Iraq’s SOMO close to JV with China’s Zhenhua to boost crude sales

Flames rise from the burning of excess hydrocarbons at the Hammar Mushrif new Degassing Station Facilities site inside the Zubair oil and gas field, north of the southern Iraqi province of Basra on May 9, 2018. (AFP)
Updated 27 August 2018
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Iraq’s SOMO close to JV with China’s Zhenhua to boost crude sales

  • The move will bolster Iraq’s position in Asia, the world’s biggest and fastest-growing oil-consuming region
  • China is under the pressure to cut oil purchases from Iran, OPEC’s third-largest producer

BEIJING/DUBAI: Iraq’s state oil marketer SOMO is close to a deal with China’s state-run Zhenhua Oil to boost the OPEC member’s crude oil sales to the world’s top oil importer, four sources with knowledge of the matter said.
Iraq is the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC). The move will bolster Iraq’s position in Asia, the world’s biggest and fastest-growing oil-consuming region, which already takes 60 percent its oil exports at some 3.8 million barrels a day (bpd).
“Zhenhua helped Iraq to penetrate the Chinese market and make more revenues for Iraq,” said a senior source familiar with the discussions on the deal, adding that a 50/50 proposed joint venture could be finalized in October or November.
Another source said the deal was pending regulatory approvals, giving no further details.
It is not clear where the JV would be located, but two of the sources familiar with the negotiations said the port city of Tianjin, near Beijing, was under discussion. Singapore is also among the options, they said.
All four sources declined to be named as they were not authorized to discuss commercial matters with media.
Zhenhua declined to comment. SOMO did not immediately respond to an email request for comment.

Under Pressure

China is under the pressure to cut oil purchases from Iran, OPEC’s third-largest producer, as the United States re-imposes sanctions on Tehran and threatens to choke off the Islamic republic’s oil exports to zero.
Amid the trade dispute between Washington and Beijing it is also unclear whether Chinese importers will be able to continue to import US crude.
The SOMO-Zhenhua deal would give China another crude supply option as the Iran and US oil flows are threatened.
Zhenhua’s relationship with SOMO goes back to former Iraqi President Saddam Hussein’s days, when China-based parent company defense conglomerate Norinco, was among the first Chinese entities active in Iraq’s oil and gas exploration.
Last year, Zhenhua won a term contract to supply diesel fuel to SOMO for the first time, and it also recently entered a deal to develop Iraq’s East Baghdad oilfield.
Zhenhua has been marketing Iraq’s main crude grade, Basra Light, for SOMO since the start of 2018 and has also sold some to Taiwan, said a separate Singapore-based trading source.
Zhenhua, the smallest of China’s state-run oil and gas majors, has over the past three years expanded its foothold in oil sales to independent Chinese refiners, which were only allowed to start importing crude from 2015 and now make up some 20 percent of China’s total crude imports.
Zhenhua’s crude sales to such independents, sometimes known as “teapots,” hit a record 6.5 million tons last year, or 131,000 bpd, equivalent to about 7 percent of overall teapot purchases, according to industry estimates.
China’s state oil majors Sinopec, CNOOC and PetroChina are regular Iraqi oil customers under term supply deals with SOMO or oilfield service contracts.


Careem looks to raise up to $200 million in China

Updated 20 November 2018
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Careem looks to raise up to $200 million in China

  • Investment bank China International Capital Corporation (CICC) is advising Dubai-based Careem, but it was not immediately clear when or if a deal would be finalized
  • Careem said in October it had secured $200 million in a new funding round from existing investors

HONG KONG: Careem, Uber’s main Middle East rival, is looking at raising between $100 million and $200 million from Chinese investors, a source with direct knowledge of the matter told Reuters.
Investment bank China International Capital Corporation (CICC) is advising Dubai-based Careem, but it was not immediately clear when or if a deal would be finalized, the source said, adding there was a lack of familiarity and interest among Chinese investors in Middle Eastern start-ups.
Beijing-based CICC and Careem both declined to comment.
Reuters reported on Monday that CICC and New York-based investment bank Jefferies were both advising Careem on potential investment options and capital raising, including a possible Middle East M&A deal with Uber.
Careem, which counts German car maker Daimler and China’s largest ride-hailing company DiDi Chuxing among its other backers, competes head-to-head with Uber in most of the major cities in the Middle East.
Careem said in October it had secured $200 million in a new funding round from existing investors, and that it expected to raise more to finance expansion plans.
That investment, combined with previous fund raising and company growth into new markets and segments, gave Careem an estimated valuation of more than $2 billion.
Reuters reported in March that Careem was in early talks to raise as much as $500 million.