Kurdish crude sales to rise as exports reach second Turkish

[Aslan]

* Taq Taq crude exports to reach about 60,000 bpd by end June

* Kurdistan to start deliveries to second terminal in Turkey

* Crude in steady stream to Northern Europe

By Julia Payne and Peg Mackey

LONDON, May 22 (Reuters) - Iraqi Kurdistan's crude oil sales to world markets, deemed illegal by Baghdad, are set to rise by nearly 50 percent next month as trucks start deliveries to a second export terminal in Turkey, industry sources in the region said on Wednesday.

Crude exports from the Taq Taq oilfield in the autonomous northern region to Turkey's Mersin port started at a trickle in early January and have risen to just over 40,000 barrels per day (bpd).

They are expected to hit around 60,000 bpd by the end of June as trucks unload at the neighbouring Dortyol terminal in southern Turkey.

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.

In retaliation, Iraq's State Oil Marketing Organisation (SOMO) sent letters warning customers not to touch any oil that had not been marketed by SOMO and the ministry intends to sue producers, namely Anglo-Turkish firm Genel Energy.

Turkish intermediary Powertrans has found a steady stream of customers in Northwest Europe for its crude and condensate sales. Major oil firms with interests in southern Iraq have opted not to participate in tenders.

Germany's Select Energy lifted the first two Taq Taq cargoes in April. The grade is a light sour crude, a highly sought after quality.

One was delivered to Klesch's Heide refinery in northern Germany and the other discharged in Rotterdam.

Select is loading a third larger 80,000 tonne cargo.

Austria's OMV, already black-listed by Baghdad due to upstream stakes in Kurdistan, also bought one cargo in May, sources said.

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.

Adding condensate exports, the total amount of Kurdish oil exports would rise next month to nearly 80,000 bpd, or about 40 percent of the region's total oil production.

Kurdish oil had been exported through a Baghdad-controlled pipeline to Turkey before drying up last December due to a payment dispute between Arbil and Baghdad.

Moving oil to world markets by pipeline is far cheaper and logistically easier than via truck. Exports by truck are a temporary solution until the autonomous northern region completes its own pipeline to Turkey.

Exports via the new 300,000 bpd pipeline are unlikely to start before the year's end, a source familiar with the matter said, particularly as it is still not clear how it will join-up with existing Turkish infrastructure.



Turkey eyes oil, gas deals with Iraqi Kurdistan

Minutes before his departure for Washington, Erdogan announced that a Turkish company already had a contract in place with U.S. energy company Exxon Mobil but declined to provide details until after the visit.

Yildiz, who was in Erdogan's delegation, said the discussions with Obama and his team were very positive and fruitful.

"We are likely to be involved with Russian and American companies in northern Iraq for different projects like oil and gas exploration. And this year, state-owned and private companies could sign commercial contracts with northern Iraq," he said in an interview.

He declined to name companies.

Exxon was the first to sign up for exploration deals with the Kurdistan Regional Government (KRG). Others including Chevron, Total and Russia's Gazprom Neft have followed.

Iraqi companies operating in the northern region could also take part in such partnerships, which will involve three or four partners, Yildiz said.

Turkey has increasingly courted Iraqi Kurdistan as it seeks to boost involvement in oil and gas, a move that has upset the central government in Baghdad which says it alone has the authority to control oil exports from Iraq.

Baghdad views deals between oil companies and the KRG as illegal while leaders of the autonomous Kurdish region say their right to control oil resources is enshrined in Iraq's federal constitution, drawn up following the U.S.-led invasion of 2003.

STANDOFF

Washington, wary of the divisions between Baghdad and the Kurdish region, has urged passage of a long-delayed national oil law to resolve the stand-off, which has intensified since the last U.S. troops left in December 2011.

Yildiz said Turkey had made it clear during the U.S. visit that it was impossible for Ankara to remain indifferent to potential projects in Iraq and the two parties discussed what the ideal model for partnership should be in order to respect the Iraqi constitution.

"These partnerships could be done through state companies, semi-state companies and sometimes completely private ones," he said.

Until now, resource-hungry Turkey has been a customer and a transportation outlet for oil exports from the Kurdish region. With such partnerships, the Turks would play an active role in exploiting Iraqi Kurdistan's rich hydrocarbon resources.

Yildiz also said Turkey was keen to help Iraq build more pipelines as the OPEC member's oil production is increased, but that the existing pipeline carrying oil from Iraq's Kirkuk fields to Turkey's Mediterranean hub of Ceyhan should be fully utilised.

Turkey also discussed its oil purchases from Iran during Erdogan's U.S. trip, Yildiz said.

"The U.S. had no requests from us to further reduce the oil we buy from Iran," Yildiz said, adding Turkey would continue to buy Iranian oil at current levels.

Following last year's 40 percent cut, Turkey's sole refiner Tupras is now buying around 110,000 barrels per day (bpd) of Iranian oil as a European Union oil embargo against the Islamic Republic came into full force on July 1.

Turkey was twice granted a waiver on Iranian oil last year by the United States for 180 days after it made initial cuts.

Before the introduction of stricter U.S. and EU sanctions against Iran last year, imposed over Tehran's disputed nuclear programme, Tupras's purchases were averaging 180,000 bpd.

[Anthea]

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