KRG Sells Second Piped Oil Cargo, for $106 Mln

Source: Reuters 6/24/2014, Location: Middle East

Iraqi Kurdistan has sold a second cargo of about 1 million barrels of crude oil delivered via its new pipeline for $106 million, a spokesman for the regional government said, a steep discount compared to regional alternative sour grades.

The oil was sold at about a $13 per barrel discount when taking the current level of benchmark dated Brent, whereas Urals has been at a discount of $1.50 to $3/barrel this month.

The spokesman added the money had been deposited in Turkey's Halkbank.

The grade is sourer than Urals, meaning it has a higher sulphur content, which makes it cheaper to buy as a refiner will have to spend to remove the sulphur.

The risk associated in buying Kurdistan's first pipeline shipments have also likely weighed on the price. Most refineries and traders have been reluctant to get involved in the trade that Iraq's central government calls "smuggling".

Baghdad has opened arbitration against Turkey for allowing the sales and has threatened to pursue buyers.

The first tanker of piped crude is still waiting off Morocco after local authorities asked it to leave its waters, while a second discharged at Israel's Ashkelon port last week.

A quality assessment by a shipping agent of the oil in May, pegged the grade at around 31.3 degrees API with a sulphur content of around 2.7 percent.

The grade is a mix of Kurdistan's Tawke and Taq Taq grades and is expected to change over time as the first loadings from storage were mixed with some residue of Iraq's Kirkuk grade.

The crude is loaded onto tankers at the Mediterranean port of Ceyhan in Turkey.


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