Crude Swap With Iraq Will Begin Next Week

Iraq is expected to start crude oil exports from its northern Kirkuk Oilfield to Iran next week, an Iraqi oil official said.

Alaa al-Yasiri, acting director general of Iraqi state oil marketer SOMO, added that Iraqi exports could increase, as the country plans to start trucking crude to Iran’s Kermanshah Refinery under a swap agreement announced last month, Reuters reported.

Iraq and Iran have agreed to swap up to 60,000 barrels per day of crude produced from Kirkuk for Iranian oil to be delivered to Iraqi customers in southern Iran.

Kirkuk crude sales have been halted since Iraqi forces took back control of the fields from the Kurds in October.

Iraq and Iran are also planning to build a pipeline to carry the oil from Kirkuk to avoid having to truck the crude. The planned pipeline could replace the existing export route from Kirkuk via Turkey and the Mediterranean.

After years of remaining idle, Iran resumed swapping crude oil late last year from the Caspian Sea in the north to customers in the Persian Gulf region. Officials say the country has the infrastructure to transfer up to 500,000 barrels per day of crude.

Oil swap, which was cut off under the previous Iranian government, can be an important source of revenue for Iran.

With an output of 4.4 million bpd in December, Iraq is the second-largest producer of the Organization of Petroleum Exporting Countries after Saudi Arabia.

The country is producing below its maximum capacity of nearly 5 million bpd in line with an agreement between OPEC and other exporters, including Russia, to curtail global supply and support oil prices. Yasiri also said crude exports by SOMO ran at an average rate of 3.5 million barrels per day in January.

"The average of the month could top December’s 3.53 million bpd record," the official said.

Total exports for the country should be higher, as SOMO does not control oil sales from the northern semi-autonomous Kurdistan region, estimated at more than 200,000 bpd.

“SOMO’s recent export rate increase is not because of higher production, but due to a drop in local consumption,” he said. It was not immediately clear why consumption had fallen.