Kurd Oil Supply Seen Growing as Region Grabs Territory

By Nayla Razzouk, Anthony DiPaola and Rupert Rowling June 17, 2014

Iraq’s Kurdish region may be able to gain more autonomy and increase crude exports after taking control of territory around the nation’s fourth-largest oil field, analysts from Saxo Bank A/S and JBC Energy GmbH said.

Kurdish troops are protecting the Kirkuk oilfield and surrounding areas after an offensive by Islamist insurgents last week prompted Iraqi central-government forces to flee. The Kurdistan Regional Government plans to double its crude exports next month to as much as 250,000 barrels a day and has built a new pipeline that could ship Kirkuk oil to international markets, Ashti Hawrami, KRG’s natural resources minister, said at a conference in London today.

“The current situation could lead to a better environment for exports if the Kurdish region gets more autonomy and can ship its oil, and the south of Iraq continues to grow,” David Wech, managing director at JBC Energy GmbH in Vienna, said yesterday by phone.

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Iraq’s central government in Baghdad and the Kurds have been in a dispute over oil revenue and territory for years, including disagreements about Kirkuk. Tensions increased last month when the Kurds started to export crude to Turkey through their own pipeline without approval from Baghdad. Two tankers have loaded cargoes of crude from the Kurdish region on Turkey’s Mediterranean coast.

Two more tankers will load oil exported from the Kurdish region at the Turkish port of Ceyhan this week, Hawrami said yesterday at the Iraq Petroleum Conference in London. The region will raise exports to 200,000 to 250,000 barrels a day in July, from 125,000 now, he said.

Daily shipments may increase to 400,000 barrels by the end of the year, he said.

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Heading for Independence

“The central government has tried to halt exports from the region, but it is weak and the Kurdish north could potentially be heading for independence,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by e-mail. “It could potentially mean increased supply from a region that has been relatively stable.”

Exports of Basrah Light crude, southern Iraq’s main grade, may reach about 2.8 million barrels a day next month, according to a preliminary loading plan obtained by Bloomberg News June 16.

Current Kurdish exports are not big enough to make a difference to global oil markets “compared with what’s coming out of Basrah in the south, but political stability there could attract renewed investment and increase the effort to produce more,” Hansen said.

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The Kurdistan Regional Government controls 45 billion barrels of oil reserves and has attracted international oil companies including Exxon Mobil Corp. (XOM:US)and Total SA (FP) with financial terms many investors see as more generous than those available in the rest of the country.

Kirkuk Pipeline

Kirkuk contains 8.9 billion barrels of crude reserves, according to data compiled by Bloomberg. The field and surrounding area is producing 300,000 barrels a day of crude, down from 650,000 to 700,000 before March 2, when the export pipeline to Ceyhan was sabotaged, according to a statement from state-run North Oil Co. yesterday.

The government in Baghdad has declined an offer to export oil from the Kirkuk area to Turkey through a separate pipeline controlled by the Kurdish government, Hawrami said in London yesterday. The recently completed link could ship as much as 1 million barrels a day of oil from northern Iraq, including 325,000 barrels a day of Kirkuk crude, by connecting the area to an existing pipeline that runs through Kurdish territory, he said.

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To contact the reporters on this story: Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net; Anthony DiPaola in Dubai at adipaola@bloomberg.net; Rupert Rowling in London at rrowling@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Rachel Graham

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