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Did Baghdad Reject Nechirvan’s Offer?

By John Lee.

Reuters has reported an unnamed Iraqi government source describing what is supposedly the real reason for the delay in exporting 100,000 bpd from the Kurdish Regional Government to Turkey.

As part of an interim deal , this oil was intended to be exported through the Iraqi state pipeline network.

The oil represents a quarter of what the KRG is supposed to export via the State Oil Marketing Company (SOMO) according to Baghdad. Last week, Kurdish PM Nechirvan Barzani (pictured) offered to export 100,000 bpd via SOMO as a gesture of “good will.”

Baghdad then informed the KRG that it was not able to receive the oil due to a severely damaged part of the pipeline, but sources have noted the oil could have been re-routed.

Instead, an anonymous government of Iraq source told Reuters that the real reason Baghdad would not receive the oil was that it had simply rejected Barzani’s offer.

A source remarked,

“We did not even sit to discuss their proposal. Why should we accept for the region to export 100,000 bpd when the federal budget says they should pump 400,000?”

If this is Baghdad’s official position, then difficult negotiations look set to remain difficult.

(Source: Reuters)





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Iraq’s Oil Income Surges

By John Lee.

Iraq’s oil income is set to jump in April, boosted by the continued discount on Basra Light as of February last year, and increased shipments to Asia.

February saw a record 3.6 million bpd in exports, setting a 3 decade record for Iraq.

According to Bloomberg, who interviewed analyst Alexander Poegl of JBC Energy GmbH in Vienna, Iraq’s short term outlook for oil exports is looking positive.

The report notes how despite Baghdad’s dispute with the KRG and attacks on northern oil infrastructure are hindering exports, the south is increasing export capacity and this is reassuring buyers, as Poegl highlighted:

“They should be on track for a good April. There’s great export capacity available and that will help boost confidence among customers that they’ll get their crude when they want it.”

(Source: Reuters)



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Shahristani Welcomes Barzani’s ‘Good Will’ Offer

By John Lee.

Deputy Prime Minister for Energy Hussein al-Shahristani (pictured) has welcomed Nechirvan Barzani’s offer of sending 100,000 bpd of oil through the State Oil Marketing Company.

According to Aswat al-Iraq, Barzani’s widely reported “good will” gesture was also welcomed by former oil minister Ibrahim Bahr al-Uloum who was positive about the offer.

Until the dispute is resolved, a million barrels of oil from the Kurdish region cannot be sold and is waiting in storage at the Turkish port of Ceyhan, and Kurdish local government officials have had their salaries withheld by Baghdad.

(Source: Aswat al-Iraq)


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KRG Offers 100,000 bpd Through SOMO

By John Lee.

Kurdish Regional Government PM Nechirvan Barzani (pictured) has offered to send 100,000 bpd of oil from the Kurdish region through the State Oil Marketing Company, Reuters reports.

The move is designed to partially appease Baghdad in the on going and tortuous dispute over oil revenues and exports to Turkey. Currently over 1 million barrels of oil are in storage at the Turkish port of Ceyhan, exported via the Kirkuk-Ceyhan pipeline which became operational in January.

Many analysts remain skeptical of a breakthrough any time soon, especially in the run up to (and aftermath of) April’s general elections. Kurdish  and Iraqi officials have also  acknowledged the dispute has been very difficult to resolve.

A statement from Barzani explained the rationale behind the decision:

“The negotiations with Baghdad on oil export and budgetary matters are ongoing. These negotiations have not yet resulted in any acceptable agreements. As a goodwill gesture the Kurdistan Regional Government (KRG) has offered to make a contribution to Iraqi oil pipeline exports to give the negotiations the maximum chance of success”.

(Source: Reuters)



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Iraq’s Oil Exports Hit Record High

By John Lee.

Surprising skeptics, the International Energy Agency has announced that Iraq’s oil exports have hit 3.6 million bpd, a record 30 year high, The Wall Street Journal reports.

Previously exports were falling due to export bottlenecks, bad weather and extensive work on infrastructure, while some northern areas such as Kirkuk were adversely affected by insecurity.

