“Pending points” for the resumption of Kurdistan oil exports... Expectations that it will flow at ha

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[size=52]“Pending points” for the resumption of Kurdistan oil exports... Expectations that it will flow at half capacity[/size]

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2023-11-29
A website specializing in maritime shipping news revealed today, Wednesday, the possibility of oil flowing in the pipeline between the Kurdistan Region of Iraq and Turkey after its closure months ago, while indicating that there is a need to settle a group of political and commercial issues and address obstacles in this regard. It is likely to resume Exports at half of its recorded production capacity during the next month.[/size]
[size=45]The Hellenic Shipping website said in a report, “There is a long history of conflict over control of oil production, exports, and revenues between the Iraqi authorities and the Kurdistan Regional Government,” noting that the oil pipeline between Kirkuk and the port of Ceyhan was a pivotal part of this conflict.[/size]
[size=45]The report recalled part of the history of this issue, saying, “An agreement was reached between Turkey and Iraq to extend a pipeline from the Kirkuk fields to the port of Ceyhan on the Mediterranean Sea in 1973. This line consisted of two pipes with a diameter of 40 inches and 46 inches, and the first pipeline was operated.” In 1977, while the second line was operated a decade later, but the line was damaged and neglected.[/size]
[size=45]The report stated that “the year 2010 witnessed the signing of an amendment to the original agreement by both sides requiring the remaining pipeline to be used for transporting, loading and storing Iraqi crude oil.” He added, “The second pipeline was not ready for work, and the agreement temporarily suspended guarantees that Iraq would pump the minimum amount of oil through the pipeline network.”[/size]
[size=45]After asking about the reason for closing the pipeline, the report said, “In 2013, the Kurdistan Regional Government activated the abandoned 40-inch-diameter pipeline, and then began exporting oil through it from the Khurmala Dom, Tauki, and Sheikhan fields under its control, which raised the objection of the federal government.” Considering that the region does not have the right to export its oil through Turkey and that this constitutes a violation of the terms of the original agreement, which was the beginning of a legal battle that lasted 9 years between Baghdad and Ankara.”[/size]
[size=45]The report continued, “The International Court of Arbitration in Paris ruled in March 2023, in favor of the federal government, and Ankara recognized the ruling and closed the pipeline immediately. As a result, the local storage capacity in Kurdistan was completely completed, forcing the operating companies to reduce production in light of saturation.” Local market".[/size]
[size=45]The report stated that “the significant decline in oil production imposed unprecedented pressure on the financial resources of the regional government, which agreed in April that oil sales from fields under its control would be carried out by the Iraqi government oil marketing company, SOMO, provided that The financial proceeds are in a private bank account controlled by the Kurds and exposed to the federal government.”[/size]
[size=45]The report continued, “In June, a new law was issued that significantly limits the region’s control over oil sales revenues, and forced Erbil to deliver 400,000 barrels per day of oil to Baghdad in exchange for a share of the federal budget, which the regional government agreed to.” Partially reluctantly, it initially delivered about 50,000 barrels per day, and it increased by August to reach 200,000 barrels per day.[/size]
[size=45]As for the Iraqi government, according to the report, for its part, it agreed to “a limited temporary funding for a period of three months for the region worth 538 million US dollars, which is enough to pay the salaries of public sector employees, but the main issues remained unresolved.”[/size]
[size=45]What is the situation now?[/size]
[size=45]The report stated that the recent discussions between SOMO, the Kurdistan Regional Government, and the Turkish state pipeline company, Botash, had achieved “some progress towards restarting the pipeline,” noting that “the issues addressed in the negotiations dealt with pipeline fees and quality.” The amount of oil exports, the minimum productivity, and re-exports.”[/size]
[size=45]The report pointed out that “in theory, it is now possible to begin allowing oil to flow through the pipeline again, but for this to be achieved, it is necessary to settle a number of political and commercial issues.”[/size]
[size=45]The report continued, “SOMO must first sign purchase agreements with oil traders who previously purchased crude from the region’s fields (although even without these agreements, SOMO can still resume exports and sell spot shipments).”[/size]
[size=45]Secondly, the report said, “Legal issues between Ankara and Baghdad must be addressed and future terms and tariffs for the pipeline must be agreed.”[/size]
[size=45]Thirdly, the report pointed out that “an agreement must be reached regarding how the federal government will pay the regional government’s revenues from oil exported through the pipeline.”[/size]
[size=45]The report indicated that “Estimates of the Kurdistan Oil Industry Union speak of a loss of $7 billion in export revenues since the closure of the pipeline in March 2023.”[/size]
[size=45]What happens later?[/size]
[size=45]The report quoted official sources as saying that “Turkey, after retracting the measures it was forced to implement for technical reasons, and decided to reopen the pipeline, can now begin imposing fees on the Iraqi government for pipeline tariffs under the terms of the 2010 amendment.”[/size]
[size=45]He explained, “The total customs duties will reach about 25 million dollars per month, which creates a financial incentive for Baghdad to settle competing compensation claims with Turkey, resolve budget problems, share revenues with the Kurdistan Regional Government, and resume oil exports, as estimates indicate that the federal government incurs more than One million dollars in fines for not fulfilling its obligations.”[/size]
[size=45]The report of the website specialized in maritime shipping concluded by saying, “It is believed that the pipeline can return to work at half of its production capacity recorded in January 2023, or about 500,000 barrels per day, including 130,000 barrels per day coming from the Khurmala field and another 100,000 barrels per day.” Of the fields operated by the North Oil Company, it is expected that oil companies will hope to obtain clearer guarantees regarding payments.”[/size]
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