Iraq Kurds unveil plan to ramp up oil exports

ARBIL - Reuters

A member of Kurdish ‘peshmerga’ security forces takes up position with his weapon as he guards an oil refinery on the outskirts of Mosul. REUTERS Photo

Iraq’s self-ruling Kurds outlined plans to swiftly ramp up oil exports now that their forces have seized control of Iraq’s main northern oil fields.

Kurdish Natural Resources Minister Ashti Hawrami told Reuters the Kurds had plans to increase their exports eight-fold by the end of 2015, including pumping oil from the fields taken by Kurdish fighters two weeks ago.

“We expect to be able to export 1 million bpd by the end of next year, including crude from Kirkuk,” he said, although he insisted the Kurds would share the proceeds with Baghdad.

“We want to work with Baghdad under the constitution, and they will get their share of the oil they export from Kirkuk.”

Kurdish oil sales are firmly opposed by the central government in Iraq which says they violate the constitution. Increasing them to such levels would radically alter the balance of power in Iraq, potentially requiring the central government to seek payment from the Kurds for some revenue, rather than the other way around.

Two weeks ago Kurdish “peshmerga” troops took control of Kirkuk – a city Kurds consider their ancestral capital – and outlying rural areas rich in oil, expanding their territory by more than a third.

The Kurds say they were filling a security vacuum after Iraqi troops fled from Sunni fighters of the hardline Islamic State in Iraq and the Levant, who seized the biggest northern city Mosul at the start of a lightning offensive on June 10.

Hawrami told Reuters the fall of Mosul had transformed Iraq, suggesting this would require a new settlement over oil rights.

“Resources and revenues must be shared. But pre-Mosul Iraq has gone and there is now a new reality,” Hawrami said during an interview at his office near Kurdish regional parliament.

Iraqi oil was sold by the government in Baghdad and the Kurdish region given a fixed percentage of the total income. But that deal has unravelled this year after the Kurds began pumping their own smaller amounts of oil to port in Turkey and the central government cut off their share of budget funds. The Kurds sold their first tankers full of oil to Israel last month.

The 125,000 barrels of oil per day the Kurds have so far been able to pump abroad provides only a fraction of the money they have received in the past from Baghdad, but control of the oil fields in Kirkuk could bring a much larger windfall.

Western interest

Western oil firms have rushed to do business with the Kurds, defying blandishments from Baghdad, which says any such deals are illegal. About 20 Western energy executives were waiting to meet Hawrami on June 25 when Reuters visited his office.

“Oil companies and governments around the world are now showing increasing interest in buying our crude. Many have already done so,” he said.

“Baghdad made the same threats when the big energy companies first wanted to come and work here,” Hawrami said. “We know how this plays out.”

He added that the Kurds would not act on their own: “We need to have an agreement with Baghdad. We’re not going to start exporting oil from Kirkuk unilaterally.”

Hawrami said exports could double “within a month or so” to around 250,000 bpd and hit 400,000 bpd by the end of 2014.