More recently, efforts to clear Iran-Iraq war era shipwrecks from the Shatt al Arab waterway caused some disruption, but experts are divided as to whether the recent rise represents Iraq meeting their export target of 3.4 million bpd for the year or whether February’s achievement is a blip.

Notably, challenges involving pumping and storage capacity at the Fao peninsula and ongoing infrastructure improvements represent near term challenges to Iraq’s export target for the year.

If these challenges are surpassable, Iraq’s oil exports can be expected to rise considerably.

(Source: WSJ)




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Erbil and Baghdad: One Step Forward?

By John Lee.

Just as some observers were saying the dispute looked intractable, Deputy Prime Minister for Energy Hussein al-Shahristani has announced a potentially big breakthrough in the ongoing saga of deal and no deal between Baghdad and the Kurdish Regional Government over oil exports to Turkey and oil revenues.

Reuters has reported that after intensive negotiations which have seen Kurdish oil exports stuck at the Turkish port of Ceyhan, the KRG has agreed to export through SOMO, the State Oil Marketing Organisation.

If such a deal survives where previous agreements have stumbled, this leaves an ongoing dispute about the 17% of oil revenue the KRG is supposed to receive from Baghdad, which the KRG complains is frequently reduced. Since January, Baghdad has been withholding salaries of civil servants in the KRG and threatening to sue Turkey.

Shahristani has hailed the deal with SOMO as a positive step forward, and salaries for KRG civil servants will supposedly be paid for the month of January. Shahristani has said February’s payments will go through when the SOMO deal comes into effect.

(Source: Reuters)


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Turkey Defers to Baghdad on Kurdish Oil

By Semih Idiz for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

With hundred of thousands of barrels of its oil stuck in the Turkish Mediterranean port of Ceyhan, unable to be sold on the world market because of its continuing row with Baghdad, the Kurdistan Regional Government (KRG) is discovering just how landlocked and boxed in it is in terms of utilizing the vast oil reserves under its control.

Baghdad also has support from Washington, where administration officials fear the energy cooperation between Turkey and the KRG will increase the risk of splitting up Iraq — already in the throes of sectarian strife — and are consequently putting pressure on Ankara over its energy dealings with the Iraqi Kurds.

Iraq’s constitution says oil revenues, regardless of where the reserves are located in the country, have to go through Baghdad and allocates the autonomous Kurdish region 17% of total revenues.

Nouri al-Maliki’s government argues that the KRG can only export its oil after an agreement is reached between Erbil and Baghdad on how to proceed in this matter.

Baghdad has also threatened to cut the KRG out of its share of Iraq’s vast oil revenues, should it go ahead and sell its oil unilaterally.

Iraqi Oil Minister Abdul Kareem Luaibi told Reuters in January that the government would take legal action against Turkey and consider canceling all contracts with Turkish firms if Ankara enabled the exporting of KRG oil before an agreement between Erbil and Baghdad is reached.

Such an agreement, though, has been elusive because of Kurdish claims of sole ownership over oil reserves discovered in northern Iraq after the region gained political autonomy from Baghdad following the US invasion in 2003.

KRG officials are disappointed that a comprehensive package of agreements they signed with Turkey in November 2013 has not become fully operational yet.

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Iraq Becomes China’s Number Two Crude Exporter

By John Lee.

Intensive competition to supply China’s oil demand has combined with slowing demand for oil globally, and this is putting downward pressure on oil prices in 2014, Reuters reports.

Iraq and Russia have positioned themselves to be long term suppliers of the Asian giant, squeezing out African and Latin American producers trying to improve their terms for the Asian market. This intensive competition means that oil on the market is surpassing demand.

In the case of Iraq, the strategy to increase exports to Asia will see exports rise to 882,000 bpd, an increase of 62%, according to Reuters data. China’s slowing demand will still see a 7% rise in oil imports, but Iraqi and Russian exports will more than match this increase.

Iraq’s rise to become one of China’s main suppliers has been somewhat rapid, seeing the country become the 5th biggest supplier last year, overtaking Iran after cutting the price of its main crude, Basra Light.

(Source: Reuters)

(Tanker image via Shutterstock)

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