 billion energy business district that is being developed in Doha, due for completion by 2012.
“The planned flagship contract for IMEX will be an innovative LNG contract which will be the first of its kind in the energy exchange world,” says Jon O’Neill, Vice President of HETCO (UK). “The Middle East’s dominance in the global LNG market is starting to have profound pricing impacts in end-user markets and the nascent spot LNG arbitrage market is anticipated to grow quickly in the coming years. IMEX’s LNG project contract will provide a unique platform to manage gas risk and further catalyse the development of the spot LNG market. IMEX aims also at being a platform for other innovative trading contracts that are currently under development, some of which will be aimed at Islamic investors.”
The State of Qatar alone, where IMEX is located, posses an estimated 15.2 billion barrels in petroleum reserves, the world’s third largest reserves of natural gas at 14.9 per cent and has already emerged as the world’s leading producer of LNG. Collectively, the Middle East boasts of 60 per cent of the world’s proven petroleum reserves and 40 per cent of the natural gas reserves. The IMEX platform is designed to offer world class connectivity to global institutions and will enable them to trade remotely in a highly secure environment. Furthermore, the platform itself is highly robust and its architecture is equipped to support all future product innovations and contracts.
According to a senior IMEX spokesperson the company is open to both organic and inorganic routes for its planned global expansion. The establishment and operation of IMEX and the associated clearing and settlement systems are subject to requisite approvals being obtained from the QFC Regulatory Authority and QFC Authority.