* Kurds have sent fuel oil, naphtha through Iran for years
* Not clear what Iran gets out of the arrangement
* Tankers from Iran present documents showing Iraqi origin
By Isabel Coles and Daniel Fineren
ARBIL, Iraq/DUBAI, Aug 7 (Reuters) – Iraq’s Kurdistan region
is exporting crude oil by truck to an Iranian port for shipping
to Asia, industry sources say, using a trade route that is
likely to anger both Baghdad and Washington.
In a dispute largely over revenue sharing, Kurdistan’s crude
exports through a pipeline controlled by the Iraqi central
government dried up last year. However, it is transporting about
50,000 barrels per day (bpd) of crude and condensates by road
from the landlocked region through Turkey.
Now the Kurdistan Regional Government (KRG) has approved a
second route for crude through Iran used previously only for
petroleum products, the sources said.
For the past two months, crude has been trucked from Kurdish
fields over the border to Iran’s Bandar Imam Khomeini (BIK)
terminal, 900 km (560 miles) to the south on the Gulf. Amounts
are unclear but could be as much as 30,000 bpd, they said.
One industry source in Kurdistan said the regional
government in Arbil was anxious not to put out either of the
region’s powerful neighbours, Turkey and Iran, in transporting
the crude. “It’s a political compromise,” said the source, who
declined to be identified. “They cannot ignore the Iranians and
go all the way … with the Turks. They have to balance.”
However, it is not clear what Iran, which faces huge
problems in selling its own oil products because of
international sanctions, gets out of the arrangement.
Asked about the route, the Kurdish government did not
comment on the record, although a KRG official source denied any
crude was going through Iran yet.
Oil lies at the heart of the dispute between the Arab-led
Iraqi central government and the ethnic Kurdish-run northern
enclave. At issue are control of oilfields, territory and crude
revenues shared between the two administrations.
“We have made it very clear that the only acceptable option
for oil exports is through the federal pipeline network,” a
senior Iraqi oil official said. “We consider any other trade,
whether it be through Iran or Turkey, as smuggling. It’s
illegal.”
Baghdad claims sole authority over oil exploration and
export. It has already accused the Kurds in the past of
smuggling crude via Iran and keeping the revenue for itself.
The KRG says its right to exploit and export the reserves
under its soil is enshrined in Iraq s federal constitution,
which was drawn up following the U.S.-led invasion of 2003, and
has passed its own hydrocarbons legislation.
Arbil has already antagonised Baghdad by signing exploration
and production deals on its own terms with firms including Exxon
Mobil, Chevron and Total, and is
currently laying the final stretch of an independent export
pipeline to Turkey.
Fuel oil and naphtha have moved by truck from Kurdistan
through Iran for years, because Kurdish domestic sales contracts
allow the sale of these products outside Iraq.
Washington, a long-standing ally of the KRG, has previously
pressured Arbil to stop this trade as it tightens the sanctions
imposed over Iran’s disputed nuclear programme.
“We have advised Arbil in the past not to engage in business
with Iran and will continue to do so,” a U.S. diplomat said when
asked how Washington would view the KRG’s official approval for
crude exports through Iran.
Amounts of Kurdistan crude being trucked through Iran are
likely to be modest compared with its production capacity. This
is three times its refining capacity of around 125,000 bpd,
although some more oil is being refined locally in rudimentary
topping plants.
Industry sources said the oil is mainly from the region’s
three biggest producing fields – Taq Taq, Tawke and Khurmala.
Bjoern Dale, acting managing director of DNO which operates
Tawke, said he did not know whether any crude from the field was
going over the border into Iran. “We have no knowledge of any
such transactions,” said Bjoern Dale, acting managing director
of DNO, which operates Tawke. “We sell oil on the market, and
once we sell, the buyer takes control and responsibility.”
Genel Energy, which is involved in both Tawke and
Taq Taq, also said it sold crude at the well-head.
GULF SHIPPING
At Iran’s BIK terminal, the truckloads of crude are pooled
in storage tanks and then pumped onto ships for export.
The tankers sail directly to Asia or to storage facilities
at Fujairah in the United Arab Emirates and elsewhere in the
Gulf, where the crude is kept in tank farms part-owned by
European companies, AIS Live ship tracking data shows and
industry sources say.
At least a dozen tankers have loaded crude or fuels at BIK
over the past few months and unloaded them at the Vopak Horizon
terminal in Fujairah – part-owned by Dutch Royal Vopak
– and at VTTI Fujairah, a nearby terminal which is 50
percent-owned by Swiss trader Vitol, according to ship tracking
data and terminal operators.
EU sanctions prohibit European companies from dealing in
Iranian oil and any crude and oil products, regardless of
origin, that have been exported from Iranian ports. But the
joint ventures running the terminals are not incorporated in the
European Union.
“If the JV company itself is not domiciled in the EU and is
not a branch of an EU company, then it is unlikely to be subject
to EU sanctions,” said Patrick Murphy, a legal director at Clyde
& Co. in Dubai who specialises in Iran sanctions.
Many ships mask their entry into Iranian ports by switching
off their AIS transmitters – vanishing from the global ship
positioning system as they approach BIK and reappearing days
later laden and heading to Fujairah.
Shippers from BIK arrive at storage terminals waving Iraqi
certificates of origin for their cargoes of crude, fuel oil or
naphtha.
“We take due care to establish that no Iranian petroleum
products with certificate of origin Iran are currently being
stored at any facilities owned, leased or operated by the
company, Vopak Horizon Fujairah Limited (VHFL) or any controlled
entity,” a spokesman for the Dutch company said.
He said that four examples of ships identified by Reuters as
having loaded oil at BIK and unloaded at VHFL over the last few
months had presented Iraqi certificates of origin on arrival
from Iran.
As for VTTI Fujairah, “the Vitol group of companies has
ceased all business dealings with Iran; including the sales of
refined product to Iran and all purchases of crude oil from
Iran,” a spokeswoman said.
