SOURCE: Zawya.com (Reuters) —Iraqi Kurdistan's oil exports to world markets, deemed illegal by Baghdad, have doubled since the start of the year and flows from the autonomous region are set to rise higher still. Crude and condensates are being trucked over Iraq's northern border with Turkey, bypassing Iraq's federal pipeline system, in trade that's risen to nearly 60,000 barrels per day (bpd), say industry sources.
Rates next month are expected to touch 70,000 bpd, which would require loading about 350 tanker trucks each day.
"This trade is here and here to stay," said a source familiar with Kurdish oil operations. "But the ramp up has been more logistical - getting the requisite types and numbers of trucks and tanks - than political."
Kurdish crude had been moving to world markets through a Baghdad-controlled pipeline to Turkey, but Kurdish exports via that route dried up last year due to a row over payments. The central government is still using it to ship its own oil to Turkey.
Small amounts of condensate, or light oil, kicked off Kurdistan's direct trade last October and the first cargo of crude from the Taq Taq oilfield was exported earlier this month.
A second cargo of Taq Taq was bought by Germany's Select Energy and is expected to sail from Turkey next week, market sources said. A third Taq Taq cargo is being offered for the second week of May.
Roughly a third of Kurdistan's current production - 170,000 bpd of crude and 15,000 bpd of condensates - is now being exported.
And Kurdistan could be in a position to shift significantly more volume within months after a new pipeline is completed. The Kurdistan Regional Government (KRG) is on track to finish the pipeline in the third quarter, linking the Taq Taq oilfield with the existing Iraq-Turkey crude pipeline.
The move is likely to bring the payment row with Baghdad to a head and Turkey has said it could play an active role in settling the dispute.
Oil lies at the heart of a feud between the central government and Kurdistan. Baghdad says it alone has the right to control exports and sign deals, while the Kurds say their right to do so is enshrined in Iraq's federal constitution.
Iraq's central government says Kurdistan is expected to provide 250,000 bpd towards Iraq's 2013 oil export target of 2.9 million bpd.
In 2012, the Kurdistan Regional Government (KRG) was to contribute 175,000 bpd to the federal budget, but supplied an average of only 61,000 bpd - roughly what it is now exporting independently.
Iraqi Oil Minister Abdul Kareem Luaibi said in January the ministry of oil intended to sue Anglo-Turkish firm Genel Energy
and other companies for the export of crude from Kurdistan.
At the same time, Iraq's State Oil Marketing Organisation (SOMO) sent letters warning customers not to touch any oil that had not been marketed by SOMO.
Major oil firms with interests in southern Iraq have opted not to participate in tenders offering Kurdish crude and condensate to avoid angering Baghdad.
But buyers of Kurdish condensate have faced no major repercussions, with one notable exception - trading house Trafigura, which was banned from Iraq in December.
The KRG says the Kurdish oil is being swapped for refined products with a private Turkish company with no cash involved.
Kerosene and diesel are now moving into Kurdistan, said industry sources, with gasoline expected at a later stage.
by Peg Mackey