Zhenhua Oil is set to sign a letter of intent this week with Iraq’s state oil marketer SOMO for establishment of a China joint venture, Reuters reports, citing industry sources familiar with the matter.
The agreement will be among several deals expected at the China International Import Expo in Shanghai, a trade promotion event that will be attended by thousands of foreign companies and Chinese buyers, according to the report.
The new joint venture will be based in the northern Chinese port city of Tianjin, a source was quoted as saying.
The joint venture between SOMO and state-run Zhenhua, which has been under negotiations for months, will give China another crude supply option as the country is under pressure to cut oil purchases from Iran, as the United States is set to re-impose sanctions on Tehran.
China’s Iraqi crude oil imports rose to 32.28 million tons in the first nine months of the year, or 863,000 barrels per day, 15 percent more than the same year-earlier level, according to Chinese customs data.
At the Shanghai expo, being held from Nov 5-10, Zhenhua Oil is also expected to renew an annual crude oil supply agreement for 2019 with Saudi state-run oil and gas firm Aramco, a source told Reuters.
Zhenhua Oil is a subsidiary of China’s defense conglomerate Norinco.
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