Iraq's government is working to take control of all crude exports from its territory
It wants this to happen in around a month's time, in collaboration with the Turkish government.
Iraq's oil ministry said it will ensure transparency with respect to Ceyhan export rates and revenues resulting from crude sales.
Seaborne Iraqi crude exports from Ceyhan largely comprise oil marketed by the Kurdistan Regional Government (KRG). Baghdad and the KRG had agreed a deal whereby the KRG exported 150,000 b/d from state-owned North Oil (NOC) controlled fields in Kirkuk and divided revenues equally. Under the deal Iraq's state-owned Somo received around 600,000 bl of Kirkuk crude at Ceyhan every 10 days, which it then largely shipped by pipeline to Turkish refiner Tupras' 113,400 b/d Kirikkale refinery. But Somo was last transferred Kirkuk crude in June.
Baghdad has deemed exports of KRG-marketed crude illegal and has threatened to take legal action against buyers, most recently acting against a delivery to Canada. KRG crude has gained favour with buyers in northwest Europe and the Mediterranean region, with five lifters — Russia's state-controlled Russia's Rosneft and trading firms Vitol, Petraco, Glencore and Trafigura — marketing the supply. These arrangements could be affected by any Baghdad move to control exports.
Rosneft has said it intended to feed all of the KRG crude it receives under its prefinance agreement to its German refinery system, while the trading firms have placed Kurdish crude to a variety of end-sellers, largely in the Mediterranean. Some KRG crude has been sent to storage in Israel and found homes in Asia-Pacific — more often following ship-to-ship transfers than through direct shipments.
Should Iraq begin unilaterally marketing KRG crude, this would likely affect pricing and delivery of the grade. KRG supply is sold with delivery to buyers, who do not assume the risk of transport. Iraq's Somo allocates its southern Basrah cargoes only on a fob basis, requiring the buyer to collect. Buyers traditionally prefer fob sales, as they can commission a tanker and crew, negotiate their own rates and reserve the right to redirect.
Baghdad's control over KRG supply could also affect buyers' access. For many European refiners KRG supply has been the go-to regional medium-sour crude alternative on the spot market to Saudi, Iraqi and Russian Urals. The crude especially gained favour after Mideast Gulf producers cut allocations to Europe in an effort to prioritise their Asia-Pacific market share. Other than the free-destination shipments it allocates its equity producers, Somo places all of its Basrah cargoes on term, setting regional restrictions and banning resales — a treatment it could choose to apply to Kurdish supply.