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Iraq has signed a $2 billion prepayment deal with a Chinese company for oil exports, state news agency INA reported without naming the company.
Alaa Al Yasiri, General Manager of Iraq’s State Organisation for Marketing of Oil, said the prepayment mechanism allows the value of the shipment to be paid a full year in advance.
"Iraq got $2 billion at zero interest with a premium over the price," Al Yasiri said in an interview to INA.
“Several offers have been made by the companies and there was intense competition between two European and Chinese companies, and the Chinese company won," he added.
SOMO, which is responsible for marketing Iraq’s oil, in November offered to supply 130,000 barrels a day of crude for five years, with upfront payment for one year of supply.
While Al Yasiri did not name the company, media reports last month said ZhenHua Oil, a Chinese state-owned oil trader, has emerged as the frontrunner in a tender to buy Iraqi crude for five years.
Under the agreement, the Chinese trader will pay for a full year's worth of crude before shipment.
“The flexibility that Iraq has granted to companies is the freedom to determine the day of loading the shipments, the export destination, the possibility of resale and a set of marketing benefits in return,” Al-Yasiri said.
He also said that following the recent OPEC agreement, Iraq’s oil exports have amounted to 2.9 million barrels per day, with revenues of $4.2 billion.
The oil price crash last year due to the slowdown in economic activity triggered by COVID-19 had a huge impact on Iraq, OPEC’s second-biggest producer. It has the world’s fourth-largest oil reserves and depends on oil revenues to fund 95 percent of its national budget.
(Reporting by Brinda Darasha; editing by Seban Scaria)
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