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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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Oil-Rich Iraqi Kurds May Go it Alone

More than 5 million people live in the northern semiautonomous Kurdish provinces isolated from much of the violence plaguing Iraq. The area was shielded from most of the ravages of the U.S.-led invasion and has generated significant interest from international oil companies despite ongoing disputes with the central government in Baghdad. Though there have been repeated attacks on export routes to Turkey, the region is at the dawn of an oil boom. While the rest of Iraq slides closer to sectarian war, a foreign affairs official from the Kurdish government said independence may be something to consider.

July was the deadliest month in Iraq since an insurgency prompted the U.S. military to adopt its so-called surge strategy during the war. Iraqi Foreign Minister Hoshyar Zebari told U.S. Secretary of State John Kerry last week the country "is not crashing, and it’s not heading to civil or sectarian war." A July jailbreak and a steady stream of bombings across the country, however, has destabilized the country to the point that al-Qaida is on the comeback trail.

Last week, a bomb struck a crude oil pipeline running from the northern city of Kirkuk to the Turkish port city of Ceyhan, situated along the Mediterranean Sea. Officials said Friday it would take about two days to get the pipeline working again, though the 560-mile pipeline has been the target of dozens of attacks since the beginning of the year.  Nevertheless, the region remains the focal point of energy investors keen to get Kurdish oil to the international market. The region ships about 30,000 barrels of oil per day to Turkey by truck and its production capacity is expected to increase 30 percent by the end of the year to 400,000 bpd.

Related article: Iraqi Oil Exports Slump But Optimism Abounds

Testing began earlier this year to convert a Kurdish natural gas pipeline to an oil route slated for delivering crude to Turkey.  Todd Kozel, chief executive officer at Gulf Keystone Petroleum Ltd., said getting a line running exclusively for Kurdish crude oil has been something he's been anticipating for more than five years. The region, meanwhile, is on the cusp of an oil boom.  The Kurdish government estimates its provinces could hold more than 45 billion barrels of oil, enough to satisfy U.S. economic demands through 2020.

Four people were injured last weekend when a truck bomb exploded at the port city of Umm Qasr, near the Iraqi border with Kuwait. Port traffic wasn't affected, though the facility handles imports of some of the equipment used to support Iraq's oil industry. The blast occurred near the oil-rich port city of Basra, however, prompting security officials there to express concerns about the "serious" breach of security.

OPEC in its August market report said Iraq's crude oil export capacity should fall by as much as 500,000 bpd in September because of maintenance at export terminals. Iraqi oil production for July was around 2.9 million bpd, about 6 percent less than its average for the second quarter of the year. OPEC said Iraqi outages were part of the reason crude oil prices have been "well above" the $100 per barrel mark for August.

Related article: Is There a Correlation Between the Level of Violence and the Output of Oil?

Kurdish Foreign Minister Falah Mustafa Bakir said the three provinces that make up the semiautonomous region could be characterized as the largest nation in the world without a state. Kurds were the target of a genocide campaign by Saddam Hussein and Bakir says history has largely betrayed them. The Kurdish north has a right to self-determination, maybe not now, but in the foreseeable future, he said. If the rest of Iraq falls, and the Kurdish governments makes good on its oil pipeline promises, the case for independence may be a bit easier.

"We have seen the fall of the Berlin Wall," he said. "When you think of the changes in the world, this future may happen faster than you think."

By. Daniel J. Graeber of Oilprice.com


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