Page 4 - MEOG Week 48

MEOG COMMENTARY MEOG

SOMO extends pre-payment

deadline as buyers scramble

Iraq’s state oil marketer has pushed back its crude pre-pay deadline as it seeks to generate
short-term revenues, but it is unlikely to fill the massive deficit facing Baghdad.

IRAQ BAGHDAD last week amended the deadline there may only be one ‘winning bidder’.
for bids for its crude pre-payment scheme, with An official from Iraq’s Ministry of Oil (MoO)
the original date having given traders just four was quoted by Reuters as saying: “We decided
WHAT: days to turn around paperwork and banking to extend the deadline to give more space for
The deadline for bids for requirements. customers to study our offer and make sure they
the pre-payment deal The bidding window was expanded by a week fully understand contract terms.”
has been moved until and will now close on December 4, according
December 4. to sources spoken to by Middle East Oil & Gas Cash grab
(MEOG). SOMO is understood to have been considering
WHY: The scheme was announced by the State Oil implementing an oil sales pre-payment solution
Traders had been given Marketing Organization (SOMO) on November for some time. However, given the lack of warn-
little time to prepare bids, 23, though in addition to the tight turnaround ing and short deadline, the move bears the hall-
and documents issued time, the letter, seen by MEOG, included only marks of a knee-jerk reaction to fill Baghdad’s
by SOMO lacked some ‘general terms’ and brief clarification of the $3-4bn monthly operating deficit.
clarity. pre-payment with “all other terms and condi- Speaking to MEOG, one source said: “SOMO
tions […] subject for SOMO’s standard GT&Cs”, has made several key moves here. The pre-pay-
WHAT NEXT: leaving some traders seeking clarification. ment announcement, the addition of the Basrah
Successful bidders will In the letter, SOMO’s director-general, Alaa Medium crude grade and the revision of dis-
be expected to pay for al-Yassiri, proposed that buyers should pay for a counts on the heavier crude grades suggest that it
48mn barrels of crude year’s supply in advance to guarantee crude sup- may be under increased pressure to bolster state
within 30 days, though plies for a five-year period covering January 2021 coffers.” As MEOG reported last week, Baghdad
this is likely provide little until December 2025. The pre-payment would is hoping to achieve a sales volume of around
more than a quick fix for cover the “total quantity to be lifted from July 1, 1mn barrels per day (bpd) with the Medium
Iraqi finances. 2021 till June 30, 2022”, with the buyer required grade.
to pay SOMO for 48mn barrels “within 30 days SOMO also issued a notice to operators and
of countersigning the contract”. buyers informing them of official selling prices
On price SOMO said: “The amount has to for its three grades, Basrah Light, Medium and
reflect a provisional price for said quantity which Heavy.
shall be based upon the monthly or yearly aver- Buyers of Basrah Light and Basrah Medium
age price of “Brent Dated” (whichever is higher) will be compensated by $0.4 per barrel for each
[…] as published by Platts.” Signature of a sin- degree below the grades’ associated agreed
gle contract on these terms would bring in up API gravity, which are set at 33 degrees and 29
to $2bn, though there has been speculation that degrees respectively. Meanwhile, Basrah Heavy

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