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Basra Light Crude may Split into 2 Grades

By John Lee.

The Iraqi State Oil Marketing Organization (SOMO) has proposed splitting its Basra Light crude supply into two grades.

Reuters cites trade sources as saying that SOMO and has requested feedback on the proposal by the end of the week from buyers in Asia.

Iraq now plans to offer two grades of crude for exports from its southern terminals: “light” with an API gravity of 29 degrees, and “heavy” with an API gravity of 24-25 degrees.

SOMO would set monthly official selling prices (OSPs) for each grade.

(Source: Reuters)

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Iraq Bans KRG Tankers

By John Lee.

Platts reports that Iraq has banned three oil tankers from loading at its oil terminals.

in response to direct exports of crude by the Kurdistan Regional Government over the objections of Baghdad, shipping market sources said Friday.

The United Carrier (pictured), the United Dynamic and the Nautilus have previously transported crude on behalf of the KRG. The United Dynamic and the United Carrier are managed by Greece-based Marine Management Services (MMS).

A document from Iraq’s State Oil Marketing Organization (SOMO) gave no reason for the ban, but a chartering source told the news agency:

Ships that loaded Kurdish crude have been blacklisted by Iraq …

“Maybe they [shipping companies] are getting a high premium [for loading Kurdish] crude and their activity is not reported.”

(Source: Platts)

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New US Airbase ‘No Threat To Iran’

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Spokesman For Iraqi Kurdish Govt: ‘New US Airbase in Erbil No Threat To Iran’

NIQASH interviewed Safeen Dizayee, the spokesperson for the government of semi-autonomous Iraqi Kurdistan. During a candid and wide ranging conversation, Dizayee spoke about why the US is building a new airbase in the region, where exactly Iraqi Kurdish oil is going and whether refugees in the region are being maltreated.

Over the past few months, Iraqi Kurdistan has come under attack from Sunni Muslim extremists in the group known as the Islamic State, it has become home to over a million refugees and it has also been subject to a “financial blockade” by the Iraqi government in Baghdad.

NIQASH held a wide-ranging conversation with Safeen Dizayee, the spokesperson for the Iraqi Kurdish government in the semi-autonomous northern region and a member of the region’s biggest political party, the Kurdish Democratic Party.

The conversation covered everything from the establishment of a new US air base in Iraqi Kurdistan to whether Iraqi Kurdish authorities were discriminating against Arab refugees. He also discussed whether Iranian and Turkish reactions to Iraq’s security crisis were adequate as well as where exactly Iraqi Kurdish oil was being exported to, and how much of it was going there.

Dizayee also commented on whether Iraqi Kurdish authorities might be getting any closer to resolving their long standing disputes with the government in Baghdad, especially now there is a new Prime Minister in charge.

The conversation has been split into three parts for ease of reading.

On US Plans To Build Air Base in Erbil

NIQASH: Apparently the US has also decided to build a military base – maybe more than one – in Iraqi Kurdistan. What can you tell us about this?

Safeen Dizayee: Discussions are continuing about the specifics of this issue. Nothing has happened on the ground as yet.

NIQASH: Would this base be a substitute to the nearest US base, the Incirlik Air Base in Turkey?

Dizayee: No. Incirlik Air Base is a NATO base and it will remain so. The prospective air base in Erbil is in order to confront the IS group in the nearby area.

NIQASH: Do you think that the Iranians will see this as a threat to their influence in the region?

Dizayee: Incirlik Air Base and other US military bases in the Gulf States – in places like Bahrain, Qatar, Kuwait and the United Arab Emirates – are also close to Iran. The base to be built in Erbil is all about fighting the IS group, not about confronting Iran, or any other country, in any way. We have stressed time and again that we don’t want Iraqi Kurdistan to become a battlefield for major powers in the region.

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Oil Exports Fall in August

By John Lee.

Reuters reports that Iraq’s oil exports fell from $7.8 billion in July to $7.1 billion in August.

Citing sources at the State Oil Marketing Organisation (SOMO), the report said that 73.6 million barrels of oil were exported in August at an average price of $97.4 per barrel, down from $102.8 in July.

This averages 2.375 million bpd, down from 2.442 million bpd in the previous month.

(Source: Reuters)

(Oil image via Shutterstock)

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BP, CNPC Increase Stakes in Rumaila

By John Lee.

Reuters reports that a revised contract signed last week by BP and China’s CNPC for the Rumaila oilfield has raised both companies’ stakes in the project.

Thamer Ghadhban (pictured), energy adviser to former Prime Minister Nuri al-Maliki, told the news agency that BP’s share has been increased from 38 percent to 47.6 percent, and CNPC’s from 37 percent to 46.4 percent.

