LONDON (Reuters) – Iraq has restarted exports of Kirkuk oil, halted a year ago due to a standoff between the central government and Kurdistan’s semi-autonomous region, industry sources said on Friday after a new government in Baghdad agreed a tentative deal with Erbil.
The development is a win for the U.S. government, which has been urging both sides to settle the dispute and resume flows to help address a shortage of Iranian crude in the region after Washington imposed new sanctions on Tehran.
Flows resumed on Friday at a modest level of around 50,000-60,000 barrels per day (bpd) versus a peak of 300,000 seen occasionally last year and it was not clear when and by how much they would rise, sources said.
The Iraqi Oil Ministry did not immediately respond to a request for comment.
The deal signals new Iraqi Prime Minister Adel Abdul-Mahdi and Oil Minister Thamir Ghadhban are ready to work with Erbil despite previous tensions and a failed independence referendum in September 2017.
The halting of exports from Kirkuk in October 2017 stopped nearly 300,000 bpd flowing out of Iraq toward Turkey and international markets – causing a net revenue loss of some $8 billion over the past year.
Most of Iraq’s exports come from southern fields, but Kirkuk is one of the biggest and oldest oilfields in the Middle East, estimated to contain 9 billion barrels of recoverable oil.
Exports have been on hold because Iraqi government forces took control of Kirkuk from Kurdish authorities. The Kurds had controlled Kirkuk and its oilfields after Islamic State militants drove the Iraqi army out in 2014, and Kurdish forces in turn ejected the militants.
The pipeline Baghdad once used for export via Turkey was wrecked by Islamic State – leaving only one working pipeline, built and controlled by the Kurds.
Talks about a flow resumption were also complicated by the fact that the pipeline is controlled by Russian oil major Rosneft, which collects transit fees for exports.
Kurdistan is producing and exporting some 400,000 bpd via the pipeline. Kirkuk’s flow resumption will boost the volume to 450,000-500,000 bpd, short of the 700,000 bpd Kurdistan was exporting in some periods of last year.
Iraqi authorities say they still need to feed local refineries where Kirkuk’s output has been diverted over the past year. The refineries are still set to receive some 185,000 bpd under the latest arrangements, according to sources.
Baghdad and Erbil have yet to find a compromise over maximum flow levels as well as budget transfers from the central government to Erbil – something the two sides have struggled to agree on for many years.