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Iraq agrees tentative deal with Kurds to resume crude oil exports to Turkey

Berlin — Iraq has agreed a deal with the semi-autonomous Kurdistan Regional Government to resume crude oil exports through its pipeline to Turkey, halted since last July, local media quoted Prime Minister Haider al-Abadi as saying on Tuesday.

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"It was agreed with the Kurdish side to start exporting oil from Kirkuk," he said during his weekly press conference in Baghdad.

Iraq's State Oil Marketing Organization has not exported any crude oil from Ceyhan since June 2017. Even before the shipments stopped, SOMO was only exporting around 32,000 b/d from the port.

Analysts were, however, skeptical about the deal being implemented in the near future.



KRG officials have been silent on the deal to transport crude produced by federal oil companies through its pipeline to the Turkish Mediterranean port of Ceyhan.

"We don't know the details. We don't know whether the deal is contingent on restarting the disputed fields. But this could be the first signs of a breakthrough," an oil analyst, who focuses on Iraq, said.

Two key fields -- Bai Hassan and Avana -- are offline, and it is not clear how quickly production can be resumed.

"It remains to be seen whether production from the two Kirkuk fields can come online very soon. There are some reports that KAR met with NOC recently to talk technical equipment on Kirkuk", the analyst added.

There are also problems between Baghdad and Erbil to be resolved before exports can be resumed.

"It is not just an oil issue. Which is why Abadi said that non-oil issues will be discussed later," the analyst said.

Iraqi oil minister Jabbar al-Luaibi visited Ankara earlier this month for talks on resuming exports. He met his Turkish counterpart Berat Albayrak. Iraq wants Turkey to confirm that crude transported through its territory would be delivered exclusively to SOMO.

Even if SOMO managed to agree on a deal and get control of the crude at Ceyhan, it would probably take a while, at least until after Iraq's elections, which are due in May, Michael Knights, an analyst with the Washington Institute for Near East Policy, said.

Exports from the KRG to Ceyhan -- opposed by Baghdad as unconstitutional -- have more than halved from a year ago to around 300,000 b/d after federal Iraqi forces seized control of some of the region's key oil fields in and around the Kirkuk province.

Federal forces are threatening to take back control of the remainder of the Kirkuk fields, including the vital northern dome of Khormala and the northern border with Turkey where the Kurdish oil export pipeline is located.

The oil ministry has put together plans to rehabilitate the Iraq-Turkey Pipeline, which has been inoperable since March 2014 after sustained attacks by Islamic State militants. Luaibi has said that he hopes this could be restored to export 250,000-400,000 b/d of crude.

A new federal pipeline line could take at least three years to build, assuming financial investors are found. So Iraq will have to rely on the Kurdish pipeline infrastructure for now.

--Adal Mirza, adal.mirza@spglobal.com
--Eklavya Gupte, eklavya.gupte@spglobal.com
--Edited by E Shailaja Nair, newsdesk@spglobal.com