BAGHDAD: Iraq hit a record 3.15 million barrels per day in oil production last year. Iraq’s plan to split heavier crude being produced in its southern oil fields from its flagship grade should reduce quality issues dogging its exports, though there will be challenges getting the price it wants and setting up infrastructure.
But Iraqi officials have indicated they will move to price their heavier crude competitively and secure a port facility from May in a bid to make the split production approach work.
“Splitting into Basra Heavy makes sense in the long term as the production is expected to increase and the newer production will be the heavy stuff,” said Victor Shum, managing director for downstream energy consulting at IHS.
An official at the state-run South Oil Company said that Iraq was planning to ship an average of 350,000 bpd of Basra Heavy oil, meaning it could account for about 13 percent of the current export volume at 2.6-2.7 million bpd.
Most would come from Iraq’s Missan oil fields, said the official, who declined to be named due to company policy.
The pricing was still being discussed, but it would be competitive with other Gulf exporters and a lower API gravity would mean a bigger discount, said the official.
A system by the American Petroleum Institute, known as gravity, is used to compare the oil density. Crude with gravity below 27 degrees is considered heavy.
Iraq’s State Oil Marketing Organization is expected to announce an official selling price for Basra Heavy Sunday when it releases May prices, said a trade source familiar with the matter.
SOMO has said that it would allocate one of its export facilities for Basra Heavy from May onward.
SOMO has said that it could supply 450,000-800,000 bpd of the grade which will have an API lower than 24 degrees. SOMO did not respond to requests for further comment by email and phone.
A separation of Basra Heavy from Light will increase buyers’ confidence in quality, traders said. It could also cut time spent waiting for different crudes to arrive at terminals for blending which has caused expensive ship loading delays.
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