Oil For "Loan", Iraq Will Sign A Contract With China Zhenhua Oil!

In late November, the Iraq oil report reported that Iraq was seeking an advance payment of about $2 billion in exchange for a long-term crude oil supply contract to address the growing financial crisis under the new crown epidemic.

Such an operation is often called oil for loan. In the past, Angola, Venezuela, Ecuador and other countries have also conducted oil for loan transactions with China. Now, Iraq also seems to have decided to trade oil loans with China.

Iraq has chosen a Chinese company to sign a multi billion dollar contract with China Zhenhua Oil Co., Ltd., according to reports from the media such as Bloomberg and Reuters on Tuesday. According to foreign media reports, according to people familiar with the matter, SOMO, the Iraqi oil export agency, selected Zhenhua oil after inquiring oil dealers. However, at present, there is no "official propaganda".

Iraqi cabinet spokesman Hassan Nadhim said on Tuesday that there were "several proposals" that they were studying before Prime Minister Hassan Nadhim made a final decision.

01. Iraq sells oil to save itself

The global pandemic of the new crown epidemic has triggered a sharp drop in global oil prices, which has caused the profits of major oil producing countries to plummet, especially those in the Middle East, which are heavily dependent on oil economy. This is especially true for Iraq. Oil exports account for almost all of Iraq's government revenue. According to the prediction of the International Monetary Fund, the Iraqi economy will shrink by 12% this year, more than any other member of OPEC.

In recent months, thousands of Iraqis have taken to the streets to protest against deteriorating living conditions. In order to ease the financial pressure, Iraq intends to seek a five-year supply contract to supply 4 million barrels per month (about 130000 barrels per day) to alleviate its poor financial situation. Buyers will prepay a year's supply, which is slightly more than $2 billion at current prices, according to the calculations of Bloomberg.

"SOMO, on behalf of the Ministry of oil, is interested in proposing a long-term crude oil supply agreement in exchange for an advance payment of a small part of the total supply," SOMO, the Iraqi oil export agency, said in a letter to oil traders. In the letter, Iraq asked potential buyers to pay 48 million barrels of crude oil after signing the contract, which will be delivered between July 2021 and June 2022.

In addition, to increase its attractiveness, Iraq allows buyers to ship crude anywhere in the world within a year. Traditionally, sellers of Middle East crude oil have strict terms when selling middle east crude oil, which prohibit dealers from reselling in different regions by taking advantage of price differences between Asia, Europe and the United States.

02. Zhenhua may be signed

SOMO, Iraq's oil export agency, has awarded China Zhenhua a five-year tender for crude oil supply, including a $2 billion advance payment period, according to a person familiar with the matter, according to a report by the company. In the tender held by SOMO, the company submitted "the most competitive offer," the person said.

According to the contract, Zhenhua will receive 48 million barrels of Basra crude oil per year from January 2021 to December 2025. The bidder is required to pay 30 days in advance for the supply of crude oil from January 2027 to January 2027.

Zhenhua, a subsidiary of China North Industries Co., Ltd., was established in 2003 and headquartered in Beijing. It is an international oil company mainly engaged in oil and gas industry investment, oil and gas exploration and development, international oil and gas trade, oil storage and transportation, oil refining and other businesses.

As one of the important teams actively participating in the national "going out" strategy and the "belt and road" construction, it has a lot of "intersection" with Iraq. In 2018, Zhenhua oil and SOMO, an organization in charge of oil export in Iraq, held talks for several months, planning to establish a joint venture in Tianjin to broaden China's crude oil import channels. In addition, Zhenhua oil also owns some shares in the southern part of Iraq's eastern oilfield and Ahdab oilfield.

Under the guidance of the national energy development policy, Zhenhua oil is committed to building an industry-leading mechanism and cultivating its competitive ability in market development, technological innovation, project operation, capital operation, risk control and international resource integration.

At present, there are more than 1200 million tons of oil and gas reserves in China, more than 1 200 million tons of oil and gas reserves in China, and more than 1 200 million tons of oil and gas have been set up in Zhenhua; It has established an industrial chain from oil and gas exploration and development to international oil and gas trade, storage and transportation, and oil refining. Zhenhua oil has established a business model of coordinated development of upstream, midstream and downstream, and formed a value chain system of organic combination of oil and gas exploration and development, trade, storage and transportation, refining and chemical, finance and futures.