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Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls

Northern Iraqi exports and output fell again this week as Baghdad’s oil ministry engineers scrambled to refit looted facilities that were recently recaptured from Kurdish forces, according to a new report by Bloomberg.

One anonymous source familiar with the issue said on Thursday that Kirkuk’s Bai Hassan and Avana oil fields remained shuttered. The two fields had produced 275,000 barrels per day before Iraq launched its offensive against Kurdistan - a semiautonomous region that voted to gain independence from Iraq in a referendum last month.

The Kirkuk-Ceyhan pipeline saw saw flows fall to 196,000 barrels a day on Thursday - down from 225,000 barrels per day the day before. Normal, non-wartime scenarios peg flow at 600,000 barrels per day, according to Bloomberg data

Kirkuk is the center of the financial struggle between Baghdad and Erbil. Oil revenues from the oil fields could work as an economic engine for the Kurds, who have been fighting for an independent land since the ethnic group’s political power was divided between Iran, Iraq and Turkey in the last century.

The September 25th referendum included the Land covering the Kirkuk field, despite Baghdad’s argument that the area contained Arabs and other ethnicities other than Kurds.  The field also sits outside of the preset boundary between the KRG’s jurisdiction and that of Baghdad.

Related: Is The Aramco IPO On The Brink Of Collapse?

Racial tensions are high in Kirkuk after the Kurds suffered the defeat against the Iraqi army.

“We’ll only bear one or two weeks of this,” a young phone salesman in the city told the Financial Times. “After that, if our leaders don’t act, we will take this into our own hands.”

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According to Goldman Sachs, although both Iraq and Kurdistan are interested in keeping the oil flowing through the Kirkuk-Ceyhan pipeline, “…this does not rule out sustained production disruptions as we note that Iraq has less downside risk [given its southern exports] than KRG [Kurdistan Regional Government] if flows to Ceyhan [in Turkey] are interrupted and global oil prices rally,” the bank said on Tuesday, as quoted by Reuters.

By Zainab Calcuttawala for Oilprice.com

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