Iraq Asks Turkey to Resume Northern Oil Export Pipeline

(Reuters) — Iraq has sent an official request to Turkey to restart oil export flows through a pipeline that runs from the semi-autonomous Kurdistan Region in northern Iraq to the Turkish port of Ceyhan.

A statement by Iraq's Kurdistan Regional Government (KRG) on Thursday confirmed news reported earlier by Reuters that Iraq requested Turkey restart flows that have been shut in for almost seven weeks.

"Both the Kurdistan Region's Ministry of Natural Resources and Iraq's Ministry of Oil are reportedly waiting for Turkey's response before resuming oil exports," the KRG statement said.

Iraq's request to Turkish state energy company BOTAS came after traders buying crude from the Kurdistan region signed contracts with Iraq's state-owned crude marketer SOMO on Tuesday and Wednesday following weeks of discussions, according to four sources familiar with the matter.

Iraq's oil ministry and Turkey's energy ministry did not immediately respond to requests for comment.

Turkey halted Iraq's 450,000 barrels per day (bpd) of northern exports through the Iraq-Turkey pipeline on March 25 after an arbitration ruling by the International Chamber of Commerce (ICC).

The ICC ordered Turkey to pay Baghdad damages of $1.5 billion for unauthorized exports by the KRG between 2014 and 2018.

Iraq put off asking Turkey to resume flows as it spent weeks resolving various issues with the Kurdistan Regional Government (KRG) surrounding a restart deal.

The KRG has agreed for SOMO to market its crude oil. Its export revenue will be deposited in an existing KRG bank account with Citi in the United Arab Emirates, according to three sources familiar with the matter. Baghdad will have auditing access, Reuters previously reported.

SOMO also had to iron out contracts with buyers of KRG crude. The newly signed contracts are for a period of up to three months but do not address the vast amount of debt that the KRG owes trading firms, one of the three sources said.

Producers in the region have called for the KRG to prioritize debt repayment, making transparency and regularity of payments conditions for new investments and maximum export flows once the pipeline reopens, a separate industry source said.

The timing of the pipeline restart, however, remains uncertain.

Turkey is seeking negotiations relating to the damages it was ordered to pay in the arbitration case, and wants permanent resolution of open arbitration issues before resuming flows, sources previously told Reuters.

"There are a number of considerations and one of the important (ones) is presidential elections in Turkey on May 14 with a possible run off," Bijan Mossavar-Rahmani, executive chairman of Norwegian oil company DNO, told a call with analysts on Thursday on the matter of the restart.

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