Kurdish Oil Appears Bound for U.S. Again After Three-Year Pause

(Bloomberg) -- An oil tanker carrying Kurdish crude appears to be en route to the U.S., reviving a trade from three years ago that became a symbol of a dispute between the semi-autonomous region in Iraq and the federal government in Baghdad.

The Aframax tanker Neverland, which normally hauls about 650,000 barrels, exited the Mediterranean Sea two days ago, according to vessel tracking data compiled by Bloomberg. A week earlier, it left a port in southern Turkey from where Kurdistan Regional Government cargoes are shipped by traders.

The KRG, which is preparing for a referendum later this year, has long been pushing for greater independence in oil sales, saying the Kurdish region wasn’t getting its share of the federal budget. The dispute escalated three years ago when Kurdish deliveries to the U.S. were blocked and Iraq threatened to take action against companies involved. Those tensions simmered down somewhat as both sides worked together to regain control of the country’s north taken by Islamic State fighters in 2014.

The Neverland’s tracks show it to be heading toward the U.S. East Coast, though it could still go elsewhere. Despite going close to full speed at 13 knots, the vessel’s destination is noted by its crew as “for orders,” a designation for ships that haven’t been given definitive sailing instructions.

Michael Howard, an adviser to the Kurdish minister of natural resources, said he was unaware of the ship’s destination.

August 2014 story on Kurdish shipments to the U.S., dispute with Iraq

The ship earlier this month collected cargo from a loading terminal at Ceyhan on Turkey’s southern Mediterranean coast, which is used to load cargoes that have come by pipeline from the Kurdish part of Iraq. A small proportion of the crude delivered from the terminal is sold by Iraq’s state oil company, known as SOMO, but all such sales this year have been shipped by pipeline to the Kirikkale refinery near Ankara, according to information from a local port agent.

If the Neverland completes its voyage across the Atlantic, it will be following a route taken by only a small number of ships carrying Kurdish crude. In mid-2014, a handful of vessels delivered more than a million barrels from the region, according to data compiled by Bloomberg.

‘Smuggled’ Oil

Iraq’s federal government in Baghdad threatened to sue buyers and shippers of crude sold by the KRG after the two sides failed to agree on control of oil flows and payment receipts, dubbing any such shipments "smuggled" oil.

The tanker United Kalavryta, which loaded around 1 million barrels of Kurdish crude in June 2014 and hauled it across the Atlantic, found itself caught up in the dispute. The Baghdad government filed a lawsuit in Houston federal court to block the tanker from unloading its cargo, and a magistrate judge issued an arrest warrant and ordered U.S. marshals to seize the oil if the Kalavryta came into U.S. waters. The ship remained off the coast of Texas until the following January, retraced its journey back across the Atlantic and eventually discharged its cargo in Israel.

While Kurdish oil has been delivered to ports in Europe and, occasionally, to the Middle East and Asia, the Neverland is the first to carry it across the Atlantic since the United Kalavryta.

“It does feel like a bit of a test case,” Energy Aspects analyst Richard Mallinson said by phone. “Whilst Kurdish oil has found its home in the market, Baghdad hasn’t seemed to want to try and challenge Kurdish exports.”

To contact the reporter on this story: Julian Lee in London at jlee1627@bloomberg.net.

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net, Brian Wingfield

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