Vitol, the world’s biggest oil trader, has inked an agreement with the National Iranian Oil Company (NIOC) to loan it an equivalent of $1 billion in euros guaranteed by future refined products exports, according to sources who spoke to Reuters. This marks the first major pre-finance deal to be signed between Iran and a global oil trader since sanctions were lifted this time last year.
This is significant because it underscores how quickly Iran is recovering only a year after the lifting of sanctions. The country is on its way to achieving its goal of 4 M/bpd of production (currently at about 3.8 M/bpd) and has elicited some interest from foreign companies (mainly European) in its oil and gas sector, as it aggressively seeking to recapture its spot as OPEC’s number 2 producer, right behind archrival Saudi Arabia (it’s the group’s third-largest producer now).
While many western majors are reticent to enthusiastically reenter Iran’s oil sector, mainly due to complex regulations regarding still-existing sanctions, the Vitol deal shows how privately-held trading companies are more flexible and have the ability to negotiate agreements more quickly than public firms, according to the Reuters report.
The Vitol deal was signed in October and will become effective this month, one of the sources told the news agency. “It is in euro…with the interest rate of around 8 percent in exchange for oil products,” the source said, adding that the private sector rather than NIOC could supply some of the products.