The flow of crude oil through the Kurdistan pipeline from Kirkuk to the Turkish port of Ceyhan have plummeted to some 225,000 bpd, from a typical flow of around 600,000 bpd, Reuters reported on Wednesday, citing a shipping source.
On Tuesday the crude oil flows were some 500,000 bpd, said the source who didn’t provide a specific reason for the sharp drop.
Also on Tuesday, Iraqi government forces seized control of all oil fields that Iraqi state-held North Oil Company operates in the oil-rich Kirkuk region from Kurdish forces.
Last week, Iraq’s Oil Minister Jabbar Al-Luiebi ordered state-held oil and pipeline companies to begin restoring oil flows from Kirkuk to Ceyhan via a pipeline that bypasses Kurdistan, increasing pressure on the breakaway region that voted for independence last month in a referendum strongly opposed and deemed illegal and invalid by the federal government.
But until that pipeline bypassing Kurdistan is repaired, Iraq’s central government must rely on the Kurdish Kirkuk-to-Ceyhan route for exports from its fields in the Kirkuk area. So, it’s in the interest of both parties to keep flows running.
The escalation of the tensions in Iraq since the Kurdistan referendum at the end of September has brought the geopolitical premium back into the oil markets.
According to Goldman Sachs, although both Iraq and Kurdistan are interested in keeping the oil flowing, “…this does not rule out sustained production disruptions as we note that Iraq has less downside risk [given its southern exports] than KRG [Kurdistan Regional Government] if flows to Ceyhan [in Turkey] are interrupted and global oil prices rally,” the bank said on Tuesday, as quoted by Reuters.
“It remains to be seen whether the Kurds, after withdrawing from the region they claim to be entitled to, will allow crude oil to be transported by pipeline across their territory to the Turkish Mediterranean port of Ceyhan,” Commerzbank analysts said, quoted by Reuters.