Iraq set to reopen own pipeline as Kurdish talks stall

Baghdad is repairing a pipeline that could allow it to send 350,000 barrels per day to Turkey by the end of the month, an Iraqi deputy oil minister said on Monday, a step likely to rile foreign oil companies and the Kurdistan Regional Government (KRG).

The reopening of the Kirkuk-Ceyhan pipeline, which has been shut for a decade, would provide a rival route to a pipeline from the Kurdistan region that has been shut for a year as talks between Baghdad and the KRG on resuming exports have stalled.

Baghdad deems production-sharing agreements between the Kurds and foreign companies using the KRG's pipeline illegal.

The federal government in Baghdad will require oil companies to negotiate with it to sell their oil via the revived pipeline to Turkey, potentially angering the Kurds who rely on almost entirely on oil revenue.

Exports via the 960-kilometre (600-mile) pipeline were halted in 2014 after repeated attacks by Islamic State militants. It once handled about 0.5 percent of global supply.

"Repair works are ongoing and a major crude pumping station with storage facilities has been completed. The pipeline is likely to be operational and ready to restart flows by the end of this month," Basim Mohammed, Iraqi deputy oil minister for upstream affairs, told Reuters.

Repairing damaged sections inside Iraq and completing one essential pumping station will be the first stage of operations to bring the pipeline back to full capacity, he said.

The KRG's pipeline was halted on 25 March 2023 after an arbitration court ruled it violated provisions of a 1973 treaty by facilitating oil exports from the semi-autonomous Kurdish region without Baghdad's consent.

Negotiations to restart it have faltered as Turkey, the KRG, and the federal government have made conflicting demands.

Two Iraqi oil officials and a government energy adviser, speaking on condition of anonymity, said Baghdad had balked at a Kurdish demand that the federal government pay a $6 per barrel transit fee to Russian oil firm Rosneft, which partly owns the pipeline.

"Iraqi oil ministry officials told the Kurdish negotiating team they consider the agreement between KRG and Rosneft illegal and a violation of valid Iraqi laws," said Kurdistan region-based energy adviser Bahjat Ahmed who was briefed about the talks.

A KRG spokesman did not reply to requests for comment.

Mutual need

Despite tensions between the Kurds and Baghdad, the two sides need each other. Kurdish parties have helped Iraqi politicians to come to power and Baghdad has contributed to the salaries of Kurdish civil servants and fighters.

KRG exports flow through a KRG pipeline to Fish-Khabur on the northern Iraqi border, where the oil enters Turkey and is pumped to the port of Ceyhan on the Mediterranean coast.

Three sources from the state-run North Oil Company (NOC) said crude test pumping started early last week to check the parts of the pipeline that run inside Iraqi territories and found leakage in some segments.

Iraqi technical NOC crews have speeded up repair operations to fix the damaged sections that run from Kirkuk through the provinces of Salahuddin and Mosul to the border area with Turkey.

The two Iraqi oil officials and a government energy adviser said the agreement between Baghdad and Ankara on the Iraq-Turkey oil pipeline (ITP) operations was extended in 2010 for 15 years and will expire in mid-2025.

The resumption of operations at the old pipeline will be discussed as part of talks to extend the ITP agreement, the government energy adviser said.

(Reuters)