ERBIL, Kurdistan Region (Kurdistan24) – Swiss mining company Glencore is looking to raise USD $550 million from investors to secure a high-reward market in the Kurdistan Region which is currently at war with the so-called Islamic State (IS), Reuters reported on Saturday.
Crude oil in the Kurdistan Region has been the target of different Western oil traders in the past two years since the Region began selling its oil independently without referring to the federal government of Iraq.
The Region’s oil is comparably cheap with other countries’ oil markets due to the risk of the Baghdad government suing any company involved in the Region’s crude oil without prior agreement with the federal government.
According to Reuters, the Kurdistan Regional Government (KRG) borrowed around two million USD from Glencore’s rivals, including Vitol, Petraco, and Trafigura which they aimed to repay in oil.
Glencore, who entered the Kurdistan oil market in 2016, had already lent $300 million to the KRG. The debt is being repaid around $25 million per month.
“Glencore expects to enter into a new five-year agreement with the government of Kurdistan to buy its crude,” Reuters reported.
“Six cargoes a month would represent a quarter of overall exports from Kurdistan and would be worth over $1.7 billion a year at today's price of around $40 per barrel for Kurdish oil, and more than $8 billion over the course of five years,” the report continued.
According to Reuters, the company aims to gain 12 percent interest rate within a five-year note.
As of Sunday, Glencore has not released any statements or comments about the report.
The Kurdistan Region has faced a financial crisis since the beginning of 2014 when Baghdad blockaded the KRG’s federal budget share, accusing the Region of seeking independent oil sales.
“You can argue that in a way it is not Glencore but Kurdistan who is paying that interest rate as it is the ultimate borrower,” an industry source close to the deal told Reuters.
Editing by Karzan Sulaivany