Iraq has threatened legal action against Kurdish crude purchases that were not sanctioned by state oil company Somo, in Baghdad's latest attempt to take over marketing these supplies from Erbil.
In a letter seen by Argus, Somo says it and the Iraqi oil ministry reserve the right to "take all the legal measures against dealer or a buyer (of the smuggled crude oil) that has been proven to have loaded Iraqi oil from, precisely, Turkish Ceyhan Oil Terminal without the explicit endorsement of Somo."
Ceyhan is the seaborne loading point of Kurdish crude, marketed by both Somo and the Kurdistan Regional Government (KRG).
It adds such crude procurements are "illicit" and "considered to be a breach to our aforementioned warranties and announcements," disclaiming the company would take steps to block loadings of the "unlawful cargoes." Somo qualifies such purchases fall in breach of a February decision of the Iraqi Supreme Court, which pronounced the KRG oil and gas legislation unconstitutional and invalidated contracts brokered with foreign firms.
Erbil has repeatedly rejected the validity of the decision, but the court ruling has already prompted US oil services firms Schlumberger, Baker Hughes and Haliburton to begin liquidating their positions and exiting tenders and contracts in Kurdistan.
The letter was sent to a spate of international oil companies (IOC) assisting with KRG production, traders and buyers of KRG-marketed crude, according to an Iraqi and several market sources. Traders viewed the communication as an escalation in the dispute, which could discourage some buyers from continuing KRG purchases. It is not immediately clear whether Somo could pursue a lawsuit against buyers, one trader said.
Many refiners already shy from acquiring KRG crude for fear that Somo will retaliate by terminating their term contracts of the company's Basrah crude. The company has also previously blacklisted vessels that undertake KRG crude loadings, one trader says. Most KRG crude has traditionally gone to Mediterranean refiners.
Argus tracking data indicate Kurdish crude exports reached 471,000 b/d over January-July, of which 396,000 b/d were marketed by the KRG and 75,000 b/d by Somo.
