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Commodity trader Vitol has agreed to provide the National Iranian Oil Company with the euro equivalent of US$1 billion in exchange for a share in future oil product exports from Iran.
The news was unveiled by sources close to the deal, cited by news wires, but remained unconfirmed by either party officially.
The deal comes on the heels of an announcement from Tehran that it had selected 29 foreign companies to bid in forthcoming oil and gas tenders, further highlighting Iran’s determination to get is energy industry back on track after the removal of most Western sanctions last January and, possibly, before U.S. President-elect Donald Trump gets into a position to do effect a reversal of some sort.
As Reuters notes, Vitol, unlike most big oil companies from the Western part of the world, is a private enterprise, which gives it much more flexibility in closing deals with Iran. Much more than, say, BP, whose CEO Bob Dudley is a U.S. citizen and as such unwilling to risk re-entering Iran, which still has some sanctions from the U.S. in place.
The pre-finance nature of the deal is becoming increasingly common among commodity traders, as it provides them with long-term access to substantial amounts of oil and fuels, Reuters also notes, and their partners benefit from the upfront cash.
Late last year, Vitol sealed another pre-finance deal, this time with Kuwait Energy, which will see the world’s top commodity trader provide the Kuwaiti company with US$100 million in exchange of crude oil, to be drawn from Kuwait Energy’s operations in Iraq. Most of the money that Vitol will provide, will be spent on expanding those same Iraqi operations, Kuwait Energy said. The remainder will go towards developing Kuwait Energy’s Egyptian business.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.