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Reuters: Iraq is seeking to conclude the first oil deal of its kind extending for 5 years


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Reuters: Iraq is seeking to conclude the first oil deal of its kind extending for 5 years
 

Baghdad - People  

The Ministry of Oil revealed, on Monday, that Iraq is seeking to conclude its first-ever advance payment of crude oil to support its finances, as it seeks to counter the decline in oil prices and demand due to the Coronavirus pandemic.  

According to a letter sent by the state oil marketing company (SOMO) to its customers published by Reuters (23 November 2020), “The country is seeking to prepay for five years, starting from January 2021 until December 2025, to be returned with shipments of Basra crude. ".  

An official in the Iraqi Oil Ministry confirmed the contents of the document. The oil marketing company said in the letter issued on November 23 that it "will accept offers from potential parties until 16:00 Baghdad time on November 27th."  

The official said, "The prepayment of oil shipments is part of an urgent plan to finance the state budget and bypass the financial crisis. We have obligations to OPEC to reduce production. Foreign oil companies' dues must be paid and also to support our economy, and this is the reason why we need to request prepaid financial payments. To purchase some of our oil shipments. "  

OPEC and allies including Russia, within the framework of what is known as "OPEC +", announced record cuts in oil production in the first half of the year, with the collapse of demand for crude when the world became almost stalled due to the general isolation measures aimed at combating the Covid pandemic. -19.  

OPEC + was due to raise production by 2 million barrels per day in January, but the group is currently considering delaying the increase or deepening production cuts. 

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Here your article PP...     China prepared to bail out cash-tight Iraq with multibillion oil deal If the deal goes through, Iraq will repay China in oil, not cash.

Oil for cash who would have thought! 

Now Iraq politicians sell out their own country. In 10 years China will be running that country and have millions of its citizens there.  It will be engulfed by China's buddy Iran.  

 

 

 2020-11-23 15:30

Shafaq News / The Iraqi Ministry of Oil said, on Monday, that Iraq is seeking to conclude the first-ever deal to prepay crude oil to support its finances, in light of its efforts to confront the decline in oil prices and demand due to the Corona virus pandemic.

The country is seeking to pay a five-year prepayment from January 2021 until December 2025, to be returned with shipments of Basra crude, according to a letter sent by the state oil marketing company (SOMO) to its customers, according to Reuters.

An official in the Iraqi Oil Ministry confirmed the contents of the document. The oil marketing company said in the letter issued on November 23, "It will accept offers from potential parties until 16:00 Baghdad time on November 27th."

The official said: “The prepayment of oil shipments is part of an urgent plan to finance the state budget and overcome the financial crisis. We have obligations to OPEC to reduce production. Foreign oil companies' dues must be paid and also to support our economy, and this is the reason why we need to request prepaid financial payments to purchase some of our oil shipments.

OPEC and allies, including Russia, within the framework of what is known as "OPEC +", announced record cuts in oil production in the first half of the year, with the collapse of demand for crude when the world became almost stalled due to the general isolation measures aimed at combating the pandemic. Covid-19.

OPEC + was due to raise production by 2 million barrels per day in January, but the group is currently considering delaying the increase or deepening production cuts.

 
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Information / translation ...
(BNN Bloomberg) revealed that Iraq is seeking to obtain an advance payment of $ 2 billion in exchange for the supply of private oil, in a sign of Baghdad's increasing desperation to obtain cash.
"The country is suffering from an economic crisis caused by a combination of low oil prices and reduced OPEC production, and with the collapse of state coffers and non-payment of employees' salaries, the country risks a repeat of the unrest that brought down the government and witnessed the killing of hundreds of protesters last year," the report, translated by the agency, said.
He added, “In a secret message to the oil companies, the Iraqi government sought to alleviate its poor financial position by proposing a five-year supply contract that would provide 4 million barrels per month, or about 130,000 barrels per day. The buyer will pay in advance for one year of supply, which will bring about $ 2 billion to the Iraqi government at current prices. ”
According to the secret letter sent by the state oil marketing company, SOMO, the Iraqi Ministry of Oil has an interest in proposing a long-term deal to supply crude oil in exchange for prepayment of a fraction of the total allocated amount, as the company asked potential buyers to respond by November 27.
The report stated that “often cash-strapped oil producers relied on prepaid deals to raise money, but Baghdad has not yet done so, and the Kurdistan Regional Government has used similar contracts in the past, as have Chad and the Republic of the Congo,” indicating that “in A pre-payment deal, the buyer of oil effectively becomes a lender to the country, barrels of oil are collateral for the loan, just as borrowers use their homes as mortgage collateral. ”
The report added that “in the secret letter, Baghdad asked the potential buyer to pay, upon signing the contract, the amount of 48 million barrels to be shipped between July 2021 and June of the year, and improved the offer by allowing the buyer to ship crude to any facility anywhere in the world during the year. the one".
For his part, an expert in the Iraqi oil industry at the Oxford Institute for Energy Studies, Ahmad Mahdi, said, "Iraqis need money on a monthly basis, as the Iraqi government suffers from a shortage of about $ 3.5 billion to pay salaries, imports, pensions and debts."
The report indicated that, "according to the expectations of the International Monetary Fund, the GDP of Iraq will shrink by 12% this year, more than any other member of OPEC under the production quota. End / 25 z

