EghtesadOnline: After failing to attract customers for crude oil offered on the Iran Energy Exchange, the National Iranian Oil Company says it plans to again tweak rules and procedures in the process, an official with the company said.
Amirhossein Tebianian, NIOC’s representative in charge of offering petroleum products on IRENEX, said the company is revising earlier instructions issued by the Oil Ministry for selling crude oil on the bourse.
“To attract buyers we are considering issues related largely to updating terms outlined in the ministry’s instructions,” IRNA quoted him as saying.
According to the official, oil will be offered soon based on the new instructions, Financial Tribune reported.
Tebianian said there is no legal limit on the presence of foreign customers in the energy market.
Highlighting one limitation, however, he noted that Iran’s bourse is not capable of conducting international trade.
“This has made it difficult for the presence of foreigners in the market because they should first become familiar with the bourse mechanism.”
This is not the first time the NIOC is reconsidering oil sale conditions in the energy market. In April the company adjusted terms related to the minimum volume and pricing mechanism.
Accordingly, the minimum purchase order was reduced from the previous 35,000 barrels to 1,000 barrels for land delivery.
In past procedures, 1 million barrels of crude oil was offered in cargos of 35,000 barrels each and buyers were required to purchase at least one cargo.
However, the minimum purchase for sea delivery remains unchanged.
Also the payment period was extended from 60 to 90 days with an obligation on potential buyers to pay 6% of the order value in rials or foreign currency two hours before the beginning of trading time.
Despite sweetening the terms and conditions, the desired results have not been achieved. Except for one initial transaction in the early offerings, most of the subsequent oil offers have fallen flat with rarely any customers.
According to the IRENEX website, the NIOC has hardly managed to sell 1.1 million barrels of crude via the energy market since the program started in October 2018.
However, the capital market mechanism for other oil derivatives, such as gasoline and diesel fuel, has been successful.
Oil Minister Bijan Namdar Zangane confirmed earlier in the week that the sale of oil products in the bourse has been beyond expectations and admitted that the crude oil offers left much to be desired.
Offering crude oil on the stock market is a government move to involve the private sector and international companies in the oil industry, which has long been under government control.
Role of the private sector in oil sale has gained traction, particularly after the new US sanctions, which among other things, hit the Iranian oil industry, in bid to undermine the Iranian economy.
Tebianian pointed to the legislative obligation that has obliges the Oil Ministry to offer crude oil on the IRENEX on a regular basis. He said the NIOC has completely fulfilled its obligations as per law.
As part of the current fiscal budget (March 2019-20), the Majlis obliged the ministry to offer on a monthly basis 2 million barrels of light crude, 2 million barrels of heavy crude oil and 2 million barrels of natural gas condensates on IRENEX.