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Iraq ends Iran oil trade, increases Qayara field exports to Turkey

Oil pump

Iraq ended its trucked crude to Iran nearly a month ago, multiple Iraqi oil officials told S&P Global Platts, likely leading to Washington turning its cheek to ongoing gas and power trade between the two countries.


During this time frame, the Iraqi Oil Ministry increased its exports from the Qayara field to a Persian Gulf port and tendered another 30,000 b/d for trucking to Turkey, according to a SOMO tender and ministry officials.

 

Last week, SOMO published a tender for the Qayara field lifting to the Zakho Border Gate with Turkey, starting November 11 and ending June 19, 2019. The tender was closed Sunday, but no winner has been announced.

 

For the past month, about 6,000 b/d of the field's 15,000 to 22,000 b/d production had been sent to the Qayara refinery, with the rest trucked 1,000 km to Khor al-Zubair, multiple NOC and shipping officials told S&P Global Platts.

 

A port official said at least three tanker loadings of the nearly 17 API crude, each at around 11,300 mt, were loaded at Khor al-Zubair. The destination is not known.

 

Qayara is operated by Angolan firm Sonangol under a 2010 contract that was recently resumed following a force majeure from early 2014 until late 2017. Qayara is 100 km south of Mosul and was under control of ISIS temporarily.

 

Sonangol and Iraqi Oil Ministry officials have said they aim to reach 60,000 b/d production capacity by Q2 2019 - about half the field's production plateau target, according to the contract.

 

Meanwhile, multiple senior officials at Iraq's state-run North Oil Company said that crude shipments to Iran ended by October 10, if not earlier. The official reason is for lack of tanker trucks.

 

The boost in field development and non-Iranian exports comes as Washington is pressing countries to comply with the snapback of sanctions on Iran, which went into effect on Monday.

 

Iraq had been asking the US for an exemption because so many basic services like electricity come directly via feeder lines from Iran or gas imports to power stations, multiple officials familiar with the talks told S&P Global Platts.

 

Baghdad asked to end the short-lived trucking of around 11,000 b/d of crude to Iran, which the Iraqi Oil Ministry said was to pay for the gas and power imports. Iraq had announced a swap deal, whereby Iraq would send between 30,000 b/d and 60,000 b/d of Kirkuk-area crude to Iran in the north, and an equal amount of Iranian crude would be sent to southern Iraq for export.

 

An estimated 200,000 b/d of Kirkuk-area crude is currently shut in due to a lack of export routes, with the Iraq leg of the Iraq-Turkey Pipeline destroyed by ISIS, and a political dispute over oil sales prohibiting Baghdad usage of Kurdistan's oil pipeline to Turkey.

 

Washington has been pressing Baghdad to restart crude exports to Turkey via that pipeline as a way to partially offset the decline in Iranian crude to the global market. Multiple sources said issues over transit fees and marketing had been resolved, but no orders have been given.

 

Iraq has also been asked to make future payments to Iran in non-dollar denominations and via non-sanctioned banks. Iraq has also been pressed to move forward on power, oil and gas projects with American companies.

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