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  •  Time: 11/24/2020 11:45:43
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He revealed a letter from the Iraqi government to the oil companies
  
(Baghdad: Al Furat News) According to the agency, Bloomberg, which specializes in economics, on Tuesday, Iraq is demanding two billion dollars in exchange for the value of its oil sales to alleviate the financial crisis, while it indicated that Baghdad had reached despair in providing financial liquidity.

The agency said, in a report: "Iraq is combating the economic crisis caused by low oil prices and the reduction in OPEC + production, with dwindling state coffers and non-payment of salaries of employees."

The agency added, "The Iraqi government has sent a message to the oil companies in their endeavor to alleviate the financial crisis, by proposing a five-year supply contract that provides 4 million barrels per month, or about 130 thousand barrels per day."

"This proposal will pay the buyer up front for one year of supply, which, at current prices, will bring in just over $ 2 billion," according to Bloomberg calculations.

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The Ministry of Oil said that Iraq is seeking to conclude the first-ever deal to prepay crude oil to support its finances in light of its efforts to counter the decline in oil prices and demand due to the Corona virus pandemic.

The country is seeking a five-year prepayment from January 2021 through December 2025 to be returned with shipments of raw material. Basra According to a letter sent by the state oil marketing company (Sumo) To their customers.

An official said Oil Ministry "The prepayment of oil shipments is part of an urgent plan to finance the state budget and overcome the financial crisis."
 
 
He added, "We have obligations to OPEC To reduce production, you must pay the dues of foreign oil companies and also to support our economy and this is why we need to request payments be paid in advance to buy some of the oil ship , the . "

Announced the organization OPEC And allies among them Russia, Under what is known as OPEC+, About record reductions in oil production in the first half of the year with the collapse of demand for crude when the world is almost stopped due to general isolation measures aimed at combating the Covid-19 pandemic.
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Iraq seeks $2 billion upfront for oil supply contract as its economy falters

By JAVIER BLAS AND LAURA HURST on 11/24/2020
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(Bloomberg) --Iraq is seeking an upfront payment of about $2 billion in exchange for a long-term crude-supply contract, the latest sign of Baghdad’s growing desperation for cash as its economy unravels.

The Middle Eastern country is grappling with a crisis brought to a head by low oil prices and OPEC+ output cuts. As state coffers dwindle and school teachers go unpaid, the country risks a repeat of upheaval last year that brought down the government and saw hundreds of protesters killed.

In a letter to oil companies seen by Bloomberg News, the Iraqi government sought to mitigate its dire financial position by proposing a five-year supply contract delivering 4 million barrels a month, or about 130,000 barrels a day. The buyer would pay upfront for one year of supply, which at current prices would bring in just above $2 billion, according to Bloomberg calculations.

The letter from SOMO, the Iraqi state-owned agency in charge of petroleum exports, was first reported by the Iraq Oil Report.

“SOMO, on behalf of the Ministry of Oil, has the interest to propose a long-term crude-supply deal in exchange for prepayment for a fraction of the total allocated quantity,” according to the letter, which was marked strictly confidential. It asked potential buyers to respond by Nov. 27, which may be too soon for some companies to get internal approvals.

Loan Security

Cash-strapped oil producers have often relied on pre-payments deals to raise money, but Baghdad hasn’t done so until now. The semi-autonomous Kurdistan Regional Government in northern Iraq has used similar contracts in the past, as have Chad and the Republic of Congo.

In a pre-payment deal, the oil buyer effectively becomes a lender to the country. The barrels are a security for the loan, much as borrowers use their homes as collateral for a mortgage.

For Iraq’s federal government, the loan could help Prime Minister Mustafa Al-Kadhimi, who came to power in May and has warned that the government will struggle to pay civil servants without raising more debt.

“They need the money,” said Ahmed Mehdi, an expert on the Iraqi petroleum industry at the Oxford Institute for Energy Studies. “On a monthly basis, the government is short around $3.5 billion to pay for salaries, imports, pensions and debts.”

Iraq’s monthly revenue has shriveled to roughly $4 billion this year, barely half what it was in 2019.

