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Iraqi Kurdistan sells second piped oil cargo for $106M

  • Motorists queue to fill their tanks at a fuel station in Arbil, in Iraq's Kurdistan region June 24, 2014. REUTERS/Azad Lashkari

LONDON: 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 that the money had been deposited in Turkey’s Halkbank.

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

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 sulfur 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.

Separately, British oil and gas services group Petrofac reported a record order backlog of $20.1 billion Tuesday and said violence in Iraq had not so far affected its operations there.

The group, Britain’s largest oil services company, maintained its profit forecast for this year after downgrading it last month.

The crisis in Iraq has not had any impact on the FTSE 100 company’s operations in the country which are concentrated south and east of Baghdad and represent less than 5 percent of the group’s revenues for 2014, it said.

The group’s order backlog grew by around $6.1 billion in the first six months of the year, with the bulk coming through its core onshore engineering and construction business with several new projects in Oman, Kuwait and Algeria. The profits are expected to be weighted toward the end of the year as projects are delivered, Petrofac said.

“The group’s backlog stands at record levels, giving us good revenue visibility for the rest of this year and beyond,” Chief Executive Officer Ayman Asfari said in a statement.

Service companies, which provide the engineering and construction on oil and gas projects, have seen profits squeezed as big oil companies face huge project delays and tighten their budgets.

Petrofac last month lowered its profit forecast for 2014 by 11 percent after weak results in integrated energy services in which it invests alongside oil companies and earnings are linked to the volume of barrels taken out of the ground.

On Tuesday it maintained its group profit forecast in a range of $580 to $600 million.

 
A version of this article appeared in the print edition of The Daily Star on June 25, 2014, on page 8.
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Summary

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.

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

Separately, British oil and gas services group Petrofac reported a record order backlog of $20.1 billion Tuesday and said violence in Iraq had not so far affected its operations there.

The group, Britain's largest oil services company, maintained its profit forecast for this year after downgrading it last month.


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