NIOC Readjusts Oil Sale Terms via Iran Energy Exchange

EghtesadOnline: Almost a month after Oil Minister Bijan Namdar Zanganeh adjusted the guidelines for crude oil sale via IRENEX, the ministry again tweaked purchasing terms to attract buyers.

News ID: ۷۴۹۲۳۳

21 December 2019

Amirhossein Tebianian, the National Iranian Oil Company representative in charge of petroleum products on IRENEX, said the new terms pertain to pricing and procedures.

As per the new instructions, crude oil and gas condensates will be offered at discounted rates for the first time. The spot price would be quoted in dollar premiums and be set as per key oil price indices, the Oil Ministry’s news portal Shana reported.

According to Tebianian, the NIOC considers the maximum discount based on major oil indices. Accordingly, each barrel of light crude oil will be offered $7 lower than Brent crude oil price for FOB delivery, Financial Tribune reported.

Heavy crude will be priced $8.5 lower than Brent prices and $6 discounts is offered to buyers of gas condensate, considering prices in Dubai’s energy market.

This is while in November the ministry had considered minimum prices quoted on trading day as the base price.

Another variation in the new guidelines relates to procedures about oil sale and interaction between buyers and the NIOC.

Henceforth IRENEX will refer the buyer to NIOC. The two parties will (then) enter into a purchase contract that will include details about transfer of cargo, settling of payments and related issues. This means that after buying the cargo, the buyer will terminate ties to  IRENEX and NIOC will take responsibility for completing the deal.

Advance Payment

As per the purchasing terms, those interested should pay 6% of the order value in rials or foreign currency prior to the start of trade. Only buyers making the advance payment would be eligible to bid.

Payments can be made in rials or foreign currency and the exchange rates would be based on open market rates on SANA system two days prior to the trading session.

SANA is a system operating under the supervision of the central bank that records average exchange rates from across exchange bureaux.

The minimum purchase order will be 1,000 barrels for land delivery and 35,000 barrels for sea delivery.

This is the third time the NIOC is modifying conditions for oil trade on the energy bourse. In April it had adjusted the terms related to the minimum volume and pricing mechanism, apparently to no result.

Except for one initial transaction in the early offerings, most of the subsequent oil offers have fallen flat with no buyers.

According to IRENEX data, the NIOC has hardly managed to sell 1.1 million barrels of crude on the market after the program started in October 2018.

Offering crude oil on the stock market is a government move to involve the private sector and international companies in the oil industry, which has long been under government control.

Role of private companies in oil sale has recently gained traction, particularly after the new US sanctions, which among other things, hit Iran’s oil industry with the declared aim to undermine the oil-based economy.

As per law, the Oil Ministry is obliged to offer on a monthly basis 2 million barrels of light crude, 2 million barrels of heavy crude oil and 2 million barrels of natural gas condensates on IRENEX. However, due to the lack of buyers, the scheme has been suspended since October.