China’s state-run Zhenhua Oil is set to sign a head of agreement that includes a proposed joint-venture with Iraq’s state oil marketer SOMO and for 2019 annual crude oil supply in Shanghai next week, two industry officials with direct knowledge of the matter told Reuters.
The agreement will be among deals expected at the China International Import Expo during Nov. 5-10, to be attended by thousands of foreign companies and Chinese buyers to demonstrate the importing potential of the world’s No.2 economy.
The joint-venture between SOMO and Zhenhua, which has been under negotiations for months, will help bolster Iraq’s position in Asia, the world’s biggest and fastest-growing oil-consuming region. Iraq is the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) oil cartel.
The new joint venture will be based in the northern Chinese port city of Tianjin, near Beijing, said the person, who declined to be named as he is not authorized to speak to media.
The source did not specify the volume of supply in the annual crude pact.
Companies had been expected to finalize the deal around November.
Zhenhua Oil, a subsidiary of China’s defense conglomerate Norinco, is also expected to renew at the expo an annual crude oil supply agreement for 2019 with Saudi state-run oil and gas firm Aramco, said the source, without giving further details.
Calls to a Norinco spokesman were not answered.
SOMO and Aramco did not respond to requests for comment.
The Zhenhua-SOMO deal will give China another crude supply option as the country is under pressure to cut oil purchases from Iran, OPEC’s third-largest producer, as the United States is set to re-impose sanctions on Tehran on Nov. 4.
China’s Iraqi crude oil imports rose to 32.28 million tonnes in the first nine months of the year, or 863,000 barrels per day, 15 percent more than the same year-earlier level, according to Chinese customs data.