PUK President to Argus: No imminent Iraqi Kurdistan crude restart

P.U.K 07:31 PM - 2024-02-17
 Screenshot of Argus's article. Argus

Screenshot of Argus's article.

Kurdistan Region Iraq Türkiye

A restart of crude exports from the semiautonomous Kurdistan region of northern Iraq will not be coming "any time soon," according to a senior official.

Speaking on the sidelines of the Munich Security Conference today, Patriotic Union of Kurdistan (PUK) leader Bafel Talabani told Argus the situation between the federal government in Baghdad and Erbil, which has contributed to the shut-in, is "very delicate." At this point even the smallest mis-step "could impact" the situation, he said.

The PUK is one of the main political parties in the Kurdistan Regional Government (KRG), sharing power with the Kurdish Democratic Party (KDP).

The pipeline that transports northern Iraqi crude to Turkey for onward export was shut in March 2023 after Ankara lost an arbitration case with Baghdad. Production in the KRG territory was around 470,000 b/d prior to the pipeline closure. Around 400,000 b/d of this was marketed by the KRG and around 70,000 b/d by Iraqi state-owned marketer Somo.

Turkey said in early October that the pipeline is ready to resume operations and that the delay in restarting is down to internal Iraqi politics. The KRG has held a number of meetings with federal government officials since the pipeline's closure, but major disagreements over international oil firms' (IOC) contracts and the KRG's commitments to trading companies have prevented a restart.

Baghdad has been studying an amendment to its federal budget that would enable it to pay IOCs working in Iraqi Kurdistan, Iraqi prime minister Mohammed Shia al-Sudani said in December. This would see a compromise between Baghdad and Erbil over the recovery cost for oil produced in Iraqi Kurdistan. Iraq's budget law requires the federal government to pay an average of $8/bl as recovery cost for oil produced in Iraq outside the Kurdistan region, al-Sudani said. But the KRG says production costs in the north are around $30/bl.

Keep pushing
The IOCs operating in the Kurdistan region have for some months been urging the US to help persuade Baghdad to resume exports from the north of the country, through the Association of the Petroleum Industry of Kurdistan (Apikur), an industry body representing them. The association renewed this call to US officials attending the Munich Security Conference.

Apikur "urgently requests US congressional action to facilitate the reopening of the Iraq-Turkey pipeline," it said. "This vital conduit… has been closed due to political disagreements, [and] is directly affecting US interests and the global energy market, and threatening the region's economic and security stability."

The dispute appears to be complicating matters for Baghdad when it comes to its commitments under the Opec+ deal. Argus assessed Iraqi production at 4.22mn b/d in January, which, while down 110,000 b/d on December, was still 220,000 b/d above its 4mn b/d quota for the month. Opec's secondary sources, of which Argus is one, assessed Iraqi output at 4.19mn b/d, and Baghdad officially reported its output at 3.979mn b/d, below its January target. But this probably excludes output from the Kurdistan region. Argus estimated production in the region at around 200,000 b/d, which has all be directed for internal consumption because of the halt to exports.

Baghdad this week vowed to comply with its output quota going forward, and pledged "to compensate for the increase in production in January over the next four months."


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