In Oil & Companies News 21/07/2016
A year or so after Iraq’s State Oil Marketing Organization was having to defend the quality and stability of flagship crude Basrah, the Middle East’s newest grades – Basrah Heavy and Basrah Light – have established themselves, with the heavier grade in particular growing in popularity.
SOMO has made inroads with all major Asian crude importers, while also selling nearly a third of its volumes to the competitive European market and a not insignificant 11% into the US, according to shipping data compiled by S&P Global Platts.The quality issue has, of course, largely been resolved. Prior to the separation, Basrah crude exports had an average API gravity of 28.66 degrees.
Ahead of the launch, an assay released to lifters by SOMO, indicated that Basrah Heavy would have an API gravity of 23.55 degrees, while Basrah Light would be 27-30 degrees. Looking at loading data since June last year, it is possible to see the average API for the two grades, which are both loaded from Iraq’s southern oil export terminals and single point moorings in the Persian Gulf.
Basrah Heavy averaged 23.96 over the course of the year to end May, with a high of 24.32 degrees in December. In June 2016, it was just 23.65 degrees, its heaviest point. Basrah Light averaged 28.11 degrees over the same period, well within the expected range. Daily loadings of Basrah Heavy averaged around 700,000 b/d over the year, rising from 691,000 b/d at its launch in June to a high of just under 900,000 b/d in August.
SOMO hopes to increase this figure to more than 1.1 million b/d in the next three years, driving the country’s oil export growth. Much of the heavy oil is used to pay international oil companies developing fields in Iraq. The figure has varied month to month but, on average, around 65% of Basrah Heavy loadings are sold through term contracts, with the remaining loaded as payment to international oil companies.
Over the past three months, around 60% of the heavy grade was for term buyers. According to the latest nominations which are for August, SOMO plans to export 22 million barrels, or 710,000 b/d of Basrah Heavy, with the oil company contractors allocated 290,000 b/d as payback payments and 420,000 b/d for term buyers. “We are talking to the customers. They are asking for more”, one SOMO executive told Platts.
CRUDE DESTINATIONS
Looking at the monthly data, there is considerable variation in volumes taken by buyers, which would indicate that finding a consistent source of demand has been difficult, though this should not be surprising in the first year of marketing.
China bought 2 million barrels of Basrah Heavy when the grade was first launched, before reaching a high of 8 million barrels in February. State-owned oil companies were the largest consumers of Basrah Heavy, consuming a total of more than 51 million barrels over the course of the year, averaging 3.9 million barrels a month from June 2015 to June 2016.
India was the second largest destination, taking nearly 36 million barrels. Peak demand was seen in February and May, when more than 6 million barrels were taken. Reliance Industries began importing Basrah Heavy in April, having tied up a long-term supply arrangement for the high-value heavy grade.
The Indian refining and petrochemicals giant is Iraq’s largest term buyer importing a total of nearly 20 million barrels since June last year. Europe has also been a major buyer, with 29% of purchases. Demand peaked last October at 10.6 million barrels and has since fallen to around 4 million barrels/month.
Currently spoilt for choice with sour crudes, Europe took only 1.9 million barrels in June. With plenty of coking capacity available, the US accounted for 11% of Basrah Heavy sales, at 2.45 million barrels a month. The last few months have seen intake of more than 4 million barrels.
