Sri Lanka considers importing Iraq oil

Opening up new options, Sri Lanka's government will begin talks with Iraq to import Basra Light crude during a bilateral trade meeting next week, an official statement said on Thursday. Prospective imports were suggested by Iraq Ambassador in Sri Lanka Kahtan Taha Khalaf when he met Industries and Commerce Minister Rishad Bathiudeen. The latter has agreed to consider the proposal and after further study in Sri Lanka the two parties are expected to broach official discussions during the Joint Economic Commission (JEC) talks in Baghdad that will begin on Feb. 24. This will be the eighth session of talks since the commission was established in 1975. "In the past Sri Lanka bought and refined our oil but has discontinued. You can buy our Basra Light brand of crude and we are ready to supply them to you as we are a top buyer of Ceylon Tea. You can refine Basra Light crude to more than 50 percent, even up to 60 percent here," Khalaf was quoted as telling Bathiudeen in a statement released by the Industry and Commerce Ministry. However, no prices, quantities or payment plans had been discussed between the two officials Iraq is also looking forward to proposing several other measures to increase trade ties between the two nations, according to Khalaf, including terminating double taxation, promoting medical tourism and encouraging medical professionals to migrate there. Sri Lanka spent 4.3 billion U.S. dollars on oil imports in 2013, recording a 14.6 percent decline from 5 billion U.S. dollars the previous year. Expenditure on the importation of fuel increased by 21.4 percent to 454 million U.S. dollars in December 2013, due to higher expenditure on crude oil imports, despite the decline in refined products imports. "The significant increase in the expenditure on crude oil imports by 90.8 percent to 144 million U.S. dollars in December was to ensure the availability of adequate supplies as there were less imports in November and no oil imports during October," the Central Bank said in its latest external performance report. Oil needs in 2014 are expected to be higher than 2013 due to decreasing hydro power capacity resulting from the drought currently blistering parts of the island. The shortfall will likely be made up by thermal power generation requiring more fuel. The value of total trade between the two countries was 89.99 million U.S. dollars in 2013, according to the Commerce Department. Local exports to Iraq were 89.80 million U.S. dollars putting the trade balance firmly in Sri Lanka's favor. Tea has been a major export item to Iraq accounting for about 95 percent of the total exports to Iraq. It is estimated that almost 15,000MT of Ceylon Tea is being exported to Iraq indirectly through Dubai, Jordan and Kuwait. Iraq is the Organization of the Petroleum Exporting Countries ( OPEC)'s second biggest oil power but crude exports and revenues declined in 2013 compared to the previous year, despite efforts to dramatically ramp up crude sales to fund much-needed reconstruction, according to international reports published last month. Exports totaled 872.3 million barrels, or 2.39 million barrels per day, last year compared with 2.42 million bpd in 2012, according to Iraq Oil Ministry figures. Revenues dipped to 89.22 billion U.S. dollars from 94.02 billion U.S. dollars. Baghdad is seeking to dramatically ramp up exports to fund desperately-needed reconstruction of Iraq's conflict-battered infrastructure and economy. Sri Lanka had a long standing oil partnership with Iran, which ran into trouble when the U.S. tightened sanctions in 2011. Even though technically Sri Lanka has received exemptions for two years running the island has had to severely reduce imports for technical reasons such as banks not accepting Letters of Credit. Sri Lanka's major oil refinery at Sapugaskanda, in the outskirts of Colombo, was also built decades ago using Iran funding and the machinery is specified to Iranian crude, limiting buying options for Sri Lanka. At the height of the Iran-Sri Lanka partnerships the island sourced as much as 80-90 percent of its oil requirements from Iran. Since the U.S. sanctions trimmed Sri Lanka's options Oman has been a source of oil imports. The ongoing talks between the U.S. and Iran on rolling back its nuclear program in return for scrapping or reducing sanctions could renew oil relations between Iran and Sri Lanka but no definitive views have been expressed by the Sri Lankan government so far.