By Ovunc Kutlu
ANKARA
The issue facing the Kurdish regional government of where to store its oil -- a problem that it has temporarily solved by pumping it to Turkey and from then loading it onto tankers and selling it -- could be solved by storing it permanently in tankers offshore, say regional energy experts.
The Kurds have been pumping their oil to Turkey since May, after their repeated appeals to sell the oil directly were rejected by the central government in Baghdad.
Seven oil tankers have left Turkey's Mediterranean port of Ceyhan, (which has the maximum storage capacity of 2.5 million barrels). However, so far only one of those tankers has been sold. Baghdad said the sale of the oil is illegal and has taken the case to an international arbitration court. The Kurdish government and Turkey state that the sale is in compliance with the Iraqi constitution.
Offshore storage is common especially if buyers are reluctant says Shwan Zulal, head of the London-based Carduchi energy consulting firm.
"The KRG wants to sell the oil, but if buyers change their minds due to current pressure from Baghdad, the option is open but not ideal," said Zulal, using an abbreviation for the Kurdish regional government.
There are some discussions about increasing storage capacity in Ceyhan or for sending some of the crude sent to neighboring countries for storage," Zulal said.
However, increasing the capacity in Ceyhan port does not resolve the immediate question for the Kurds, says Ayham Kamel, the Middle East and North Africa director at Eurasia Group in London, a political risk research and consulting company.
"The option of building additional storage capacity in Ceyhan is costly and there is a time issue since it would have to be commissioned and constructed," Kamel says.
An alternative solution for Kurds, according to Kamel, is to produce less oil.
"The KRG can decrease the oil production and oil flow from the pipeline, and not produce at full capacity from the fields," Kamel said.
"Tanker storage is more realistic option since tanker rates are low at this point," he said. "They can increase tanker storage little by little, but they can't just hire tens of tankers."
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