"Iraqi oil" abandon partners and make way for the crude trade

The Iraqi oil marketing company (SOMO) has canceled two joint ventures and cut contracts with some European customers to seek to sell more of its oil as appropriate, according to Reuters reported.

After years of watching major oil companies and independent trading companies benefit from major business operations, state oil companies in North Africa and the Middle East decided to take away what they saw as potential lost revenue, the agency said.

The main solution was the establishment of joint ventures to acquire the necessary skills, followed by the Sultanate of Oman, which initially cooperated with the World Trade Company in the last decade. The Sultanate eventually purchased the joint Omani project.

"This is what they always aim at, like those joint ventures, learning from seasoned players and starting a company on their own," one source said.
Sumo has set up a joint venture in 2017 with Litasco, the Russian Lukoil commercial arm, but has emerged from it at the end of 2018, Reuters quoted four sources as saying.

A similar arrangement with China's Chinhwa Oil managed by Sumo was also abandoned, the sources said.

In a separate context, Somo briefly sold shipments on the Dubai Mercantile Exchange and through the Global Plats Standard & Poor's platform, while the company now sells crude more actively on its own.

Additional profits
Sumo is considering how best to exploit the knowledge of its "managing team," Sumo employees who worked for the joint venture on oil trade, one source said.

The State Oil Marketing Company believes that it can only carry out its trade operations at present.

"We need to re-evaluate what we have gained and how to employ it in our activity," he said.

After the resale of its oil has been scaled up, Somo is increasingly selling its crude through auctions, with the aim of obtaining additional profits from former trading companies.

Sumo forbids contract holders from reselling their shipments, but in practice previous complaints from Baghdad have largely been ignored.

Traders said that in 2019 some contracts with major European refineries and oil companies had been cut or substantially curtailed, partly because of resale.

Traders involved in Iraq's oil market said Sibsa, Total, Shell, BP and IPI were among those whose contracts were scrapped, according to Reuters.

By March, the quantities raised through auctions had jumped to more than six million barrels of Basrah Light, Basra heavy crude and newly recovered Kirkuk oil.