Pipeline policy forces Kurdistan to sell oil at a discount

Crude output from Iraq’s semi-autonomous Kurdistan region is currently around 350,000 barrels per day (bpd), but it all goes to local buyers at deep discounts as the key export route via a pipeline to Turkey’s Mediterranean coast continues to be closed.

Kurdistan’s crude output is now about 50,000 bpd lower than production levels before March 2023, when the pipeline to Ceyhan in Turkey was shut down due to an international dispute, according to figures provided to the Argus by spokesman Myles Caggins of the Petroleum Industry Association. from Kurdistan (Apikur).

Kurdish oil flows through pipelines to Turkey of about 450,000 bpd stopped last year after being shut down in March 2023 due to a dispute over who should authorize Kurdish exports.

The impasse followed a March 2023 ruling by the International Chamber of Commerce in a dispute between Turkey and Iraq over oil in Kurdistan. The ICC ruled in favor of Iraq, which argued that Turkey should not allow Kurdish oil exports through the Iraq-Turkey pipeline and the Turkish port of Ceyhan without the approval of Iraq’s federal government.

Apikur’s member companies continue to produce oil in Iraq’s semi-autonomous region, but must sell their crude to local buyers at deep discounts of about $45-$50 a barrel below the international crude price, Apikur’s Caggins estimated.

“Production volumes have generally increased since the closure of the pipeline in March 2023. All members of Apikur remain focused on reopening the pipeline for export,” the spokesperson told the Argus.

Kurdistan has been unable to export its oil through a pipeline for more than a year, but crude continues to flow from the semi-autonomous Iraqi region in smuggling operations, by tanker trucks to the border with Iran.

More than 1,000 such tankers are estimated to be carrying at least 200,000 bpd of Kurdish oil to Iran and Turkey, a Reuters investigation found.

By Charles Kennedy for Oilprice.com

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