Crude Sweeteners

All OPEC+ countries have suffered economic hardship, but Iraq’s position is among the weakest. Although crude prices have recovered from the worst of this year’s slump, they are still down 30% this year at around $46.50 a barrel.

Members of OPEC+ -- an alliance of the Organization of Petroleum Exporting Countries and others such as Russia -- also have less oil to sell because of deep production cuts the cartel agreed to in April during the height of the coronavirus pandemic. Iraq, along with other nations such as Nigeria, has pumped above its quota on several occasions since then, angering OPEC’s de facto leader, Saudi Arabia.

Iraq’s gross domestic product will contract 12% this year, more than that of any other OPEC member under a production quota, according to International Monetary Fund forecasts. The country pumped 3.87 million barrels a day last month, according to data compiled by Bloomberg. Average output of 4.18 million barrels daily so far this year is down 12% from last year.

Rough Times

In the letter, Baghdad asked the potential buyer to pay, on signature of the contract, for 48 million barrels to be shipped between July 2021 and June 2022. It sweetened the proposal by allowing the crude to be shipped to any facility in the world during that one-year period.

Traditionally, Middle Eastern nations restrict where buyers can deliver their crude, limiting the ability of traders to exploit price disparities between Asia, Europe and the U.S. They also limit re-selling, forcing buyers to refine the barrels themselves, which can also curb potential profits.

 

https://www.worldoil.com/news/2020/11/24/iraq-seeks-2-billion-upfront-for-oil-supply-contract-as-its-economy-falters

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"SOMO" presents a proposal to provide financial liquidity to the country

 
  Baghdad: Muhammad Al-Ansari
 
The Oil Marketing Company (SOMO) issued a clarifying statement on Tuesday regarding a proposal to sell 48 million barrels and receive their sums in advance, which would provide financial liquidity to the country in light of the current conditions.
 The company stated, in a statement, that it is a continuation of the measures of the Ministry of Oil represented by the Oil Marketing Company to support the financial resources of the Iraqi state’s treasury during the current period and for the purpose of diversifying and accelerating the collection of financial revenues from selling Iraqi crude oil to global markets in a way that achieves the supreme interest of the country and as a new initiative to diversify methods of selling and paying oil Iraqi crude, the Ministry of Oil represented by the Oil Marketing Company invited the contracting companies to buy Iraqi crude oil, service contract companies, as well as qualified companies to buy Iraqi oil through the auctions that the Oil Marketing Company announces from time to time, which is one of the major international companies specialized in the field The oil industry around the world, to demonstrate the possibility of those companies purchasing a specific quantity that does not exceed 5% of the total quantities available for export of Iraqi crude oil at (4) million barrels per month for a period of one year only, starting from 1/7/2021 and ending on 30 / 6 /2022, with the best return possible.
The winning company or companies in the bid are required to pay all their financial valuations in advance within (30) days from the date of signing the contract according to an initial estimated price per barrel equal to (the monthly or annual rate of Brent oil for the period preceding the date of signing the contract), deposited in the Central Bank of Iraq account at US Federal Bank.
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Sumo Building
 

 energy


Economy News - Baghdad

The oil marketing company "SOMO" announced a new strategy for selling Iraqi oil with the start of the third phase of the OPEC Plus agreement at the beginning of next year, which includes selling 4 million barrels per year.

SOMO said in a press release received by "Al-Eqtisad News" that it will offer a specific amount that does not exceed 5% of the total quantities available for export of Iraqi crude oil, at a rate of 4 million barrels per month and for a year through an auction starting from 7/1/2021 and ending on 30 / 6/2022.

She added that the winning company in the bid will be required to pay its full financial value in advance within (30) days from the date of signing the contract according to an initial estimated price per barrel equal to (the monthly or annual rate of Brent oil for the period preceding the date of signing the contract) deposited in the Central Bank of Iraq account with the bank The US Federal Reserve), adding that the final price of these shipments is equal to the official price announced by the Oil Marketing Company for the month of loading and according to the destination of the shipment, in addition to the price difference provided by the competing companies .

She noted that a contract will be made with the winning company to supply it with a similar quantity of 4 million barrels per month for a period of five years, including the year mentioned above for the period from 1/1/2021 until 12/31/2025, and those quantities will be loaded and priced with the same terms and sales mechanisms currently in force with the company. Marketing oil at the official declared prices and without any privileges. Only ensuring that quantities are prepared in a stable manner for the winning company to encourage companies to offer the best possible prices in order to obtain the largest possible return for the country in exchange for making prepayment .

