BRAZIL BOOSTING OIL TIES WITH IRAN AFTER LOSS OF IRAQI TRADE

Brazil continues to strengthen ties with Iran, following the loss of key trading partner Iraq as a result of the Persian Gulf crisis. Braspetro, overseas exploration arm of Brazil's Petroleos Brasileiro SA, is participating in a tender for a major natural gas development program in Iran. It also plans to participate in another tender, one covering delivery of as many as 24 onshore and offshore drilling rigs to National Iranian Drilling Co. (NIDC). Meanwhile, Brazil has secured better terms

April 22, 1991

3 min read

Brazil continues to strengthen ties with Iran, following the loss of key trading partner Iraq as a result of the Persian Gulf crisis.

Braspetro, overseas exploration arm of Brazil's Petroleos Brasileiro SA, is participating in a tender for a major natural gas development program in Iran. It also plans to participate in another tender, one covering delivery of as many as 24 onshore and offshore drilling rigs to National Iranian Drilling Co. (NIDC).

Meanwhile, Brazil has secured better terms on its crude supply contract with Iran.

BRAZIL'S IRAN, IRAQ TIES

Prior to Iraq's invasion of Kuwait last August and the resulting international embargo of both countries' exports, Brazil had received most of its oil exports from those two nations. Iran was one of the first countries to help Brazil make up its oil imports shortfall in the wake of the crisis.

A Brazilian trade mission to Iran at yearend 1990 under former Infrastructure Minister Ozires Silva sought to offer Brazilian goods and services to Iran to help the latter with reconstruction efforts related to its war with Iraq.

Silva and Petrobras Commercial Director Medeiros Alvarenga met with Abdib, Iran's basic industry development association entrusted with a leading role in rebuilding Iran's infrastructure under a 5 year, $120 billion plan.

Recession has left considerable civil construction, capital goods, and services idle capacity in Brazil.

That was made worse by the loss of key trading partner Iraq, which Brazil had supplied with arms and industrial equipment and services. Brazilian engineering/construction giant Mendes Junior is unable to receive about $1 billion in credits for construction projects it undertook in Iraq (OGJ, Sept. 10, 1990, p. 21).

DRILLING, RIG TENDERS

The tender for gas development in Iran involves 14 wells in Kanghan and Aghar fields in the southwest part of the country.

The wells are each expected to produce an average 70 MMcfd.

The contract is to be valued at $200-300 million, Alvarenga said.

Mobilization will take 6 months and drilling and installation of production facilities another 12 months.

Braspetro is participating in the tender with Brazilian drilling contractor Enterpa. It plans to use five rigs on the job, two from Enterpa and the other three to be purchased from Brazilian suppliers.

Other bidders include companies from Canada, Japan, France, Britain, and Germany.

The tender by NIDC, a subsidiary of National Iranian Oil Co. (NIOC), calls for 21 onshore rigs as well as three jack ups rated to work in 70 m of water.

NIDC currently operates 21 onshore rigs.

CRUDE SUPPLY TERMS

Brazil renegotiated crude supply contracts with NIOC covering 200,000 b/d of crude, with terms retroactive to Nov. 1, 1990.

Contract prices were trimmed by a total of $10 million for deliveries in November and December 1990. The cuts were 600/bbl for light crude and $1.22/bbl for heavy. Payment terms were extended to 30 days from 20 days, and a letter of credit is no longer required.

Silva said Iranian Oil Minister Gholamreza Agazadeh told him Brazil is a top priority customer for future oil sales.

Brazil has two 100,000 b/d oil supply contracts, one running July 1990-July 1991, the other renewed in December 1990.

Until the 1990 contracts, Brazil had not purchased crude from Iran since August 1989. In the 1980s, Brazil exchanged industrial goods and services and arms for crude from Iran and Iraq.

The current arrangement does not include such barter agreements, and there were no representatives of Brazil's weapons industry among the trade delegation.