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Baghdad's Threats Fail to Curb Demand for Kurdish Oil

Source: Reuters 1/28/2013, Location: Middle East

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European oil companies are purchasing an increasing volume of oil independently exported by Kurdistan, in defiance of Baghdad's threats to punish those that deal in exports it says are illegal.

Baghdad has promised to prosecute buyers of Kurdish condensate, a light grade of oil that has been exported without its permission.

Demand by international oil firms has been strong enough to absorb an increasing amount of the independently exported oil, and traders said tenders have been drawing interest from a widening range of companies.

So far, buyers of Kurdish condensate have faced few repercussions, with one notable exception - trading house Trafigura, which was banned from Iraq in December 2012.

In January 2013, the region's exports are expected to hit around 60,000 tonnes, equivalent to about 15,000 barrels per day.

The flow of oil, including condensate, from the Kurdish region could gradually rise to around 40,000 barrels per day (bpd), Turkey's energy minister has said, the equivalent of around 200 trucks a day.

Condensate exports already account for nearly the entire output of 17,000 bpd from Kurdistan's Khor Mor field, and as capacity grows there are plans to begin exporting oil from other fields.

The flow has drawn a wide range of interest from Swiss-based trading firms such as Vitol and Trafigura, and new firms such as U.S. chemical company Dow have joined the rank of buyers, shipping sources said.

The latest shipment of Kurdish condensate loaded aboard the Lucky Lady at the Toros terminal near Ceyhan in Turkey on 15 January 2013 and was bought by a small trading house called Crownhill Investment Limited, the shipping sources said.

The independent firm is sometimes used as a middleman by large trading companies in oil deals that may be politically sensitive or unusual.

Ship tracking data showed the cargo was headed for Terneuzen in the Netherlands, due for arrival on 31January 2013.

A second cargo of Kurdish condensate is scheduled to load aboard the Iver Progress in the last week of the month and was purchased by Dow, the shipping sources said.

The central Iraqi government in Baghdad has repeatedly insisted that it considers independent exports from the Kurdish Regional Government (KRG) as smuggling. State-owned marketer Somo is the only body legally entitled to export Iraqi oil.

Baghdad has also promised to ban any firms that sign agreements with the KRG.

On 26 January 2013, Iraq's oil minister said Exxon Mobil, the first major oil company to sign an agreement with the KRG, had been given an ultimatum to choose between its oilfields in the south or Kurdish blocks in the north.

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