Kurds sell crude cargoes for $100 million

The Kurdish region of northern Iraq is making

close to $100 million from the sale of each
million-barrel crude cargo via a controversial
export deal with Turkey, some 9% below cur-
rent market prices for an alternative crude,
official documents show.
The Kurdistan Regional Government sold
its second crude cargo lifted from the Turk-
ish Mediterranean port of Ceyhan at $101/b,
shipping documents seen by Platts reveal, as
the semiautonomous region continues to skirt
Baghdads protests to become an indepen-
dent crude exporter.
The 1.048 million barrels of medium sour
crude loaded June 9 onto the KRG-chartered
United Emblem tanker sold for a total of
$106 million, a senior KRG official confirmed
Wednesday, adding that KRG net $97 million
from the deal.
The shipping documents, including a bill
of lading and inspection docket with testing
data, additionally show the cargo had an API
gravity of 31.94 with a sulfur content of 2.6%.
The value of the crude is roughly an
11% discount to current Brent futures and
9% below current values for Russias Urals,
another medium, sour grade crude which can
be delivered to the Mediterranean.
The Russian export blend has an API gravity
of 32 and a sulfur content of about 1.2%. But
in terms of crude quality, the KRG crude is clos-
er to Kuwaits export blend which has a typical
API of 31.4 and a sulfur content of 2.52%.
Before Iraqs main export pipeline to Cey-
han was shut due to attacks in March, the
countrys Kirkuk crudewith an API of 35-36
degrees and a sulfur content of 2%was sell-
ing at $110.02/b as assessed by Platts.
The confirmed selling price for KRG crude
follows a report, denied by the KRG, that Erbil
had been forced to accept half the market
price on its crude to overcome buyer concerns
over the legality of the exports without Bagh-
dads consent.
More cargoes
Turkeys energy minister Taner Yildiz said
earlier this week that Turkey receives $1/bar-
rel for transiting crude from Kurdistan through
the Turkish section of the Kirkuk-Ceyhan pipe-
line. He said the KRGs first cargo, lifted on
May 22, was also sold for $97 million.
The KRGs second export cargo was trans-
ferred from the United Emblem to another ves-
sel not chartered by the KRG, the SCF Altai, off
the coast of Malta before the United Emblem
returned to Ceyhan to lift a third cargo.
The SCF Altai later discharged its cargo
at the port of Ashkelon, on Israels southern
Mediterranean coast, according to vessel-
tracking data.
The United Emblem is now back in the
ship-to-ship transfer zone offshore Malta, car-
rying a third Kurdish crude cargo, tracking data
shows. A fourth KRG cargo completed loading
earlier this week onto the United Kalavrvta and
a fifth cargo is expected to be loaded at Cey-
han later this week, Turkish officials have said.
The Kurdish shipments have heightened a
long-standing war of words between the KRG
and Iraqi central authorities in Baghdad, both
of which claims jurisdiction over producing
and marketing the crude.
Baghdad has, among other things, alleged
that the KRG has sold oil to Israel, contraven-
ing government principles.
It is unclear whether that is the case as a
number of foreign trading companies store oil
at Ashkelon and Israeli refiner Bazan Group
has declined to comment.
Production growth
Market sources have said Baghdad
recently sent several letters to potential cus-
tomers indicating that any company receiving
Kurdish oil lifted from Ceyhan without the
consent of Iraqs SOMO would face legal con-
sequences.
Iraq has also filed a request for arbitra-
tion with the International Chamber of Com-
merce against Turkey for allowing the crude to
be exported from Ceyhan.
In a practice that Baghdad also deems
illegal, Erbil has been exporting crude from its
fields to Turkey by truck for more than a year.
However, the KRG only started sending piped
volumes through the Iraq-Turkey export line to
Ceyhan last December.
KRG and Turkish authorities have put
the recent flow of Kurdish crude at between
120,000 and 125,000 b/d.
According to official figures released late
Tuesday, Kurdish crude oil and liquids output
rose to an average of 236,000 b/d of oil
equivalent in January, up 18% from December
2013, A total of 7.32 million barrels of oil
equivalent were produced by seven operators
across the region, compared with 6.2 million
in December, the Ministry of Natural Resourc-
es said in its latest monthly oil report.
The biggest increase in output came from
the Taq Taq field, which is operated by Anglo-
Turkish joint venture, Genel Energy. Production
rose from 1.49 million barrels in December to
2.6 million barrels in January. A total of 1.9
million boe were exported, of which .4 mil-
lion boe was transported by road tankers, the
KRG said. It said regions two main refineries;
the 34,000 b/d Bazian and 85,000 b/d Erbil
refineries consumed 3.1 million barrels, at
almost 99,000 b/d. Staff reports
This article was published on June 24, 2014
KRG exports being sold 9% below alternative oil
n
Discount to market price reflects legal risks
n
KRG crude quality similar to Kuwaits
n
Fifth cargo to load this week
Details of Kurdish crude loadings from Ceyhan
Source: Platts Data
I TALY
TURKEY
I SRAEL
MOROCCO
I RAQ
TURKEY
I RAQ
Ceyhan
Baghdad
Tawke
Taq Taq
United Leadership
Anchored offshore Morocco
United Emblem
Headed for Malta, half way
between Crete and Malta
United Emblem
Discharged onto SCF Altai*
* The SCF Altai discharged its cargo at Ashkelon on June 22
United Kalavrvta
Northwest of Cyprus,
headed for Augusta, Sicily
[OIL ]
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