 
 
Number of observations 434   Date added 11/24/2020
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A parliamentary committee warns of efforts to sell Iraqi oil for contracts at reduced prices ... and proposes five alternatives
  
{Baghdad: Al Furat News} The head of the Parliamentary Committee for Monitoring the Implementation of the Governmental Program and Strategic Planning, Hazem Al-Khalidi, announced his strong rejection of the Iraqi government's efforts to sell Iraqi oil on long-term contracts for years to come at much lower prices. Double future. "

Al-Khalidi said in a statement that Al-Furat News Agency received a copy of, that "the injustice and loss resulting from these contracts is that Iraq is selling its oil at a price these days, which are very low prices, while those purchasing companies will continue to receive it within the next five years, the oil prices in them may change to double." What it is now, especially if the world got rid of the Corona epidemic and its effects on the movement of the economy. "
And with a simple calculation, calculating contracts to export oil in quantities of four million barrels per month according to current market prices will provide benefits of $ 1.5 billion annually to these companies from the wealth of Iraqis, and the total loss for the five years during the term of export contracts will exceed seven billion dollars.
Al-Khalidi added, "There are other sources of revenue that exceed this amount in double digits that can be collected and for a shorter period of time.
1 - Combating the rampant corruption activities in the currency auction of the Central Bank and will
save at least 2.5 trillion dinars annually 2. Adopting strict monitoring mechanisms for the work of all border outlets including the region and their governance and will save at least (8-10) trillion dinars annually
3. Exempting Iraq from the rate Reducing its exports according to the agreement - OPEC Plus - amounting to one million barrels per day, and it will save when sold more than (17) trillion dinars according to the average price of forty dollars per barrel
4. Reviewing the licensing rounds that greatly doubled the cost of Iraqi oil production to rates amounting to nearly a third of total oil revenues There are times when oil prices fall.
5. Reviewing mobile phone licenses in a fair equation for the Iraqi state, paying its companies owed financial dues from taxes and debts, and saving at least several trillions of dinars.
Ammar Al-Masoudi

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Hamza Al-Jawahry
  

 energy


Economy News - Baghdad

The oil expert, Hamza Al-Jawahry, praised the recent move of the oil marketing company "SOMO" by launching an auction to sell 48 million barrels within 5 years.

Al-Jawahiri said, in his speech to "Al-Eqtisad News", that "Sumo's recent step is very good, in marketing Iraqi oil, because Iraq will receive many requests to buy this quantity, especially from the refineries in East Asia that are designed on the basis of the quality of Iraqi oil," explaining that "Some refineries do not have much storage capacity, so they rent that out and thus pay money, while through this auction they can buy this quantity in the future without storing it."

And Al-Jawahiri said that a certain company bought oil in this auction, at $ 40, and when the oil is loaded, if the price is $ 60, it will pay an additional $ 20 to Iraq, and if it is at $ 30, Iraq will pay $ 10 in the form of oil.

The oil expert expected that large companies would submit their bids to buy Iraqi oil in this auction, especially in light of the global production surplus.

Al-Jawahiri also expected some companies to demand a specific discount, but Iraq will choose the best offers.    

The oil marketing company "SOMO", SOMO, announced last Wednesday, a new strategy for selling Iraqi oil with the start of the third phase of the OPEC Plus agreement at the beginning of next year, which includes selling 4 million barrels per month.

Sumo said in a press release received by "Al-Eqtisad News", that it will offer a specific amount that does not exceed 5% of the total quantities available for export of Iraqi crude oil at 4 million barrels per month and for a year through an auction starting from 7/1/2021 and ending on 30 / 6/2022.

She added that the winning company in the bid will be required to pay its full financial value in advance within (30) days from the date of signing the contract according to an initial estimated price per barrel equal to (the monthly or annual rate of Brent oil for the period preceding the date of signing the contract) deposited in the Central Bank of Iraq account with the bank The US Federal Reserve), adding that the final price of these shipments is equal to the official price announced by the Oil Marketing Company for the month of loading and according to the destination of the shipment, in addition to the price difference provided by the competing companies.

 
 
Number of observations 80   Date of addendum 11/27/2020
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Oil Minister: Iraq seeks to conclude the first sale deal with prepayment of 48 million barrels

Oil Minister: Iraq seeks to conclude the first sale deal with prepayment of 48 million barrels
Iraqi Oil Minister Ihssan Abdul-Jabbar Ismail during a meeting of OPEC producers last September
 

Mubasher: The Minister of Oil, Ihssan Abdul-Jabbar Ismail, revealed today, Sunday, that Iraq is seeking to conclude the first pre-payment sale deal of up to 48 million barrels of crude oil on the global markets.

 

According to Al-Sabah newspaper, the minister expected an increase in oil prices on world markets, so that the price of a barrel would touch 50 dollars in early 2021. Amid signs of a slight recovery in global demand after closures to confront the Corona pandemic.

