Glencore entertains $8 billion oil deal in Kurdistan Region

ERBIL, Kurdistan Region — Swiss energy and trading company Glencore, is seeking to raise $550 million through debt issuances funded by investors to finance greater oil ventures in the Kurdistan Region.

According to a Reuters report published on Friday, a document has reportedly been sent to a small number of prospective investors and hedge funds which specialize in high-risk, high-yield investments and emerging markets.

“Glencore expects to enter into a new five-year agreement with the government of Kurdistan to buy its crude, with deliveries rising from one cargo in January, to two in February-March, four in April and six from May onwards.” Reuters wrote.

Glencore paid the Kurdistan Regional Government (KRG) $300 million cash advance in March for oil.

Six cargoes per month would be worth over $1.7 billion a year using the recent price of $40 per barrel, and more than $8 billion over the five years. The Kurdistan Region has been exporting oil through the Turkish port of Ceyhan.

The five-year debt note would have an interest rate of 12 percent. The Swiss company was also seeking a 36-month grace period before it starts repaying the debt.

"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," said one industry source to Reuters, alluding to interest rate.

Kurdish and coalition forces have continued to secure Iraq’s cities and resources in the fight against Daesh, making potential investors weigh the risks of investing against the rewards.

Additionally, Glencore and other companies have kept a low profile in dealing with the Kurdistan Region, fearing lawsuits and repercussions from the Iraqi central government.

Glencore’s website had not made the report available as of Saturday.

The KRG began independently exporting oil in the middle of 2015 after it had not received its monthly share of the federal budget from Baghdad for more than a year.