Iraq's State Oil Marketing Organization just announced that they have awarded a $2 billion oil supply contract to a Chinese company. The contract includes partial prepayment terms without destination restrictions.
According to reports, it was the first time that Iraq offered to sell a five-year supply of oil with one year prepayment as the oil country struggles to fund its coffers.
The agreement calls for a supply of 4 million barrels of Basrah crude per month starting in July of this year to a Chinese company that SOMO wouldn't name.
However, S&P Global Platts reported in December that China's Zhenhua, the trading arm of Norinco, won a deal to take up to 16 million barrels of Basrah crude but Zhenhua officials were unreachable for comment.
Alaa al-Yasiri, SOMO's director general said that several offers were submitted by companies with two from Europe and China having the fiercest competition. The Chinese bidder won in the end.
Yasiri added that although the mechanisms of the sale had been approved by the Cabinet, SOMO is yet to receive instructions on how to proceed with the implementation.
This contract will bring in $2 billion with zero interest and a premium on the price to Iraq while offering flexibility to the buyers such as the freedom to determine the cargo loading day, export destination and the possibility to resell the cargoes.