* Iraq offers 60-day credit terms to buyers in Asia
* Terms to apply only if customer takes much more Iraqi oil
By Florence Tan and Peg Mackey
SINGAPORE/LONDON, Oct 7 (Reuters) - Iraq is promising sweeter payment terms to oil buyers in Asia as it aims to secure a bigger share of this core market for its growing exports, industry sources said on Monday.
Competition for customers in Asia has already deepened a rivalry between OPEC’s top two producers Saudi Arabia and Iraq, with Baghdad moving aggressively against Riyadh on the price front early this year.
It’s now going a step further, offering to extend credit to oil buyers in Asia for a further 30 days - in effect providing two months of deferred payment, industry sources say. The main targets are energy hungry India and China.
“This probably means Iraq is raising its game in order to get more Asian market share,” said a senior oil executive.
“But the credit terms will only be extended if the buyer agrees to substantially increase the volume.”
So far this year, there has been no extra oil.
Iraq’s oil expansion, which kicked off in 2010, has slowed due to infrastructure and security problems, pushing output and exports at times below last year’s average rates of 3 million barrels per day (bpd) and 2.4 million bpd, respectively.
Exports fell to 2 million bpd in September, the lowest rate in 19 months, as repairs and expansion work at Iraq’s strategic southern oil terminal sharply reduced shipments of Basra Light crude, which accounts for most of Baghdad’s export revenue.
Iraq shipped nearly 2.6 million bpd in August.
But state oil marketer SOMO’s offer could ring hollow with customers in Asia who are still sceptical of Iraq’s ability to ramp up exports while port work is being carried out.
“I‘m not very sure (if we’ll lift more),” said a market source in Asia. “Even now there are so many issues - including late confirmation of supply.”
For its part, Baghdad sees an immediate return to growth - anticipating a rise of 300,000 bpd, with the giant southern oilfield of Majnoon, run by Royal Dutch Shell, providing a big part of that.
Iraq signed a series of service contracts with major oil companies such as Shell, BP, Exxon Mobil and Total at the end of 2009 to develop its oilfields, neglected for decades due to wars and sanctions.
The new southern oil will push Basra Light exports back to 2.3 million bpd, according to Iraqi oil officials.
But oil traders expect ongoing work at the southern Basra Oil Terminal to restrict Basra Light rates to around 2 million bpd this month.
Two berths at the terminal have been closed for part of September, reducing export capacity, and industry sources say rates will stay depressed until the middle of this month. Iraq undercuts Saudi to snare Asian oil market share.
Shipments of Kirkuk crude from the north are expected to remain at around 260,000 bpd - far below capacity as Sunni insurgents target Iraq’s pipeline to Turkey and a payment row between Baghdad and autonomous Kurdistan keep Kurdish oil exports via the pipeline on hold.
SOMO has meanwhile asked customers for their volume nominations for 2014 supply contracts by mid October, with a view to finalising talks in mid-November. (Editing by James Jukwey)