October 01, 2018 [The Edge Markets] - Iraq's state oil company SOMO is looking at acquiring storage tanks in Asia and is open to discussions on more profit-sharing agreements as it seeks to expand its foothold in the region, a senior official said on Wednesday.
“We’re looking forward to acquire storage tanks, to acquire facilities in the major market for us which is Asia,” Ali Nazar Faeq Al-Shatari, head of the crude oil and gas marketing division at SOMO, said on the side lines of the Argus Crude Forum.
“So any other profit-sharing agreement or deal, that may serve these purposes, we may study it,” he said, adding these deals should not cause conflict of interest with the existing ones.
SOMO has formed a joint venture with Litasco, the trading arm of Lukoil, and has started supplying Basra crude to Chinese partner Zhenhua Oil which it will form a joint-venture with soon.
Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), is exporting close to 3.6 million barrels per day (bpd) of crude from its southern oilfields as OPEC and others ramp up output to replace supply shortfalls from Iran and Venezuela.
When asked if SOMO plans to switch the benchmark price for its term crude sales to Asia partly to DME Oman futures, in line with Saudi Aramco, Shatari said the company was still exploring its options.
“We’re not following suit. We still need more time to discover how to go about it,” he said. “We don’t need to rush things. When Saudi Arabia start implementing the new benchmark for Asia next month, we’ll have more data to see how that trial goes forward. If it’s successful, it will be part of our studies to see what to do next.“
Saudi Aramco plans to change the formula used to price its long-term crude oil sales to Asia starting from October, marking the first change in benchmarks for its official selling prices (OSP) since the mid-1980s.
“INE is one of the options as well. You can see that some of our cargoes being delivered to the INE,” Shatari said, referring to Basra Light crude deliveries against the Shanghai crude futures contract that is traded on China’s International Energy Exchange (INE).
“We are doing (the oil deliveries) through our joint ventures, our profit-sharing agreements. Some of our customers are doing that as well after consulting with us,” he said.
A cargo of Basra Light has also been delivered to Malaysia for trial runs at a new joint-venture refinery of Petronas and Saudi Aramco.
Shatari said the cargo came from Petronas’ term contract with SOMO, adding that any increase in Iraqi supplies for the new refinery would depend on Petronas’ deal with Aramco.
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