(recasts, adds details)
By Simon Webb
DUBAI Oct 15 Iraq is in talks for a long-term
Kirkuk crude oil supply contract to Turkey, oil industry sources
said, as the improved reliability of its northern export
pipeline inspires more confidence in increased oil revenues.
The link to to Turkey has been exporting without
interruption for two months after repeated sabotage since the
U.S.-led invasion of Iraq in March 2003.
If Iraq can maintain the flow from the Kirkuk oilfields then
more long-term contracts would follow, oil sources said on
Monday. Oil is Iraq's principal source of the hard currency
needed to rebuild its shattered economy.
Iraq issued a sales tender for up to 6 million barrels on
Sunday for loading by early November. If all the cargoes sail on
time, Baghdad will have sold around 18.5 million barrels of
Kirkuk oil since late August -- or nearly 300,000 barrels per
day (bpd) -- boosting Iraq's total exports by around 20 percent.
Iraq issues tenders to sell oil from the pipeline terminal
at Turkey's Mediterranean Ceyhan port, fed by the pipeline, when
it cannot guarantee the flow.
Exports through the line remains sporadic, but the volume
pumped since late August has already surpassed the total in 2006
of around 9.6 million barrels.
The flow was halted on Monday after another 1.3-1.4 million
barrels came through the line at the weekend, a shipping source
said. There were about 6.9 million to 7 million barrels in
Ceyhan storage tanks, he added.
The first company to hold fresh talks with Iraq on a term
contract is Turkey's Tupras (TUPRS.IS), an Iraqi oil ministry
source said on Monday.
"We are hoping to sign a contract with Tupras," he said. "We
are still in discussions to finalise quantities. Exports have
been more sustained."
Tupras can sign up to a term contract with less risk that
other Mediterranean refiners as it can take delivery of the oil
through a domestic pipeline from Ceyhan to the 113,000 bpd
Other buyers have to take on the risk of chartering a ship,
potentially expensive if the flow through the line is halted and
the vessel kept waiting.
Others on the list of potential term contract buyers were
those that have had similar supply deals in the past, a
Mediterranean oil trader said.
Iraq held Kirkuk term contracts for a brief period at the
end of 2004 for about 5 million barrels a month. Aside from
Tupras, the term buyers then were U.S. major Exxon Mobil,
France's Total and Spanish refiners Repsol and Cepsa.
Majors Shell and BP, Italian refiners Eni, Erg and Saras and
Austria's OMV have all bought crude in tenders since August.
For now, Iraq will probably want to ensure it can keep the
oil flowing before it commits to more contracts, the
Mediterranean trader said.
"They may still be holding off a bit to test the logistics
and security before they start to commit volumes to term
contracts," he said. "It's all still a bit tricky."
Sabotage attacks had kept the line mostly idle since the
U.S.-led invasion of March 2003. Prior to the war, Iraq was
exporting steady Kirkuk volumes of at least 700,000 barrels per
The northern pipeline is Iraq's secondary export route. It
relies on its main terminal in the south at Basra for exports of
about 1.5 million barrels per day.