By John Lee.

Platts reports that Iraqi oil production rose slightly in February to 2.963 million barrels per day (bpd), up by 43,000 bpd over January.

Figures from the State Oil Marketing Organization (SOMO) show that Iraq exported 2.536 million bpd last month, 177,000 bpd above January’s tally of 2.359 million bpd, and only 78,000 bpd below the September-November average of 2.614 million bpd, when it registered the highest export rates since 1990.

But oil production increases have lost momentum in recent months, partly due to infrastructure constraints in the south. Total oil production in February is still 272,000 bpd lower than the post-1990 record of 3.235 million bpd achieved only five months ago.

Production in the South rose by 45,000 bpd in February (month-on-month) to 2.281 million bpd, while production from the northern fields fell by 2,000 bpd in February to 682,000 bpd.

There was no contribution from the Kurdistan Regional Government, which suspended oil exports in mid-December as a result of the continuing row with Baghdad over oil payments. The Kurdish province had supplied 152,000 bpd in November, the highest volumes exported from the province through the federal pipeline to date.

Internal supply rates to local refineries and power stations in February totaled 598,000 bpd, compared with 675,000 bpd in January with the 77,000 bpd decline in domestic supply helping to boost export rates.

(Source: Platts)

By John Lee.

Four industry sources have told Reuters that Swiss oil trader Trafigura is still indirectly supplying gasoline to Iraq through another firm, despite being banned from participating in tenders for 2013 after buying oil from Iraqi Kurdistan.

Baghdad’s State Oil Marketing Organization (SOMO) finalised a deal in November to buy 1.56 million tonnes of gasoline from a pool of suppliers that excluded Trafigura. The contract was awarded to Vitol, Glencore, BP and Sima, an Iranian-Azeri company registered in Fujairah with an address in Dubai.

But while Trafigura’s name may not be on the suppliers list, traders say the firm is behind the gasoline supplies of Sima. They say a number of vessels delivering gasoline to Iraq’s southern Khor al Zubair terminal for Sima loaded their cargoes from Trafigura’s storage tanks at Jebel Ali in the United Arab Emirates.

“It’s a well-known secret that Trafigura back Sima’s deliveries to SOMO,” said a gasoline trader. “Hardly a secret really.”

In 2012 Trafigura delivered as much as 60,000 tonnes a month, worth more than $65 million at current prices.

(Source: Reuters)

By John Lee.

Reuters reports that Iraq has sweetened the terms for oil contract buyers and is becoming more competitive on pricing.

Oil Minister Abdul Kareem Luaibi [Elaibi], who met customers in Vienna last month on the sidelines of the OPEC meeting, told the news agency:

“We were keen that I personally meet all the companies that buy Iraqi crude oil and hear their complaints directly from them … After considering these problems in detail, we decided to improve the contractual terms and conditions as well as enhance the competitiveness of Iraq’s crude oil.“

Buyers had expressed concerns over the higher prices and the variable quality of Iraqi oil.

Customers said one change the Iraqis have offered to make is to demurrage – money to be paid in the event of a cargo loading outside the agreed period – which buyers said was costing them a fortune.

“They heard loud and clear that the demurrage payment, or lack thereof and huge delays to what was agreed, was affecting business,” said a source at one company which buys Iraqi crude.

The customer, though, was “not overwhelmed” by the offer and a second buyer, involved in an oilfield project in southern Iraq, plans to visit Baghdad to follow up with the Iraqi State Oil Marketing Organization (SOMO).

“So far, the changes are really not significant for us,” said the second buyer. “We’re still in discussions.”

But Iraq also has another problem with the variable quality of the Basra Light and Kirkuk crude streams, due to the erratic flow of Kurdistan oil into the Kirkuk stream and the start-up of new fields in the south.

Changes in the crude’s sulphur content and API gravity – a measure of its weight – affect its value and can cause processing problems for refineries configured for a certain gravity and sulphur level.

Iraq has managed to stablize the API of Basra Light at around 30 degrees, an Iraqi official said. A regular buyer of the grade confirmed the change.

Keeping the quality of Kirkuk stable will be more of a challenge after the Kurdistan Regional Government (KRG) halted shipments through the Baghdad-controlled Iraq-Turkey pipeline in December, due to the long-running feud over contracts and payments.

Luaibi told Reuters a subsea pipeline in the Gulf would be opened soon which would allow two offshore Single Point Moorings (SPMs) to load simultaneously, boosting capacity in the south to above 2.6 million bpd from about 2.3 million bpd now.

Iraq is also addressing concerns about high official selling prices for its Basra Light and Kirkuk crude oils, buyers say.

Despite the increasing supply, Basra Light has been more expensive for Asian buyers than a rival crude from Saudi Arabia, Arab Medium.

