Iraq Oil Report

Plus:
• South Korea weighs deals between Baghdad or Irbil
• Iraq oil sales bring in nearly $5 billion in November

Iraq oil produced by the Norwegian firm DNO, via a production sharing contract with the Kurdistan Regional Government, is allegedly being shipped on truck to Iran.

The oil from the Tawke field, from one of the KRG’s first forays into signing oil deals back in 2004, has no official place to go. Iraq’s central government is more than upset with the Kurds for moving unilaterally on developing their oil sector and accusing politicians of impasses to passing national hydrocarbons legislation. So they’ve prevented any oil from contracts signed outside the Baghdad authority from heading to market via state-owned pipelines or Iraqi refineries from processing it.

The Tawke field is in northern Iraq, near the Turkish and Syrian borders. Connecting the field to the northern pipeline already sending crude to a Turkish Mediterranean port, or even trucking it to Turkey, would be the logistical top choice. Turkey’s military action targeting the separatist Kurdistan Workers’ Party along the two countries’ border would prevent any trucks through there.

That’s out of the question regardless, since Turkey views any Iraqi Kurdistan action outside the Oil Ministry in Baghdad, such as controlling, developing and selling oil in the KRG territory, a move toward Kurdish independence. Turkey, the country with the largest Kurdish population, has been the most vocal against any Kurdish autonomy and empowerment. Syria and Iran have also expressed concern, though more muted.

Iran, according to sources of Faleh al-Khayat and Robert Perkins, writing in Platts’ Oilgram News, doesn’t mind getting their oil. DNO says it’s just offering the oil to local buyers and waiting for Baghdad’s approval to sell it elsewhere.

Crude oil produced from the Tawke field in the northern Iraqi region of Kurdistan is being sold by the Kurdistan Regional Government to Iran via truck, informed sources told Platts in late December. …

The sources believe the crude is being sold to third parties, which are selling it on to Iran. ..

A DNO official said December 28 the company was not aware of any oil from Tawke being exported to Iran. …

The sources believe the deal with Iran was negotiated by the KRG to be transported by road tankers across Iraqi Kurdistan for processing at the Tabriz refinery in northwest Iran.

Platts reports that the oil would traverse roads in areas controlled by Jalal Talabani, one of the two Kurdish leaders who dominate Kurdish politics. He’s also president of Iraq. And for Tawke oil to enter Iran, the Revolutionary Guard Corps would need to give the green light.

Also from the article: Tawke, which DNO says can handle 90,000 barrels per day production, began producing in June, averaging nearly 6,900 barrels per day in third quarter 2007.

Iraq’s national and Kurdistan government officials have been trying to work out a deal on controversial issues like the KRG’s deals — they’ve signed more than 20, and passed a regional oil law — and the national oil law.

Oil Minister Hussain al-Shahristani has said he’d approve the first four KRG deals, including Tawke. The KRG wants better terms for the deals they’ve signed, which include such companies as Hungary’s MOL, India’s Reliance, Austria’s OMV, Norbest – a Russian backed firm connected to TNK BP, and U.S.’s Hunt Oil.

The Kurds say the national government has reneged on an agreement on the oil deal and says the Constitution gives the region the authority to develop its own oil sector in a decentralized manner.

Shahristani has called all such activity illegal, and recently started making good on threats to blacklist companies who sign with the KRG.

SK Energy, the top refiner in South Korea and part of a consortium that signed a production sharing contract with the KRG in November, was told last week to choose between moving forward on the project or the ability to keep purchasing Iraqi oil.

The South Korean foreign and energy ministries have been in touch with their Iraqi counterparts in an attempt at damage control, Jane Han reports for The Korea Times.

Iraq is the sixth largest supplier of oil to South Korea.

Iraq sold 1.96 million barrels per day in November, the Oil Ministry said, Ahmed Rasheed reports for ArabianBusiness.com. This brought in $4.94 billion that month alone.

Last year Iraq’s oil sales sent more than $31 billion to the federal coffer. Iraqi production reached an average 2.4 million bpd in November, according to Platts. Improvements in the south and a steady protection of the northern pipeline in recent months have bolstered production and exports.

——