The stake owned by Iraq’s State Oil Marketing Organization (SOMO) was cut from 25 percent to 6 percent.

It was reported earlier this week that output targets for the supergiant field had been reduced, and the contract period extended.

(Source: Reuters)

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Gazprom Starts Oil Deliveries from Badra

By John Lee.

Russia’s Gazprom Neft, the operator of the Badra oil field (pictured) in Iraq, has announced that first oil from the field is now being delivered to Iraq’s main pipeline system for transfer to the export terminal in Basra, on the Persian Gulf.

Current deliveries from Badra to the pipeline stand at over 15,000 barrels of oil per day and this level should be maintained until the end of 2014.

According to the service contract with the Government of Iraq, the consortium of investor companies will begin receiving a share of the oil produced at the field after a period of 90 days following launch of commercial supply.

All of the oil produced in southern Iraq, including at Badra, is Basrah Light oil. The Iraqi State Oil Marketing Organization (SOMO) is responsible for oil sales and each quarter will be delivering a share of oil to the investor companies to reimburse their initial project costs.

Once these project costs have been covered, the investor companies will receive remuneration in kind for ongoing development at the rate of $5.5 of oil per barrel produced. Each investor company will be selling their share of oil independently.

First oil from the Badra field was produced in December 2013. Final commissioning at the field and testing of production and transportation infrastructure began in May 2014. Two wells are currently in production at the field and a further three wells are being drilled under a contract with the Chinese company ZPEC. According to the service contract production at the field will achieve 170,000 barrels of oil per day.

Alexander Dyukov, Chairman of the Management Board of Gazprom Neft, said:

Over the period of just a few years, a consortium of companies led by Gazprom Neft has fully prepared Badra, one of the most complex geological field structures in Iraq, for full-scale commercial development.

“This is the first major international project in upstream the company has implemented from scratch. The unique experience gained during this project will contribute to our development of future projects both in Russia and internationally“.

The field is being developed by Gazprom as lead partner (30% stake), along with Korea’s KOGAS (22.5%), Malaysia’s Petronas (15%), Turkey’s TPAO (7.5%), and Iraq (25%).

(Sources: Gazprom Neft, KOGAS)

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The Oil Will Continue to Flow

By Padraig O’Hannelly.

The Kurdistan Regional Government (KRG) has upped the ante in the continuing dispute with Baghdad over oil export revenues.

In response to what it describes as “the Iraqi federal government … not sharing revenues in accordance with the Iraqi Constitution“, the KRG has threatened to take legal action against anyone who buys oil from the State Oil Marketing Organisation (SOMO).

This follows Baghdad’s earlier threat to take legal action against buyers of Kurdish crude, which is now flowing in greater volumes through the new pipeline to the Turkish port of Ceyhan; these threats appear to have frightened some potential buyers, with several tanker-loads of Kurdish crude still remaining unsold after weeks at sea.

It now seems probable that these issues will have to be resolved in the context of more autonomous or even fully independent Kurdistan, which many expect to follow a planned referendum in the region.

In the meantime, it seems unlikely that the potential for courtroom battles will stop the flow of oil from either Kurdistan or Southern Iraq to where it is needed.

(Flag image via Shutterstock)

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KRG Warns SOMO Customers

The Kurdistan Regional Government (KRG) threatened on Wednesday to take legal action against buyers of Iraqi oil unless the autonomous region is paid its share of revenue from any sales.

The full text of the statement from the KRG follows:

Under Article 112 of the Iraqi Constitution, the Iraqi federal government is legally required to distribute oil and gas revenues from present fields “in a fair manner in proportion to the population distribution in all parts of the country.”

Under Article 112, the KRG is entitled to 17% of all proceeds from oil sales by the Federal Oil Ministry and the State Oil Marketing Organisation (SOMO) (or any other division of the Iraqi federal government).

The KRG has the right, in circumstances where the Iraqi federal government is not sharing revenues in accordance with the Iraqi Constitution, to take such action as the KRG considers appropriate to obtain all entitlements the Iraqi federal government is required to pay to the KRG under the Iraqi Constitution. This right is reflected in Kurdistan law.

Since at least 2005, the Federal Oil Ministry has failed to comply with its constitutional and legal duties to the KRG, including under Article 112. The Federal Oil Ministry and SOMO continue to sell and to seek to sell oil, gas and other petroleum products to third parties, and to retain the full proceeds of such sales, all in violation of the KRG’s express constitutional and legal rights, and without the participation or approval of the KRG.

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