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Kurdistan's Oil Industry Standoff Intensifies

Some 450,000 barrels per day of oil exports from the Kurdistan Region of northern Iraq remain shut in amid an intractable dispute over who should control the region’s oil sales. 

For the smaller oil companies operating there, it is now a choice that is really not a choice at all: Either redirect Kurdish oil exports through a newly completed Iraqi pipeline controlled by Baghdad or resume flows through the Kurdish pipeline to Turkey (which Turkey turned back on in October). The first option would make it extremely difficult–if not impossible–to continue to operate on territory controlled by the Kurdistan Regional Government (KRG) because it would amount to a betrayal. It would essentially mean handing over crude oil directly to Baghdad's state-run marketer, SOMO, without ever touching Kurdish hands. Companies might be tempted to choose this in hopes that SOMO will actually pay them, while the Kurds are in major arrears.

The second option would be to accept that the Kurds would be responsible for handing the oil over to SOMO for export to the Turkish port of Ceyhan, regardless of whether it goes through the newly resumed “Kurdish” pipeline. But at least with this option, there is room for some control and manipulation of volumes by the KRG. 

Threats have been flying from all sides: Badhad, Erbil, and independent oil producers. 

This week, the KRG warned UAE company Dana Gas against directing product through…

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