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Iran, Iraq meet for talks on crude swap deal

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Iran, Iraq meet for talks on crude swap deal

Vienna — The oil ministers of Iran and Iraq met in Vienna late Thursday for thelatest round of talks on the terms of a crude swap deal that will help supplysome of Iran's refineries with feedstock and unlock Iraq's shut-in crude atKirkuk.

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Iraqi Oil Minister Jabbar al-Luaibi outlined the deal to journalists inVienna on Wednesday, and went to see Iran's Bijan Zanganeh after the pair hadspent the day negotiating over extending OPEC's output cut deal Thursday.

The first phase of the swap deal will involve trucking crude from Iraq'snorthern Kirkuk field, followed by the construction of a pipeline in thesecond phase, Zanganeh told journalists after the meeting.

The pipeline will be installed between Iran's Tang Fani pumping stationin the southwest of the country and Iraq's Kirkuk field.

"For the second phase, we need to sign a contract for studies. Aconsultant has been chosen and the service description should be decided.From Tang Fani, the oil can go both to northern refineries or go south andthen reaches exports lines," Zanganeh said.

"I hope we sign the deal next week for the truck transfer, so we canslowly start the oil imports [and] raise it to 60,000 b/d. The important thingis to start the work and this relationship, which is a strategic one betweenIran and Iraq, is established," he added.

Funded by both governments, the pipeline will be roughly 200 km long inIraq and about the same in Iran, and should not take more than two years tocome into operation, Zanganeh said. IRAQI CRUDE FOR REFINING, IRANIAN CRUDE FOR EXPORT

Luaibi explained the idea behind the swap deal, which would see Kirkukoil refined in Iran, while Iraq would be compensated with an equivalentquantity of Iranian crude to be exported by Iraq's State Oil MarketingOrganization from the southern Persian Gulf terminals.

Trucking is intended to start at 15,000 b/d and cap at 30,000 b/d, butLuaibi said it could increase to 60,000 b/d.

Formulas for the equivalent quantities -- because the Kirkuk grade andIran's export grades will differ -- still need to be worked out.

The agreement was first announced earlier this month, following thefederal government's retaking of oil fields that the semi-autonomousKurdistan region appropriated in 2014.

The retaking of the fields and resulting political crisis shut out anexport route to Turkey, over fears that Kurdistan and Turkey would block thefederal government from taking possession of the crude.

Iraq has been in talks with Iran for a year over building an exportpipeline, and the trucking deal could either be an easy win to monetize thatstranded crude or a stopgap measure before the pipeline is built.

In August, Iraq had agreed to set up a joint committee to study thepossibility of pumping Kirkuk oil to an Iranian refinery by pipeline, afterboth parties signed a memorandum of understanding in February for the pipelinestudies.

--Staff reports,

--Edited by Annie Siebert,