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Iraq to freeze prepayments deal on rising oil prices

February 24, 2021 00:00:00

BAGHDAD, Feb 23 (Reuters): Iraq has decided to freeze its first crude oil prepayment deal because oil prices are rising, the country's oil minister told the BBC Arabic.

"We had concerns that oil prices would not rise above $40 when we announced this deal for the first time in the history of Iraq," Iraqi Oil Minister Ihsan Abdul Jabbar told the channel. Brent crude was trading above $60 per barrel recently.

Asked about the status of the prepayment crude oil deal, Abdul Jabbar said: "With the start of this year and the economic stability resulted from boosted oil prices, we decided to freeze this option."

Chinese state oil trader Zhenhua Oil Corp had emerged as the frontrunner in a tender to buy Iraqi crude for five years after it submitted the "most competitive bid" in the tender.

Iraq's state oil marketer SOMO held the tender which attracted participation from international oil companies, trading houses and Chinese and Indian refiners.

Iraq was seeking a five-year prepayment starting January 2021 until December 2025 to be repaid with cargoes of its Basra crude, according to a letter sent by state oil marketer SOMO to its customers and seen by Reuters.

Under the prepayment deal, the winner of the tender was to pay SOMO about $2.5 billion in return for 48 million barrels of crude between July 1, 2021, and June 30, 2022.

Mr Jabbar said on Sunday he was optimistic that the ongoing talks between the country's central government and Iraqi Kurdish technical and financial teams over a 2021 federal budget and oil dispute could make progress in reaching a deal.

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