The oil ministers of Iran and Iraq met in Vienna late Thursday for the latest round of talks on the terms of a crude swap deal that will help supply some of Iran's refineries with feedstock and unlock Iraq's shut-in crude at Kirkuk.
Iraqi Oil Minister Jabbar al-Luaibi outlined the deal to journalists in Vienna on Wednesday, and went to see Iran's Bijan Zanganeh after the pair had spent the day negotiating over extending OPEC's output cut deal Thursday.
The first phase of the swap deal will involve trucking crude from Iraq's northern Kirkuk field, followed by the construction of a pipeline in the second phase, Zanganeh told journalists after the meeting.
The pipeline will be installed between Iran's Tang Fani pumping station in the southwest of the country and Iraq's Kirkuk field.
"For the second phase, we need to sign a contract for studies. A consultant has been chosen and the service description should be decided. From Tang Fani, the oil can go both to northern refineries or go south and then reaches exports lines," Zanganeh said.
"I hope we sign the deal next week for the truck transfer, so we can slowly start the oil imports [and] raise it to 60,000 b/d. The important thing is to start the work and this relationship, which is a strategic one between Iran and Iraq, is established," he added.
Funded by both governments, the pipeline will be roughly 200 km long in Iraq and about the same in Iran, and should not take more than two years to come into operation, Zanganeh said.
Luaibi explained the idea behind the swap deal, which would see Kirkuk oil refined in Iran, while Iraq would be compensated with an equivalent quantity of Iranian crude to be exported by Iraq's State Oil Marketing Organization from the southern Persian Gulf terminals.
Trucking is intended to start at 15,000 b/d and cap at 30,000 b/d, but Luaibi said it could increase to 60,000 b/d.
Formulas for the equivalent quantities -- because the Kirkuk grade and Iran's export grades will differ -- still need to be worked out.
The agreement was first announced earlier this month, following the federal government's retaking of oil fields that the semi-autonomous Kurdistan region appropriated in 2014.
The retaking of the fields and resulting political crisis shut out an export route to Turkey, over fears that Kurdistan and Turkey would block the federal government from taking possession of the crude.
Iraq has been in talks with Iran for a year over building an export pipeline, and the trucking deal could either be an easy win to monetize that stranded crude or a stopgap measure before the pipeline is built.
In August, Iraq had agreed to set up a joint committee to study the possibility of pumping Kirkuk oil to an Iranian refinery by pipeline, after both parties signed a memorandum of understanding in February for the pipeline studies.