Egypt Tries Crude Swaps To Import Crucial Foreign Oil

Egypt is offering to swap some of its domestic oil production for Iraqi crude better-suited to its ageing refining system, as Cairo’s budget woes restrict its ability to buy on international markets.

Egypt’s state-owned Egyptian General Petroleum Corp issued a tender to swap a 435,000-450,000 barrel cargo of its Qarun crude oil grade for a similar-sized cargo of Iraqi Basra Light for August delivery, a tender document showed.

The tender closes on July 14 with offers remaining valid until July 21. The tender specifies that the delivery will take place through storage-tank transfer at its oil hub Sidi Kerir on August 16.

Egypt has been largely unable to buy crude oil in the international market for more than a year due to a domestic subsidy scheme which absorbs some 20 per cent of state spending.

One of its major refineries, Midor, on the Mediterranean coast, was struggling to run at even half capacity without Iraqi oil and failed to award processing tenders last year as the economics were not attractive.

The oil crunch reached a peak under deposed President Mohamed Morsi. Queues at petrol pumps were common and sometimes led to protests and EGPC had to stop importing foreign crude for its domestic refineries.

Following the return of a military-led government last year, Arab Gulf states ramped up aid, including in the form of crude oil and oil products such as gasoline and diesel either as donations or with special terms.

Newly-elected President Abdel Fattah al-Sisi has also announced cuts in energy subsidies for the fiscal year 2014/2015 to ease its budget deficit.

TENDERS

Though the country produces and exports its own oil, it used to import up to nine million barrels per quarter to supply its vast refinery network, which needs to blend various types of crude oil to achieve optimal output.

“They started doing it (swap tender) for July a few weeks ago and will practically do it every month …They have better refining values with Basra,” one trader said.

The trading arm of Azeri Socar and oil major BP were the winners of the last tender, traders said, which involved two cargoes of Qarun, one cargo of Western Desert and at least two cargoes of Iraqi Basra Light delivered to Egypt.

One trade source specified that Socar and BP each took a cargo of Qarun, while BP took Western Desert. Socar sold at least one of the Iraqi Basra Light cargoes to EGPC.

EGPC is also expected to award another tender, which recently closed, for two cargoes of Basra Light and Qarun for August delivery.