Exclusive: Kurdish oil finds new buyers in Europe despite Baghdad threats

LONDON Wed Jun 11, 2014 5:22pm EDT

Men work at a makeshift oil refinery site in the Kurdish town of al-Qahtaniya of al-Hasakah Governorate May 11, 2014. Many civilians in the village, who lost their jobs due to the Syrian conflict, are making a living by refining crude oil to extract useful fuel such as gasoline and kerosene for sale. REUTERS/Rodi Said

Men work at a makeshift oil refinery site in the Kurdish town of al-Qahtaniya of al-Hasakah Governorate May 11, 2014. Many civilians in the village, who lost their jobs due to the Syrian conflict, are making a living by refining crude oil to extract useful fuel such as gasoline and kerosene for sale.

Credit: Reuters/Rodi Said

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LONDON (Reuters) - Russian oil firm Rosneft bought a cargo of Kurdish oil for a German refinery it co-owns with oil major BP, quietly circumventing Baghdad's ban on independent oil sales by its autonomous region, according to trading sources.

While Iraq and Kurdistan will have to work together to combat an Islamist militant group that this week seized Iraq's second city Mosul, near the Kurdish border, they have been locked in a bitter oil dispute for the past two years, with Baghdad saying only its state company is authorized to sell crude.

The militants from the Islamic State in Iraq and the Levant (ISIL), an offshoot of al Qaeda, were closing in on Iraq's largest oil refiner on Wednesday.

Baghdad has already blacklisted Austrian firm OMV, so far the only regular buyer of Kurdish crude in Europe. It has threatened measures including revising contracts to develop large Iraqi oil fields as a deterrent to others.

Rosneft and BP buy crude oil via separate trading divisions for their German refining venture, Ruhr Oel, although BP is the main operator of the venture. Both companies declined to comment on the Kurdish crude purchase.

Rosneft, controlled by the Russian government, has no major projects in Iraq, while BP is among the biggest investors and is leading the project to develop the huge Rumaila field.

Outside Europe, Israel and the United States have also been frequent lifters of Kurdish oil.

The dispute escalated at the end of May when Kurdistan started selling oil out of its newly built pipeline to Turkey. Kurdish oil was previously trucked to two Turkish ports, but the pipeline would increase exports sharply.

Baghdad has so far successfully fought off the first attempt to sell pipeline crude, with a loaded tanker, the United Leadership, being forced twice to change course abruptly without being able to discharge its cargo.

But market sources told Reuters that another tanker with Kurdish oil had quietly been sold into Europe, ending up with Ruhr Oel.

The Minerva Antonia cargo loaded around 41,000 tonnes of Kurdish light grade Taq Taq, which had been trucked from Kurdistan to the Turkish port of Mersin on the Mediterranean.

The cargo - around $30 million worth of oil - then sailed to the Italian port of Trieste on May 8, according to Reuters AIS Live ship tracking and two shipping sources.

The oil was then pumped through the Trans-Alpine Pipeline for Ruhr Oel's refining facilities into Germany, several industry sources with direct knowledge of the matter said.

Because BP is the operator of the refining venture, its German arm, Deutsche BP, featured as the technical receiver of the oil, according to two shipping lists from local agents seen by Reuters and one source with direct knowledge of the matter.

Rosneft, which bought the crude, according to market sources, has no obligation to coordinate crude purchases with BP, though the development could still put the British major in an uncomfortable position.

(Additional reporting by Dmitry Zhdannikov; Editing by Will Waterman)

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