Iraq's state-run North Oil Company vowed to maintain continuity in production and exports of Iraq's northern crude flows Monday after an advance by federal forces ousted Kurdish troops controlling parts of the key disputed oil region.
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The Iraqi army captured the headquarters of state-owned North Oil Co. from Kurdish Peshmerga forces early Monday and all NOC's producing assets in the Kirkuk oil producing area, local sources said.
Federal forces regained control of Kirkuk field's southern Baba Dome as well as the Avana Dome and the nearby Bai Hassan field, Farid al-Jadir, the director general of the NOC, told S&P Global Platts.
Of Kurdistan's roughly 600,000 b/d average production from fields under its control, nearly half was produced from the Avana Dome and Bai Hassan fields, which the KRG annexed during the 2014 security vacuum after the Islamic State militant group invaded northern Iraq.
Oil production from the giant Kirkuk field, which straddles the semi-autonomous Kurdistan region, was pumping at normal levels late Monday but export flows to Turkey's port of Ceyhan were "temporarily decreased," an official close to Iraq's northern oil exports said.
He attributed the fall in export flows to the return of control to the Iraqi government and not a sign that oil fields are going to be shut in.
Al-Jadir said he plans to send NOC engineers to the Kirkuk fields on Tuesday to "maintain continuity in production and exports for all of Iraq."
Workers at Bai Hassan and Avana Dome were told not to come to work Monday, though as of now oil production is continuing at a combined average 280,000 b/d from the two fields. Tensions have flared as Baghdad tries to reassert control over the multi-ethnic city of Kirkuk and its nearby oil fields, without which the output of the Kurdistan Regional Government would be much reduced.
Iraq's oil ministry issued a statement demanding that oil flow not be harmed and the KRG's Ministry of Natural Resources also confirmed that output has not been shut in.
"We are in agreement with the minister. Despite the politics, interruption to oil flow will not occur and certainly will not be done by us," KRG's Ministry of Natural Resources said on Twitter.
KURDISH OIL PLAYERS HIT
Under a year-old deal with Baghdad, the KRG exports around 550,000-600,000 b/d through Iraq's only northern export route, Kurdistan's export pipeline via Turkey.
"Contrary to some irresponsible rumors, oil is still flowing through the export pipeline. The KRG will take no steps to stop that flow," KRG's Ministry of Natural Resources said on Twitter.
Some physical buyers of Kurdish and Iraqi crude barrels in Europe remained wary of jumping to conclusions about the future stability of exports. "People are certainly watching what happens, but no one seems to be doing anything specific," a trading source said. "Exports were not at all impacted."
"No one is all that worried," a refining source said. "This should not impact the market all that much because Baghdad and Erbil will have to find some agreement at some point."
Independent oil producers in Iraqi Kurdistan said Monday their operations were unaffected by tensions around Kirkuk as their share prices took a battering on stock exchanges.
Gulf Keystone Petroleum, which operates the Shaikan block well away from Kirkuk and 85 km northwest of the Kurdish city of Erbil, said it was "business as usual," with operations continuing as normal, even as the company is monitoring the situation.
Genel Energy, which operates the Taq Taq field 60 km northeast of Kirkuk and the Tawke field a similar distance from Kirkuk, also said its operations were unaffected.
The latest events come after the KRG held a referendum on independence September 25 which saw the Iraqi central government, along with neighboring Iran and Turkey, threaten to block Kurdish oil exports.
Military forces have been building in the area and KRG officials had warned over the last few days it believed an attack by Iraqi forces was imminent.
Iraqi Prime Minister Haider al-Abadi said in a post on Twitter late Sunday that "disputed areas would be managed by federal forces and local forces under the leadership of the federal authority."
Over the past three years, the KRG has essentially expanded its territorial claims, having remained in much of the area in Ninewa, Kirkuk and Salahaddin provinces after taking control from IS militants. It has refined or sold the crude from the fields, independent of Baghdad, ever since.
NOC operates the fields of Kirkuk/Baba Dome, Jambur, Khabaz, Bai Hassan and Avana Dome.
The oil ministry has not officially responded to the KRG's independence referendum, except to demand the return of the fields under KRG operation, especially Bai Hassan and Avana Dome.
It has also called on Turkey to stop facilitating Kurdistan's oil exports, which the federal government considers smuggling. It also demanded oil sales be solely conducted by the federal government's State Oil Marketing Organization.
Earlier this month, Iraqi oil minister Jabbar al-Luaibi ordered work to begin to rebuild the federal government's own crude export pipeline to Turkey, out of service since early 2014, to bypass the KRG's export route, which it has been forced to use.
The pipeline, which runs from Kirkuk southwest to Baiji and then north through Mosul to the Turkish border, poses not only an infrastructure and security hurdle, but a political one as well, as the previous route ran through territory of the autonomous Kurdistan region.
--Staff report, email@example.com
--Edited by Jason Lindquist, firstname.lastname@example.org