For February 2013, however, Iraq chose to raise its Basra Light price to Asia by 5 cents a barrel, while Saudi Arabia increased the prices of its Arab Light, Medium and Heavy crude to customers in the East by 15-30 cents.

“Most importantly, they recently have become more competitive with their prices compared to the usual following of the Saudi formulae,” said a long-time buyer of Iraqi oil.

A second customer felt the Iraqis could do more. “A little bit but not enough. They need to get more realistic,” the buyer said.

(Source: Reuters)

Iraq’s State Oil Marketing Organization (SOMO) has issued a statement suggesting it will take legal action against companies exporting crude oil without dealing with the central government, including the confiscation of cargoes and the filing of lawsuits against sellers, buyers and transporters.

The statement reads as follows:

“In accordance with the provisions of Laws No. 101 of 1976 and 272 of 1987, the Iraqi Ministry of Oil announces that the Oil Marketing Company (SOMO) is the sole legally authorised entity that has the exclusive right to export and import crude oil, gas and oil products from/to Iraq.

“Consequently, the Iraqi Ministry of Oil and SOMO, as its affiliate, shall reserve the right to take all legal actions against any company or entity that may deal with bodies other than SOMO, in addition to the confiscation of cargoes smuggled across borders as well as suing sellers, purchasers and transporters of such cargoes inside and outside Iraq.“

Earlier this month, Genel Energy started exporting crude oil by truck directly into Turkey from its Taq Taq oil field in Iraqi Kurdistan, after official exports from the region were halted until the federal authorities pay the 350 billion dinars ($300 million) dues owed to international companies working in the Kurdish area.

(Sources: SOMO, Reuters, Associated Press)

By John Lee.

A member of Iraq’s Oil and Energy parliamentary committee has said that the Ministry of Electricity has taken over the task of inspecting the fuel used in electricity stations from the Ministry of Oil’s State Oil Marketing Organization (SOMO).

Suzan al-Saad told AIN that there have been problems with the quality of the fuel used in electricity stations, and this has caused many problems and wasted of a lot of money.

In many cases the problems are caused by the importing ships not meeting the required technical specifications.

(Source: AIN)

(Picture: Taji power station)

By John Lee.

Reuters reports that top oil trader Vitol has apologised to the Iraqi government for buying Kurdish oil that was exported via Turkey without Baghdad’s permission.

Iraqi Oil Minister Abdul-Kareem Luaibi [Elaibi] said on in Vienna:

“In terms of Vitol, they have cancelled the Kurdish amount and they apologised officially … As for LUKoil, there will be a meeting about this concern – maybe tomorrow or the day after.“

He made no mention of Trafigura.

Kurdistan began selling oil into international markets in independent export deals in October, further challenging Baghdad’s claim to full control over Iraqi oil after signing independent exploration deals with foreign oil majors last year.

(Source: Reuters)

By John Lee.

Reuters reports that oil exports from Iraqi Kurdistan have halved to around 100,000 bpd in recent days.

An Iraqi oil official said on Monday that the Kurdistan Regional Government had told Baghdad’s State Oil Marketing Organization (SOMO) that exports were reduced because operators were “facing some technical problems that will take some time to address“.

An industry source in Erbil confirmed that exports have been reduced to around 100,000 bpd.

Regional sources have said Kurdistan is not getting enough refined oil products to run its power stations under supplies controlled by the central government.

(Source: Reuters)

By John Lee.

Reuters reports that LUKoil, Russian’s biggest non-state oil producer, which is believed to be considering buying ExxonMobil‘s stake in the West Qurna-1 oil field, has bought oil from Kurdistan in defiance of Baghdad.

Baghdad has long insisted it has the sole right to export oil, but LUKoil’s Geneva-based trading arm Litasco has become the third company to buy Kurdish condensate (very light oil), five industry sources have told the news agency.

The other companies to have bought directly from Kurdistan are Trafigura and Vitol; Swiss trader Vitol has just signed a deal to sell gasoil to Iraq.

Those earlier deals provoked an angry response from the Iraqi central government, which said it had the right to “legally pursue all those who participate in smuggling”, but according to Reuters Baghdad seems to be turning a blind eye on this occasion.

“After checking with concerned parties, we got confirmation that LUKoil has not purchased any kind of crude for the benefit of the KRG,” said an official from Iraq’s State Oil Marketing Organisation (SOMO). Iraqi government officials declined to comment.

Industry sources told Reuters that Litasco had chartered the tanker Cielo di Napoli to load around 19,000 tonnes of the Kurdish condensate from the port of Toros at Ceyhan in Turkey; The tanker sailed on 21st November.

Litasco won the tender at a $3.00 discount to naphtha prices, beating competing bids from Trafigura and Socar, one participant said, and bought the condensate through the intermediary Powertrans in a public tender.

(Source: Reuters)