| | | Energy Weekly: Legal/Regulatory Boosts To
US and Kurdish Oil Export Hopes
30 June 2014 ¦ 13 pages ir.citi.com
Immediate Threat To Iraqi Flows Recedes Though Turmoil
Continues. PSM Shows Strong Demand and Production Growth
The US Department of Commerce clarification last week that stabilized
condensate could be exported as a refined product effectively expands the
definition of distillation, and may have opened the door to a flood of exports
for similarly processed crudes, or to legal challenge if those exports are
denied. This is because Commerce’s clarification was focused on how the
crude/condensate was processed rather than any technical specification of the
crude/condensate itself, such as setting a minimum API gravity. Hence if some other
crude stream were given some minimal processing, it may be viable for exports in
line with last week’s clarification (see US Condensate Exports/Equity View).
Last week also saw a June 24th ruling by the Federal Supreme Court of Iraq in
which the court refused to issue a ban on independent oil exports by the
Kurdish Regional Government (KRG) in Iraq. As is the case with the US
Department of Commerce’s ruling, the case is far from clear cut yet may have far-
reaching implications. Iraq’s federal oil ministry had asked the country’s Supreme
Court to rule on the constitutionality of the Kurdish region’s oil contracts and its
independent oil exports back in 2012, yet the KRG have never shown up to make
their legal case, leaving the court unable to rule either way. Given this legal
ambiguity, the KRG started loading crude piped to Ceyhan in Turkey in May, and
has to date loaded four cargoes and sold one. Crude that has been trucked to
Turkey has so far remained uninhibited by legal challenge from Baghdad. The
Supreme Court on June 24th ruled, on procedural grounds, that it cannot ban KRG
exports as it has not as yet determined them to be illegal. The Iraqi oil ministry is
continuing to litigate in other jurisdictions, and threats of legal action by Baghdad
have scared off most buyers of KRG crude so far. The rulings by both the US
Department of Commerce and the Iraqi Supreme Court leave uncertainty and
bearish possibilities in their wake. |
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