Idle pipeline almost halves north Iraqi oil exports

ARBIL - Reuters

A general view shows excess gas being burnt off at a pipeline in the newly opened section of the oil refinery of Zubair, southwest of Basra in southern Iraq, on March 3, 2016. AFP Photo

Oil exports from northern Iraq nearly halved in February due to the ongoing outage of a pipeline to Turkey, wiping $350 million off the cash-strapped Kurdistan region’s revenues as it battles Islamic State of Iraq and the Levant (ISIL). 

The autonomous region of Iraq is almost entirely dependent on revenue from its exports through the oil pipeline to Turkey, which has been idle for nearly three weeks, reducing flows to an average of 350,067 barrels per day (bpd) last month.

After allocating $70.9 million for producers, the region was left with just $233 million in export revenue, its Ministry of Natural Resources said on March 7, less than one third of the amount needed to cover a bloated public payroll.

Heavily in debt, the Kurdistan Regional Government (KRG) has been struggling to meet the payroll as global oil prices plunge, stoking public discontent when its forces are battling ISIL.

“The current financial position of the KRG is unsustainable,” said `Athanasios Manis, a research fellow at the Middle East Research Institute (MERI), a Kurdish think-tank.

Manis said it would be difficult for the KRG to carry out the necessary structural reforms unless it received external financial assistance to “stabilize its macro-economic environment.”

European ambassadors and Iraq’s World Bank representative met with Kurdish officials on March 7 to discuss how the international community could help the region through the crisis.

The Kurds began ramping up independent oil sales last June in an effort to plug the gap, but low energy prices meant the region was still running a multimillion dollar monthly deficit even with exports at a peak of 600,000 bpd in January.

The pipeline outage has widened that further.

Carrying crude from fields in the region and Kirkuk to the Mediterranean port of Ceyhan, the pipeline has been idle since Feb. 17 as a result of “circumstances” inside Turkey, the ministry said, without elaborating.

Turkey’s energy ministry said on Feb. 27 it was repairing the pipeline, and an industry source based in the KRG region told Reuters on March 6 the work would be completed “in a day or two.”