The minister said that the production reduction agreement approved by the oil-producing countries (OPEC +) achieves the goal of restoring stability and balance to the global oil markets, indicating that the results of the agreement were positive and relatively influential despite the repercussions of the Corona pandemic on the economies of the producing and industrial countries. 

Ismail emphasized that the keenness of OPEC members to adhere to the determinants of reducing production greatly contributes to raising prices to certain levels.

The minister pointed out that Iraq had not asked OPEC to exclude it from reducing production for fear of a new decline in the price of a barrel on the global markets.

And press reports said, on November 24, that Iraq is seeking to conclude the first-ever advance-paid deal for crude oil . To boost public finances as the country struggles to cope with low oil prices and demand due to the COVID-19 pandemic.

According to a document by the state oil marketing company "SOMO", Iraq is seeking to obtain an advance payment for a period of 5 years, starting from January 2021 until December 2025, to be paid with shipments of Basra crude.

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 2020-12-06 06:05
 

Shafaq News / Oil Minister, Ihssan Abdul-Jabbar announced on Sunday that more than one company had applied to buy oil by prepayment.

 

Abdul-Jabbar said in a statement he made to reporters, including the correspondent of Shafaq News Agency, that "the results received on Friday were very good and there are more than one company competing for the tender to win it," stressing that "the initial reading shows that the selling price will be at the same time of payment and therefore will It does not affect the value of the exported oil, even if the sale is by this mechanism. "

 

He added, "Iraq has turned to selling oil on term to obtain financial liquidity to look at the market tolerance for the first time and to explore the market for this type of sale," stressing that it is the first time in the history of the Ministry of Oil to offer this type of advance payment, so the ministry wanted to explore the market capacity and the extent of customer confidence At the Ministry of Oil and Sumo. "

 

On November 23, the Iraqi Oil Ministry said that Iraq is seeking to conclude the first-ever deal to prepay crude oil to support its finances, as it seeks to counter the decline in oil prices and demand due to the Coronavirus pandemic.

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Today, Monday, Oil Minister Hassan Abdul-Jabbar revealed that Iraq is on its way to pre-sale to provide financial liquidity, while indicating that the government is trying to establish a solid base for investing in most of the gas fields and developing the refining sector.

Abdul-Jabbar said that "Iraq is in a way of pre-sale to provide financial liquidity," noting that "for the first time in the history of the Ministry of Oil, this type of sale was offered, as this matter revealed the market capacity, the extent of customers' confidence in the ministry, and that the results were good, to win this." Tender. "

He added that "Sumo has received good results, and there is more than one company competing in the tender," explaining that "initial readings indicate that the price will be the same as the selling price at the time of payment and there is no decrease in the value of the exported crude oil."

He stressed that "Iraq is moving towards supporting the refineries, petrochemicals and gas sectors," noting that "the government is trying to establish a solid base for investment in most gas fields and developing the refining sector, as well as re-reviewing the comprehensive development plan for oil fields, and working to create a balance between investments that pump to raise energies." Exports for crude oil production, with investments pumped to support the refineries, petrochemicals and gas sectors. "

He stated that "previous plans require review and reassessment in a manner that serves the interest of Iraq, in accordance with the early indications that resulted from the pandemic."

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In numbers ... a deputy submits a report on the "disadvantages" of selling long-term oil contracts
  
{Baghdad: Al Furat News} Member of the Parliamentary Economic and Investment Committee, Mazen Al-Faili, was surprised by the Ministry of Oil's insistence on proceeding with the sale of Iraqi oil in advance of long-term contracts.

Al-Faily said in a statement that Al-Furat News received a copy of it, "We are very surprised at the Ministry of Oil's insistence on proceeding with the pre-sale of Iraqi oil in long-term contracts for years to come under the justification of providing liquidity at current prices with the possibility of incurring losses on Iraq and providing interest to those companies that buy in advance at the expense of the people. ".

"With a brief clarification of the numbers, it becomes clear that there are no convincing justifications for this risky trend:

