KRG will not transfer crude to Somo under new agreement

  • Market: Crude oil
  • 20/12/20

Iraq's Kurdistan Regional Government (KRG) will not hand over 250,000 b/d of its physical crude to state-owned marketer Somo under a new agreement reached between Baghdad and Erbil.

The 2021 draft budget stated that the KRG must hand over 250,000 b/d of its crude to Somo in order to receive its share of the federal budget — a clause that has long been a point of contention between Baghdad and Erbil.

But the KRG is unable to transfer this crude to Somo for export as it has already sold its marketing rights to five trading firms against loans it has been receiving since 2014, an Iraqi oil source said. The ministry of finance is therefore calculating the KRG's oil revenues to be deducted from its share of the 2021 budget, the source added.

KRG oil export revenues have totaled just over $4bn so far this year, according to Argus estimates, around half of year-ago levels. The KRG produces around 450,000 b/d of crude, with exports having averaged around 415,000 b/d so far this year.

"The Kurdistan region exports its oil at prices that are less than Somo oil by $5/bl to $7/bl," finance minister Ali Allawi said, adding that 2021 budget — which is being discussed by the cabinet today — could be sent to parliament for approval within a week.

Negotiations between Erbil and Baghdad to resolve the dispute have taken place over the past two weeks. This, coupled with plans by the government to devalue the Iraqi dinar have delayed the approval of the 2021 draft budget required to kick-start much-needed economic reform.


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New York, 18 June (Argus) — A tropical storm warning has been issued for parts of South Texas and northeastern Mexico, bringing with it the risk of heavy rainfall and flooding. The warning is in effect for the Texas coast from Port O'Connor south to the mouth of the Rio Grande, as well as the northeastern coast of Mexico, according to the National Hurricane Center. "The disturbance is very large with rainfall, coastal flooding, and wind impacts likely to occur far from the center along the coasts of Texas and northeastern Mexico," the center said overnight. Maximum sustained winds this morning remained near 40 mph and the disturbance is forecast to become a tropical storm by Wednesday. The system has been classified as a potential tropical cyclone by the center since it has not yet become better organized, but is expected to become the first named storm system of the year by early Wednesday. The system was expected to disrupt ship-to-ship transfer operations off the Texas coast as of Monday evening because of heavy seas. In the Gulf of Mexico, the transfer typically is from an Aframax or Suezmax onto a very large crude carrier (VLCC) at designated lightering zones near Corpus Christi, Galveston and Beaumont-Port Arthur. Prolonged lightering delays can prevent crude tanker tonnage from becoming available and exert upward pressure on freight rates, while also adding to demurrage fees. The storm is expected to turn towards the west-northwest and west tonight and Wednesday, with the system forecast to approach the western Gulf coast late Wednesday, the NHC said. Rainfall totals of 5 to 10 inches are seen across northeast Mexico into South Texas, with maximum totals of 15 inches possible. Flash and urban flooding are likely to follow with river flooding. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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