In the FT a few hours ago16 Nov 2018 15:50
Iraq and the Kurdistan Regional Government have resumed oil exports from the disputed region of Kirkuk for the first time in more than a year, responding to calls from Washington to boost output as US sanctions target Iran.
The Iraqi Oil Ministry in Baghdad said that a “preliminary” agreement had been reached with the KRG to send 50,000 to 100,000 barrels a day of oil from the Kirkuk fields through the Kurdish-controlled pipeline to Turkey, the first such exports since federal forces retook control of the region in October 2017.
The near conclusion of talks to resume exports was reported by the Financial Times last week, helping send international crude prices back below $70 a barrel as traders weighed additional supplies reaching a market that has been roiled by signs of rising output despite the US decision to reimpose sanctions on Iran’s energy exports.
The initial volumes Baghdad are sending through the pipeline are relatively small, however, far below the more than 300,000 b/d exports from Kirkuk and its surrounding fields sometimes reached when they were under KRG control from mid-2014 to late last year.
Baghdad is said to be redirecting some of the oil to local sales and refineries, as well as needing to ramp up output at some of the fields. It is unclear whether they will start to send more crude.
“The volumes may remain low until there is a comprehensive agreement with all sides,” said Shwan Zulal of Carduci Consulting, which specialises in Iraqi Kurdistan. “Resumption has only [been] possible due to relentless pressure from the US on Baghdad, so they are giving Trump something.”
Iraq is also likely to face pressure from Saudi Arabia and other Opec members not to raise supplies too quickly as crude prices have fallen sharply in the past month, leading the cartel to mull co-ordinated production cuts of at least 1m b/d when it meets in Vienna next month. The US issued waivers to more Iranian customers than expected having leaned on Saudi Arabia, Russia and Opec to raise output ahead of the sanctions, potentially leaving the market heavily oversupplied.
After the Kirkuk oil travels through the KRG pipeline to Turkey’s Mediterranean port of Ceyhan the barrels will be marketed by the federal Iraqi Oil Marketing Company, known as SOMO, the Iraqi oil ministry said.
The KRG’s pipeline is majority owned by Russia’s state-backed oil company Rosneft, who took a stake in the Kurdish line last year as Moscow tries to increase its influence in the region.
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