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A joint venture between Sumo and China's Shenhua to support oil sales

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A joint venture between Sumo and China's Shenhua to support oil sales

Post  RamblerNash on Tue Aug 28, 2018 10:24 pm

A joint venture between Sumo and China's Shenhua to support oil sales



Headquarters of the oil marketing company "Sumo"
 
08/28/2018

Economy News Baghdad

The oil marketing company (SOMO) is in the process of concluding a deal with China's state-run Shenhua Oil to support sales of Iraq, an OPEC member, from crude oil to China, the world's largest crude importer, four well-informed sources said.

Iraq is OPEC's second largest oil producer. The move will boost Iraq's position in Asia, the world's largest and fastest-growing oil region, which already buys 60 percent of its exports at around 3.8 million bpd.

"Shenhua helped Iraq penetrate the Chinese market and generate more revenue," a senior source familiar with the talks told Reuters, adding that a proposed joint venture could be completed in October or November.

Another source said the deal was awaiting approval from the regulatory authorities. and he did not mention any further details.

The location of the joint venture remains unclear, but two informed sources said the coastal city of Tianjin, near Beijing, is being discussed, and Singapore is also among the options.

The four sources asked not to be identified because they were not authorized to discuss commercial issues with the media.

China is under pressure to cut its oil purchases from Iran, OPEC's third-biggest crude producer, with the United States re-imposing sanctions on Tehran and threatening to cut Iran's oil exports to zero.

Amidst the trade dispute between Washington and Beijing, it is also unclear whether Chinese importers will be able to continue importing US crude.

The Sumo-Shenhua deal will also allow China another option for oil, with the risks of US crude flows.

Shenhua's relationship with Sumo dates back to the 1990s, when Norinco was among the first Chinese companies to be active in oil and gas exploration in Iraq.

Last year, Shenhua won a fixed-term contract to supply diesel to Somo for the first time, and recently also participated in a deal to develop the East Baghdad oil field.

Shenhua has been marketing Iraq's main crude oil, Basra's light crude, to Sumo since the beginning of 2018, and has also sold quantities to Taiwan, according to an independent Singapore trade source.

Shenhua, China's smallest state-run oil and gas company, expanded its operations in oil sales to independent Chinese refiners, which have been approved to import crude since 2015 and now account for about 20 percent of China's total imports.

Shenhua's sales of these independent companies reached a record 6.5 million tonnes last year, or 131,000 bpd, equivalent to about 7 percent of total purchases, according to the oil sector.

Sinopec, the major Chinese oil exporter, Sinok and PetroChina, are regular customers of Iraqi oil under long-term supply agreements with Sumo, or under service contracts for oilfields.

http://economy-news.net/content.php?id=13399
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