Glencore has paid Iraqi Kurdistan $300 million as an advance for oil as it seeks to compete with trading houses Vitol [VITOLV.UL] and Petraco for profitable business despite disruptions and political instability, industry sources said.
Glencore, which declined to comment, has made a prepayment in recent days to the government of Iraq’s semi-autonomous region which will start allocating it crude from mid-year, the sources told Reuters on condition of anonymity.
Kurdistan began direct oil sales to world markets in mid-2015 as it said the central government in Baghdad had failed to respect a budget deal, depriving the Kurdistan Regional Government (KRG) of funds to pay state and army salaries as it seeks to defeat Islamic State militants.
Iraq says the KRG failed to respect a deal to transfer oil to Baghdad.
Vitol has been the dominant player in Kurdish oil in recent months, exporting as many as 12 cargoes in January, Petraco has had as many as seven, and Swiss-based Trafigura has taken one cargo a month.
Meanwhile, Glencore’s oil trading division has come under increased pressure to generate more profit after a collapse in metal and coal prices wiped out profit at its mining division.
Relatively cheap Kurdish oil has become a favorite grade for European refiners over the past year, reaching plants from Israel and Croatia in the Mediterranean to Poland and Germany.
A plunge in oil prices over the past year has triggered a budget crisis in Iraqi Kurdistan and forced the region to slash spending despite rising crude sales, which are being exported via the Turkish port of Ceyhan.
The KRG borrowed as much as $3 billion from Turkey and trading houses guaranteed by oil exports although the debt repayments are going slower than expected due to lower oil prices.
The KRG said on Monday it had received $100 million in February from a new prepayment commitment, without saying where it came from.
Kurdistan has faced severe export disruptions over the past three weeks after Turkey shut a pipeline for security reasons as it carries out a military campaign against Kurdish militants in its southeastern region.