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Iran finalising crude sales contract with OMV

08 May 2017 12:59 (+01:00 GMT)
Iran finalising crude sales contract with OMV

Dubai, 8 May (Argus) — Iran's state oil company NIOC is close to finalising a term contract to supply Austrian energy group OMV with 40,000 b/d of Iranian crude, managing director Ali Kardor said.

Part of the proceeds for the crude will be used to repay debts Iran owes to the Austrian company for some exploration work carried out in Iran more than a decade ago, he said.

"This agreement will help Tehran pay its outstanding debts to OMV," Kardor said in Tehran.

OMV carried out exploration work at the Mehr block for five years after it was awarded the rights to explore the license in 2001. It went on to discover the Band-e-Karkheh oil field in 2007, when it was originally estimated to hold 2bn bl of oil.

NIOC more than doubled this estimate to 4.5bn bl in 2009 after discovering a new oil layer.

Kardor did not clarify what Iran's standing debt was to OMV, but said 7.25pc of the price of these barrels would go towards paying the debt off, with the remainder going to the country's treasury.

OMV received its first spot delivery of Iranian crude following the January 2016 lifting of all nuclear-related US and EU sanctions last September.

Kardor said the crude sold to OMV under this deal would be destined in part for Europe and in part to the Latin American market — a new market for the Opec producer.

"Through this contract, Iran will have paid off its oil debts and found a new market for its crude in South America," Kardor said. He did not explain why Iran needed to use OMV as an intermediary in crude sales to the region.

This comes as part of Iran's efforts to further diversify its crude oil customer base following the lifting of economic sanctions.

Iran has more than doubled its crude exports to above 2mn b/d since January. Kardor said Iran's total crude and condensate exports were 2.5mn b/d in Farvardin — the first month of the new Iranian calendar year which began on 21 March.

Iran expects its crude and condensate exports to average 2.7mn b/d in the current Iranian year, up from around 1.3mn b/d while the country was still under sanctions.