1. The figures show that the total allocations for the year 2020 with the borrowing amounts for two times did not exceed (70) trillion Iraqi dinars, which represents the actual spending for the year, which can be adopted as a measure in the 2021 budget in allocations and spending.
2. By adopting the price of a barrel of oil announced by the Iraqi Oil Minister (42) dollars and the quantities of exported oil, the expected oil revenues for the year 2021 are approximately 55 trillion dinars.
3. By adding the revenues of the outlets whose estimates were announced by the Minister of Finance in his press interview with the British newspaper The Guardian, that they amount to (8) billion dollars, but corruption drains most of it and it is equal to  
(9.5) trillion dinars, the total oil and non-oil revenues are more than (65) trillion dinars, not to mention the rest of the federal non-oil revenues, revenues from mobile phone licenses, taxes and debts of their companies, in addition to several trillions that are depleted in the hard currency auction in addition to the revenues Oil region and its outlets.
4. According to the above figures, the planning deficit for the 2021 budget will not exceed (6) trillion dinars, in comparison to oil revenues and the outlets alone.
5- It is possible that the price of oil at the time of delivery will rise to ($ 60) while the Ministry of Oil will sell that quantity in light of the current oil price, meaning that Iraq will lose ($ 15) approximately per barrel and the amount that Iraq gets from this deal is two billion dollars It can be obtained from other sources instead of this big loss resulting from the rise of oil at delivery and the difference between the current price and the expected price at that time, and this is an unacceptable behavior.
Will there be any justification after that for the efforts of the Iraqi Ministry of Oil to sell oil in advance at current market prices for many years, especially if we notice that prices may rise in the coming periods, with the repercussions of the Corona epidemic and its effects on the global oil market movement receding?

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Agency: Iraq is preparing to deal with China to receive loans in exchange for long-term oil supplies

Agency: Iraq is preparing to deal with China to receive loans in exchange for long-term oil supplies
Iraq flag
 

Mubasher: Iraq is preparing to sign a contract worth billions of dollars with the Chinese company "Zain How", as part of a rescue plan from Beijing for the cash-strapped Iraqi government.

And includes the deal, according to "Bloomberg", today, Wednesday, that the Iraqi government receive money in advance in exchange for long-term oil supplies.

The agency noted that the deal is the latest example of China, through commercial companies and state-controlled banks, lending struggling oil producers, with repayment in barrels of oil instead of cash. 

The Iraqi company in charge of petroleum exports, "SOMO", chose "Zain How" after it asked the oil traders to submit bids, according to informed sources. 

Iraqi Cabinet Spokesman Hassan Nazim said yesterday that there are "several offers" and they are under consideration before Prime Minister Mustafa Al-Kazemi makes the final decision.

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Oil
  

 energy


Economy News - Baghdad

Iraq is expected to sign a multi-billion dollar contract with the Chinese oil company "Zain How", in a step taken by Beijing to rescue the cash-strapped Iraqi government, as the Iraqi government will receive a cash advance for long-term oil supplies .

 

Troubled oil producers

 

This deal is the latest example of China, through state-controlled companies and commercial banks, lending troubled oil producers, such as Angola, Venezuela and Ecuador, with the payment being in the form of oil barrels instead of cash, after causing the collapse in oil prices. This year, the Iraqi budget has been severely damaged, and the government has been unable to pay the salaries of teachers and employees on time .

 

The Oil Marketing Company (SOMO), affiliated to the Iraqi Ministry of Oil, chose Zain How after requesting offers from oil traders; According to people familiar with the matter .

Minister Hassan Nazim, a spokesman for the Council of Ministers, stated that Iraq had received "several offers", which were studied before Prime Minister Mustafa Al-Kazemi made the final decision .

 

5 year deal

 

According to the book of conditions sent by the Iraqi Oil Marketing Company last month, the winner of the deal will buy 4 million barrels per month, or about 130,000 barrels per day. It would prepay for one year of exports, which would generate more than $ 2 billion in revenue at current prices, according to Bloomberg's calculations. The deal is valid for five years, but the down payment applies to the first year only .

 

According to sources, this deal has attracted widespread interest among the major oil traders. The deadline for accepting bids was extended from late November to allow more companies to submit their bids .

 

Zain Hao did not respond to an email that was sent to the Beijing headquarters after the end of business hours yesterday, Tuesday, seeking comment from it.

 

The collapse in oil prices

 

All major producers were hit by the collapse in oil prices as a result of the spread of the Coronavirus. But Iraq, where oil revenues account for nearly all government revenues, is in a worse condition than most. According to the expectations of the International Monetary Fund; The Iraqi economy will shrink by 12% this year, more than any other OPEC country .

Thousands of Iraqis have taken to the streets in recent months to protest against poor living conditions, as the government is suffering as it tries to implement its commitments to "OPEC", which agreed at the height of the epidemic in April to reduce production. Baghdad pumped more than the specified level on several occasions, which angered Saudi Arabia, the de facto leader of OPEC .

 

A rare deal

 

Oil-rich countries, which are short of revenue, have often relied on prepaid deals to raise money, but Baghdad has never done so before. Noting that the Kurdistan government, which is self-governing in northern Iraq, has pursued similar decades in the past, as have Chad and the Republic of the Congo .

 

In prepaid deals, the oil buyer becomes a lender to the country, and barrels of oil serve as collateral for the loan .

 

It is difficult for the Iraqi government to raise money in a traditional way, such as the bond market, because of the problems it is going through, and the average yield of dollar bonds in the country is 7.5%, which is one of the highest levels .

