* Third firm to export Kurdish oil after Vitol, Trafigura
* Baghdad quiet, has said before such deals illegal
* Baghdad wants Russian, Chinese firms to take over from
By Julia Payne and Ahmed Rasheed
LONDON/BAGHDAD, Nov 28 LUKOIL has
bought oil from Kurdistan, defying Iraq's ban on trade with its
independent-minded region, but the Moscow firm has so far
avoided the wrath of Baghdad, which hopes Russians may step in
to tap its big fields further south as Westerners bail out.
Exporting oil independently of the central government is the
latest of many defiant moves by the Kurdish regional government,
which also signed deals with oil majors like ExxonMobil
of the United States to develop its resources.
Baghdad has long insisted it has the sole right to export
oil. It considers any other business illegal and tantamount to
smuggling by the ethnic Kurds in northern Iraq.
Yet LUKOIL's Geneva-based trading arm Litasco has become the
third company to buy Kurdish condensate, or very light oil, five
industry sources told following in the footsteps of
two of the world's largest trading houses, Trafigura and Vitol.
Those earlier deals, in October, provoked an angry response
from the Iraqi central government, which said it had the right
to "legally pursue all those who participate in smuggling".
But this time round, Baghdad seems to be turning a blind
"After checking with concerned parties, we got confirmation
that LUKOIL has not purchased any kind of crude for the benefit
of the KRG," said an official from Iraq's state oil marketer
SOMO, referring to the Kurdish Regional Government.
Iraqi government officials declined to comment.
Industry sources told Reuters that Litasco had chartered the
tanker Cielo di Napoli to load around 19,000 tonnes of the
Kurdish condensate from the port of Toros at Ceyhan in Turkey.
The tanker sailed on Nov. 21.
LUKOIL, Russia's No. 2 oil producer, declined to comment.
A spokeswoman for Litasco did not comment on the deal. She
said the company "consistently endeavours to meet obligations
towards its partners which are strictly in line with all the
obligations and commitments of the whole group".
The condensate was bought via the intermediary Powertrans in
a public tender, traders and industry sources said, similar to
the procedure Vitol and Trafigura used to buy supplies. Litasco
won the tender at a $3.00 discount to naphtha prices, beating
competing bids from Trafigura and Socar, one participant said.
Iraq considerably depends on Vitol and Trafigura for its
fuel imports, but there is much more at stake in the LUKOIL case
as the company is one of the biggest investors in the country.
Baghdad has said it would like to see Russian and Chinese
companies taking over from Exxon, which wants to pull out from
southern Iraq's $50-billion West Qurna 1 project as it prefers
contract terms available in Kurdistan.
"It's difficult for oil companies to resist the temptation
of contracts offered by the Kurds, which represent a prize
compared to Baghdad's tough terms," said Ali Shallal, an Iraqi
oil analyst and legal expert.
"If LUKOIL is targeting Kurdish oil, then now is the best
time. Especially since it is favoured by Baghdad to fill the gap
left by ExxonMobil," said Shallal, who specialises in drafting
TRUCKS GO TO TURKEY
LUKOIL plans to invest around $25 billion through a 20-year
deal to develop the giant neighbouring West Qurna-2 deposit and
has said it would be difficult for the company to commit itself
to another huge project.
On Wednesday, it said it would decide by the year-end
. Both Qurna projects are key to Iraqi ambitions
to at least double output from its huge reserves and produce 6-7
percent of oil in the world.
Such plans are now being threatened by the pullout of firms
such as Exxon and plans by French rival Total and
Russia's Gazprom Neft to tap Kurdish fields.
West Qurna-2 alone is expected to produce 500,000 barrels
per day in 2014, gradually rising to 1.8 million bpd.
The Kurdish regional government, lacking pipeline routes,
began sending trucks laden with condensate to Turkey in July as
part of an agreement with Ankara. In return, Turkey will export
diesel and kerosene. Toros is one of two Turkish terminals which
is designed to receive truck tankers.
The Iraqi Kurds and the central government have a long-
running dispute over oil payments and exploration, which led to
severe export delays this summer when Kurdistan blocked exports
over a payment dispute.
The two sides have been unable to agree on an amended
hydrocarbons law drafted in 2007.
The Iraqi government fears the increasing independence of
Kurdistan could destabilise the country. Prime Minister Nuri
al-Maliki wrote to U.S. President Barack Obama asking to
intervene and dissuade Exxon from going into Kurdistan.