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Iraq, Kurdistan Nearing Agreement On Oil Dispute

Oil

Iraq and the semi-autonomous region of Kurdistan are close to settling their dispute over oil exports and oil revenue sharing, according to an Iraqi oil ministry official.

Exports from Kirkuk were halted after Iraq’s federal army regained control over the oil fields in the area. Baghdad—which never recognized the legitimacy of the Kurdistan independence referendum at end-September 2017—moved in October to take control over the oil-rich area around Kirkuk. 

In mid-October, Iraqi government forces seized the oil fields around Kirkuk, which had been under Kurdish control since 2014. The military maneuver knocked some 350,000 bpd of crude oil production offline and led to oil prices spiking on concerns of unstable supply from the region.

To compensate for lower exports in the north, Iraq has boosted its exports from the south, and has increased the export capacity of its southern ports to 4.6 million bpd.

Talks between Baghdad and the Kurds have made good progress regarding the oil revenue sharing and exports, Kurdish-run BasNews quoted Iraqi oil ministry spokesperson Assem Jihad as saying on Wednesday.

“An agreement has become closer,” especially after recent meetings between Iraq’s Prime Minister Haider al-Abadi and Kurdistan’s Prime Minister Nechirvan Barzani, the media outlet quoted Jihad as saying.

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The Iraqi government wants to export oil from the province, regardless of whether it will do it through Iran or Turkey, the oil ministry official said.

Iraq plans to start exporting 60,000 bpd of crude oil from Kirkuk to an Iranian refinery under a swap deal, and earlier this month Iraqi security forces started clearing the area along the oil route to Iran.

In addition, Iraq’s oil minister Jabbar al-Luiebi is set to visit Turkey this week to discuss the resumption of oil exports via the Kirkuk-Ceyhan line to the Turkish port Ceyhan on the Mediterranean.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh G Salameh on February 21 2018 said:
    This is excellent news. It will lead to lessening of tension between the Iraqi government and the regional government of Iraqi Kurdistan. Moreover, it will enable the reuse of the Iraqi-Turkish oil pipeline (ITP) to export oil from the Kirkuk oilfields to Ceyhan on Turkey’s Mediterranean coast.

    Iraq recently signed an agreement with BP to raise oil production from the Kirkuk oilfields to 1 million barrels a day (mbd). According to BP, the oilfields in the Kirkuk area still have remaining proven oil reserves estimated at 9 billion barrels.

    The ITP is Iraq’s only available oil-export pipeline with a capacity of 1.6 mbd but it is currently out of action. Iraq’s oil ministry announced that it is planning to build a new pipeline to replace the ITP.

    Iraq should also give priority to extending the Iraq strategic oil pipeline to the Jordanian port of Aqaba on the Red Sea, possibly with similar capacity to the ITP.

    And with Iraq’s oil production currently at almost 5 mbd and projected to rise to 6-7 mbd by 2020/21, Iraq needs urgently to expand its export capacity through new export pipelines and terminals on the Gulf beyond the current capacity of 4.6 mbd.

    Dr Mamdouh G Salameh
    Intwrnational Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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