Iraq’s northern oil exports show few signs of restarting after stoppage

Date:

(Reuters) – Iraq’s northern oil exports showed few concrete signs of an imminent restart after a month of standstill, as aspects of an agreement between Baghdad and the Kurdistan Regional Government (KRG) have yet to be resolved, according to four sources.

Turkey halted Iraq’s 450,000 barrels per day (bpd) of northern exports on March 25 after an arbitration ruling by the International Chamber of Commerce (ICC), which ordered Turkey to pay Baghdad damages of $1.5 billion for unauthorised exports by the KRG between 2014 and 2018. The pipeline had been exporting around 75,000 bpd of federal crude.

The KRG’s already-fraught finances are suffering from the absence of oil revenues, two sources said.

Lost revenue from the halt for the KRG stands at over $850 million, according to Reuters estimates based on exports of 375,000 barrels per day, the KRG’s historic discount against Brent crude and 31 days of outages.

Baghdad and Erbil, the capital of Iraq’s semi-autonomous Kurdistan region, signed a temporary agreement on April 4 to restart northern oil exports. But the resumption of flows has seen further delays as the two governments iron out several aspects of the deal.

The KRG has agreed for Iraq’s state-owned crude marketing company SOMO to market its crude, which will be restricted from heading to Asia and priced against Kirkuk official selling prices (OSPs), sources previously told Reuters.

SOMO’s contracts are still under negotiation, however, and the mechanism to repay trader debts remains unclear, according to four sources familiar with discussions.

Under the April 4 agreement, KRG oil revenues will be deposited in a bank account at the Iraqi Central Bank under the control of the KRG but which Baghdad will have access to audit, two Iraqi officials have previously said.

However, details surrounding the bank account are under review including its location, which is likely to be based abroad, three separate sources told Reuters.

The KRG and SOMO are eyeing an early May export restart, two sources said, with one adding this is far from guaranteed. A restart is at least 2-3 weeks away, according to a separate industry source.

The KRG and Iraq’s oil ministry did not respond to requests for comment.

Once Baghdad and Erbil reach a resolution, the restart of oil flows rests in the hands of Turkey.

Sources previously told Reuters that Turkey is seeking in-person negotiations with Baghdad relating to the $1.5 billion it was ordered to pay Iraq in damages in the arbitration case.

Turkey also wants to resolve a second arbitration case regarding unauthorised flows since 2018 before it restarts them, the sources said.

Iraq’s lack of willingness to discuss these issues has frustrated Turkey, according to one source.

However, a separate KRG source said that Turkey is holding up discussions ahead of the country’s upcoming presidential elections on May 14.

The Turkish energy ministry did not respond to a request for comment.

Limited storage capacity in the semi-autonomous Kurdistan region means much of its oil production has been shut in.

Consultancy OilX estimates current outages in the Kurdistan region of at least 350,000 bpd.

Fields which are still running include Khurmala, which has reduced output from around 135,000 bpd to 100,000 bpd, according to a source familiar with field operations. This is feeding regional refineries and power production.

The 4,500 bpd Taq Taq field also “continues to produce into storage,” according to a spokesperson at field operator Genel Energy.

Share post:

Popular

Recent
Related

For Kuwait’s new emir, Saudi ties are seen as key

Kuwait (Reuters) - Sheikh Meshal al-Ahmad al-Sabah was named...

Pope Francis deplores Israeli killings of civilians at Gaza church

Vatican City (Reuters) - Pope Francis on Sunday again...

Palestinians must find new path from Israeli rule after war, top official says

Ramallah (Reuters) - Immediately after Israel's war in Gaza...

Israel says it struck Hezbollah sites after attacks from Lebanon

Jerusalem/Beirut (Reuters) - Israel said on Sunday it had...