Shell leases Korea National Oil tank for Basra Light

SINGAPORE/SEOUL (Reuters) - Shell has leased storage in South Korea from Korea National Oil Corp (KNOC) for Iraq's Basra Light crude, trade sources said on Friday, a rare move that could help the major bypass uncertainties at the loading port.

Exports of Basra Light from Iraq's southern Gulf port average around 1.5 million barrels per day (bpd), but refiners have said lifting from the terminal has been a headache at times since the U.S.-led invasion in 2003.

"Shell started joint stockpiling after January this year," said a KNOC source, without giving details on the volume or the duration.

Shell was leasing 3 million barrels of storage in South Korea from KNOC, a refining source said, mainly for Basra Light, and selling the grade on to Japan and South Korea.

"It's not easy to make money by storing Middle East grades but Shell has a really global system, so it may make sense for them," the refiner added.

But such trades are fitting under the current contangoed market for Middle Eastern crude, where the forward months are stronger than prompt months.

Iraq needs billions of dollars to modernise its oil industry and raise output after decades of sanctions and war. On top of those concerns, just earlier this month, wind storms disrupted shipping from the southern port of Basra for four days, largely grinding exports to a halt.

The country's oil sector has increased output as security has improved but oil companies remain nervous about sabotage, technical problems and smuggling.

"If they can store it somewhere else and minimise the uncertainty, it should be workable," a trader said.