Suspension due to production problems not politics
The semi-autonomous Kurdistan Regional Government (KRG) has denied that the suspension of crude oil exports from the region represents a new policy decision and blamed the drop in production on technical problems.
According to press reports quoting Iraq’s Oil Minister, Abdulkarim al-Luabi, the KRG halted oil exports on 11 September without giving reasons. Luaibi told reporters on the sidelines of the ministry’s fourth oil licensing round road show in Amman, that crude exports from the Kurdish region dropped in late August to 55,000 barrels a day (b/d) from about 150,000 b/d.
The KRG says the drop in production has been the result of technical difficulties.
“Over the past two days, the NOC [state-owned North Oil Company] operated export pipeline experienced serious technical difficulties causing disruption of the exports from the Kurdistan Region temporarily,” according to a statement from the KRG.
Oil flows from producing fields in the northern Iraqi region began in early February after Baghdad and Irbil came to an interim agreement on exports at an average of 100,000 b/d from the Tawke and Taq-Taq fields to the Kirkuk pipeline which runs to the Ceyhan port in Turkey.
According to data from the KRG, exports began at 75,000 b/d and averaged above 130,000 b/d over the last seven months, reaching a peak in late June and early July of 175,000 b/d.
“The past difficulties included unexpected daily shutdowns due to the lack of sufficient volumes to be pumped from the NOC producing fields. More recently, these daily shutdowns became irregular, unannounced and disruptive to the KRG’s system of export, resulting in some cut backs by the Kurdistan Region oil exporters,” says the KRG statement.
In addition, the KRG reports that NOC has doubled the operating pressure of the export system, normally set between 16-20 Bar, without warning resulting in the automatic shutdown of KRG exports.
“Accordingly the KRG connecting export system into the NOC system has been tuned and maintained to cope with these levels of operating pressures. However, over the last couple of days the operating pressure of the NOC system was unexpectedly increased to 40 Bars”, says the KRG.
The KRG adds that it is now carrying out integrity tests on the system and hopes to be able to resume exports gradually during mid-September.
The suspension of exports follows a statement issued by the KRG on 5 September rejecting an oil and gas law proposed by the government, which would govern the sector and divide responsibility between the central government and provinces, as well as the role of international oil companies. The draft law was approved by the Iraqi cabinet at the end of August, and has been submitted for approval by parliament (MEED 6:9:11).
The KRG has instead backed a rival oil law, proposed by the Parliamentary Oil & Energy Committee. It also continues to sign production sharing contracts that Baghdad deems illegal, most recently in July with the US’ Hess Corporation and Ireland’s Petroceltic for the Dinarta and Shakrok exploration blocks. The response of Baghdad was to drop Hess from its prequalification list for Iraq’s exploration bid round in January next year.