 

Goldman Sachs disclosed this week that Iraq is one of the most vulnerable bond issuers heading to 2021 .

 

The prepaid tranche of the Sino-Iraqi deal is among the largest in recent history, although it is lower than the record collected by the Russian government-run Rosneft in 2013 from Vitol and Glencore .

 

Strict conditions of sale

 

 

In addition to its size, the Iraqi deal is rare because it allows the winner of the bid to ship crude oil to any destination he wishes for a year. Usually, crude oil coming from the Middle East is sold under strict conditions that prevent traders and oil refineries from reselling barrels to a different region .

 

The exception to this rule may be considered an advantage, in exchange for the money prepaid to Iraq that does not require the payment of any interest from its side, as it is customary for the state to pay a return for the cash it receives in advance .

 

Revive China

 

 

Zain Hwa produces and trades oil. The company played a major role in Beijing's energy policy called "global orientation", and invested in oil concessions in the United Arab Emirates, Kazakhstan, and Myanmar, and traded in crude oil from countries such as Kuwait, Brazil, and the Republic of the Congo .

 

 

The company was established in 2003 as a subsidiary of the largest defense contracting company owned by the Chinese state, known as "Norinco". As stated on its website, "Zain Hwa" trades around 1.3 million barrels per day of oil and finished products .

 

Unipec, China Oil and Sinochem are among the main Chinese oil traders. These state-owned companies, which were shrouded in relative secrecy in the past, are increasingly prominent as China's oil consumption rises. China is supposed to overtake the United States as the world's largest importer of crude oil .

 

Xinhua, whose name in Mandarin means “revive China,” started a joint venture with the Iraqi Oil Marketing Company (SOMO) to market barrels of oil in China in 2018, but it was later dismissed .

 

From Bloomberg

 
 
Number of observations 84   Date of addendum 12/09/2020
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  •  Time: 12/09/2020 13:06:54
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Iraq and China are preparing for a "rare" oil deal
  
{International: Al Furat News} Iraq is preparing to sign a multi-billion dollar deal with the Chinese company "Chenhua Oil", under which Baghdad will get cash to help it in its financial distress in exchange for long-term oil supplies.

Bloomberg says the deal is the latest example of China, through commercial companies and state-controlled banks, lending troubled oil producers such as Angola, Venezuela and Ecuador, in exchange for repayment in barrels of oil. 
Reuters also quoted an informed source today, Wednesday, that the Chinese state oil trade, Chenhua Oil Company, is at the forefront of competitors in a bid to sell Iraqi crude for a period of five years.
The source added that the company presented the "most competitive bid" in a bid for the Iraqi Oil Marketing Company (SOMO), which attracted participants from international oil companies, trade houses and Chinese and Indian refiners.
Government spokesman Hassan Nazim told reporters yesterday that the Iraqi Oil Ministry is studying offers from participants in a pre-paid oil deal.
The winner of the bid will pay SOMO about $ 2.5 billion for 48 million barrels of crude between July 1, 2021, and June 30, 2022.
The collapse in demand and prices for oil has hurt the budget of Iraq, whose government is struggling to pay the salaries of its employees.
Bloomberg quoted sources familiar with the matter that the cabinet has yet to approve the offer. 
Under the terms of a letter SOMO sent to oil companies last month, the winning contractor would buy four million barrels of oil per month, or about 130,000 barrels per day. 
The company that receives the bid will prepay cash for one year of oil supply at current prices - more than $ 2 billion, according to Bloomberg calculations. 
The agreement will be in effect for five years, but the cash advance will be for one year.
Bloomberg described this deal as "rare", as Baghdad had not previously entered into a prepaid deal, although the Kurdistan Regional Government in the north of the country had concluded similar contracts in the past.
In addition, the deal is considered "rare" also because it allows the company to which the bid is applicable to ship Iraqi crude to any destination it desires for a year. Usually, Middle East crude is sold under strict conditions that prevent traders and refiners from reselling the barrels to different regions.
The deal attracted widespread interest among the top names in the oil trade industry, according to sources. The deadline for bidding, which was in late November, has been extended to allow more time for market competitors.
All major producers have been affected by the collapse in oil prices this year, caused by the Corona virus, but Iraq, which relies on crude oil for almost all of its government revenues, is in a worse position than most countries of the Organization of the Petroleum Exporting Countries (OPEC).
Iraq's GDP will shrink by 12% this year, more than any other OPEC member, according to IMF projections.
Ammar Al-Masoudi

 

