Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Join the forum, it's quick and easy

Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

Would you like to react to this message? Create an account in a few clicks or log in to continue.
Established in 2006 as a Community of Reality

Many Topics Including The Oldest Dinar Community. Copyright © 2006-2020


    China Set to Bail Out Iraq with Multibillion-Dollar Oil Deal

    chouchou
    chouchou
    Moderator
    Moderator


    Posts : 5062
    Join date : 2012-12-20

    China Set to Bail Out Iraq with Multibillion-Dollar Oil Deal Empty China Set to Bail Out Iraq with Multibillion-Dollar Oil Deal

    Post by chouchou Tue 08 Dec 2020, 10:50 am

    China Set to Bail Out Iraq with Multibillion-Dollar Oil Deal


    [You must be registered and logged in to see this image.]
    A petrochemical oil refinery. Photographer: Toru Hanai/Bloomberg , Bloomberg

    (Bloomberg) -- Iraq is poised to sign a multibillion-dollar contract with China ZhenHua Oil Co., a bailout from Beijing for the cash-strapped government which will receive money upfront in exchange for long-term oil supplies.

    The deal is the latest example of China, via state-controlled trading companies and banks, lending to struggling oil producers such as Angola, Venezuela and Ecuador, with repayment in the form of oil barrels rather than cash. The crash in oil demand and prices has hammered Iraq’s budget, and the government has been struggling to pay salaries.

    The Iraqi agency in charge of petroleum exports, SOMO, picked ZhenHua, according to people familiar with the matter. Iraq’s cabinet must still approve the deal, according to one of the people. Cabinet spokesman Hassan Nadhim said on Tuesday the offers were being studied and would go to the prime minister for approval.

    Under the terms of a letter SOMO sent to oil traders last month, the winning bidder will buy 4 million barrels a month, or about 130,000 a day. They will pay upfront for one year of supply, which at current prices would bring in more than $2 billion, according to Bloomberg calculations. The deal runs for five years in total -- but the upfront payment is only for one year.

    The deal attracted widespread interest among the top names of the oil-trading industry, according to the people. The deadline for the tender was extended from late November to allow market participants more time to bid.

    ZhenHua Oil didn’t reply to an email seeking comment that was sent to its headquarters in Beijing after normal business hours.

    All major producers have taken a hit from this year’s coronavirus-triggered crash in oil. But Iraq, where crude accounts for almost all government revenue, is in a worse position than most. Its gross domestic product will contract 12% this year, more that of any other OPEC member under a production quota, according to International Monetary Fund forecasts.

    The government is struggling to pay teachers and civil servants, many of who have taken to the streets in recent months to protest.

    Rare Deal

    Energy-rich nations short on revenue have often relied on pre-payment 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 security for the loan.

    The pre-payment part of Iraq’s contract is among the largest in recent history, although less than the record $10 billion that Russian state-run Rosneft raised in 2013 from trading houses Vitol Group and Glencore Plc.

    Besides its size, the deal is rare because it allows the winner to ship Iraqi crude to whatever destination it wishes for a year. Normally, Middle Eastern crude is sold with strict clauses preventing traders and refiners from re-selling the barrels to different regions.

    That condition was probably seen as advantageous enough to compensate for the fact the pre-payment money is effectively interest-free for Iraq. Normally, a country pays a yield for the cash it receives upfront.

    Revitalize China

    ZhenHua deals in oil production and trading. Although relatively little-known outside China, the company played a large role in Beijing’s so-called “going global” policy for energy.

    ZhenHua has invested in oil concessions in the United Arab Emirates, Kazakhstan and Myanmar, and trades crude originating from the likes of Kuwait, Brazil and the Republic of Congo.

    The company was founded in 2003 as a subsidiary of the largest Chinese state-owned defense contractor. According to its website, ZhenHua trades about 1.3 million barrels a day of oil and finished products.

    Other major Chinese traders include Unipec, Chinaoil and Sinochem. Shrouded in relative secrecy in the past, those state-owned firms are gaining prominence as China’s oil consumption rises. It’s set to soon overtake the U.S. as the world’s largest crude importer.

    ZhenHua, meaning “Revitalize China” in Mandarin, started a joint-venture with SOMO to market barrels into China in 2018, though it was later scrapped.

    [You must be registered and logged in to see this link.]

      Current date/time is Sun 03 Nov 2024, 10:06 pm