Iraq seeks to market more of its oil in Asia: SOMO

Baghdad (Platts)--16May2011/715 am EDT/1115 GMT

Iraq is looking to market more oil in the Asian market in response to strong demand growth in that region, the head of the State Oil Marketing Organization SOMO said Monday.

"In 2006, exports to eastern markets were between 25% and 28% [of total exports]... but now they are more than 60%," SOMO director general Falah al-Amri said at the Iraqi Extractive Industries Transparency Initiative conference.

Iraqi oil exports have been creeping up in recent months because of rising production, mainly from southern oil fields where foreign oil companies are operating under 20-year service contracts.

Iraq exported 2.141 million b/d of crude oil in April, slightly below the 2.2 million b/d exported in February, the first time that exports had topped 2 million b/d since early 2010, as new barrels came online from southern fields, mainly Rumaila, Zubair and West Qurna 1.

Iraq signed a dozen contracts with foreign oil companies after two bidding rounds to develop oil fields that will account for the majority of Iraq's planned production capacity increase to over 13 million b/d by 2017 from 2.7 million b/d currently.

"We have achieved an increase so far of 200-300,000 b/d from the bid rounds," Amri said.

On SOMO's marketing strategy, Amri said Iraq favored 1-2 year crude oil sales contracts "to stabilize oil marketing" rather than the six-month to one-year contracts sought by customers.

"We aim to export as much as we can at the highest price we can," Amri said.

Ali Nazar, who is in charge of SOMO's US marketing arm, said that Iraq was trying to attract new international companies that have large refineries, which he said were currently relying on Saudi Arabia and Kuwaiti supplies "because the are more stable" than Iraq.

"We are trying to expand Iraqi oil to more international markets... to rely more on important companies such as ExxonMobil, Shell and BP," because they operate in the upstream, midstream and downstream, Nazar said.

Iraq has based its 2011 budget on oil exports of 2.2 million b/d, including 100,000 b/d from the Kurdish provinces.

Nazar's presentation showed a breakdown of expected exports by SOMO in 2011 to its main export markets, with Asian sales again accounting for the highest volume and sales to the US edging up slightly.

Iraq expects to export an estimated 2.672 million b/d in 2011, with 1.463 million b/d going to the Asian market, 633,000 b/d to the US and 576,000 b/d to Europe. The higher export figure is contingent on completion later this year of the first phase of Iraq's export capacity expansion project from southern terminals.

The 2011 projected export figures compare with an average 2.235 million b/d exported in 2010, of which 1.113 million b/d went to the Asian market, 605,000 b/d to the US and 517,000 b/d to Europe.

In the second half of 2009, Iraqi oil exports averaged 2.1 million b/d -- 797,600 b/d to Asia, 683,000 b/d to the US and 633,000 b/d to Europe.

Nazar said that US sales accounted for 24% of exports in 2010, dismissing accusations that Washington had benefited from its 2003 invasion of Iraq by getting preferential oil deals. He noted that in 2004 the US accounted for over 50% of total Iraqi oil exports.

"The layman in the street says most of the oil goes to America," said Amri. "But we are not selling to countries, but to companies, based on the market."

--Ben Lando, newsdesk@platts.com

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