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The American "Bloomberg" agency revealed that Iraq is preparing to sign a deal worth billions of dollars with the Chinese "Chenhua Oil".
And the agency noted, in a report, that according to this deal, Baghdad will get cash to help it in its financial distress in exchange for long-term oil supplies.
The agency pointed out that "the deal is the latest example of Chinese lending, through commercial companies and banks controlled by the state, to troubled oil producers such as Angola, Venezuela and Ecuador, in return for payment in oil barrels."
Sources spoke to the US Agency, and quoted them as saying that "the Iraqi Oil Marketing Company (SOMO) has chosen Chen Hua to obtain this bid."
She indicated that "the Iraqi Council of Ministers must still approve this offer."
Bloomberg described the deal as "rare, as Baghdad had not previously entered into a prepaid deal, even though the Kurdistan Regional Government in the north of the country had concluded similar contracts in the past."
Cabinet spokesman Hassan Nazim said, on Tuesday, that the offers are under study and will be submitted to the Prime Minister for approval.
Under the terms of a letter SOMO sent to oil companies last month, the winning contractor would buy four million barrels of oil per month, or about 130,000 barrels per day.
The company that receives the bid will prepay cash for one year of oil supply at current prices - more than $ 2 billion, according to Bloomberg calculations.
The agreement will be in effect for five years, but the cash advance will be for one year.
In addition, the deal is also rare because it allows the company to which the bid applies to ship Iraqi crude to any destination it desires for a year. Usually, Middle Eastern crude is sold under strict conditions that prevent traders and refiners from reselling the barrels to different regions.
The deal attracted widespread interest among the top names in the oil trade industry, according to sources. The deadline for bidding, which was in late November, has been extended to allow market competitors more time.
All major producers have been affected by the collapse in oil prices this year, caused by the Corona virus. But Iraq, which relies on crude oil for nearly all of its government revenues, is in a worse position than most of the Organization of the Petroleum Exporting Countries (OPEC).
And Iraq's GDP will shrink by 12% this year, more than any other member of OPEC, according to IMF projections.

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Al-Mustaqila /… Members of the House of Representatives expressed their rejection of the attempts of the National Sumo Company to conclude a contract to sell 48 million barrels of oil by way of prior sale, at the current market price, which could expose the country's economy to heavy losses.

 

Sadiq Al-Sulaiti, the deputy for the Sawirun Parliamentary Bloc, said in a press conference held at the parliament building with the participation of a number of deputies today, Wednesday, that “the SOMO Oil Marketing Company announced the offer of quantities of Iraqi oil estimated at 48 million barrels for sale for a period of 5 years to come by prepayment and an initial estimated price per barrel One equals the monthly or annual rate of Brent oil for the period preceding the contract date, ”warning that“ this matter is very dangerous and is rejected for several reasons. 

The deputy affirmed that "the current government was formed to prepare early elections and not to enter the country into suspicious contracts that shackle the national wealth for years to come."

Al-Sulaiti pointed out that “this way, the government will receive money for oil that will be issued later and from the same share of Iraq in OPEC. Here we wonder what will happen if oil prices and the export rate stabilize at the same level, and certainly Iraq will export oil and consume nothing in the coming months and years since it receives the sums in advance and this will cause an unprecedented economic disaster. “.

He continued, "The SOMO company is a non-sovereign, non-financial, competent party to be authorized to borrow and mortgage Iraqi oil to external parties and put the neck of Iraq in the hands of those companies, and this procedure is not mentioned in the company's internal system.

 

Al-Sulaiti stated that “oil wealth is a constitutional right for all the Iraqi people and for future generations, and no one is allowed to infringe on their rights according to whims and desires to make money without deliberate plans and future calculations.” Exporting and working to reduce costs of transportation and freight in order to achieve increased financial revenues for Iraq.

Al-Sulaiti stressed, "We reject and warn the government against proceeding with such measures and tricks that shackle the country with future commitments made by suspicious parties."

Iraq is preparing to sign a multibillion-dollar contract with China's Chenhua Oil, a bailout plan from Beijing for the cash-strapped government that will receive upfront cash in exchange for long-term oil supplies.

Under the terms of a letter sent by SOMO to oil traders last month, the winning bidder will buy 4 million barrels per month, or about 130,000 barrels per day. They will pay in advance for one year of supply, which at current prices will bring in more than $ 2 billion, the agreement is valid for five years in total. But the down payment is only for one year.

The prepayment portion of the Iraqi contract is among the largest in recent history, although it is less than the record $ 10 billion that Russia's state-run Rosneft collected in 2013. (The end)

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2 hours ago, coorslite21 said:

Thanks Poker Player.... 

No expert on this.....numbers seem low.....like a let's get our foot in th door thing....

 

Biggest take away......China....they're every where.....even in Canada is what I read and hear.....     CL

 

Thxs coorslite. Yes they are here in Canada and are constantly under Investigation for one thing or another. Makes it tough for those from China wanting to move here for Legit reasons.

 

   pp

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