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Dragon says Iran crude deal is short term

22 Apr 2010 12:55 (+01:00 GMT)
Dragon says Iran crude deal is short term

London, 22 April (Argus) — Dubai-registered firm Dragon Oil's recently concluded crude swap agreement with Iran's Nico, a unit of state-owned oil firm NIOC, for its Turkmen crude production is a short-term fix, the firm said.

It has emerged that Dragon is still negotiating a new long-term agreement.

A 10-year swap contract between the two companies expired at the end of March and shipments of Cheleken crude to Iran were suspended for two weeks while the two sides struggled to agree a new contract. Under the old agreement, Dragon paid a fee to ship crude to Iran's Caspian port of Neka in exchange for the equivalent volume of Iranian crude, loaded at Kharg island in the Mideast Gulf. The nature of the current disagreement is not clear, but some observers said Nico has demanded higher swap fees, while others said Dragon wants to begin selling its own crude supplies in the Mideast Gulf.

Dragon sold around 22,000 b/d of crude in the first quarter of this year, down by 20pc from January-March last year. Around 86pc was exported through Neka. Dragon produced 47,654 b/d over the same period, up by 9pc.

The firm will increase exports through the Azeri port of Baku to the Georgian port of Batumi, or even through the Baku-Tbilisi-Ceyhan (BTC) pipeline to Turkey's Ceyhan, until agreeing more favourable long-term swap agreement terms with Nico.

“Dragon Oil is satisfied that there is sufficient capacity in existing marketing routes to satisfy current production. The realised prices are expected to be impacted by the change in the marketing arrangements. The company continues to assess additional routes to market its crude oil,” the firm said.

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