Kurdistan Begins Independent Oil Exports Despite Baghdad Opposition
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The semi-autonomous Kurdistan region in Northern Iraq has begun exporting crude oil directly to world markets without central government approval, reported Reuters on Monday, posing questions about Iraq’s ambitious production growth targets and reinforcing Kurdistan’s desire for greater economic independence.
The semi-autonomous Kurdistan region in Northern Iraq has begun exporting crude oil directly to world markets without central government approval, reported Reuters on Monday, posing questions about Iraq’s ambitious production growth targets and reinforcing Kurdistan’s desire for greater economic independence.
According to the report, the first crude oil shipment was been delivered by truck to the Turkish port of Mersin on the Mediterranean, where it was then sold via an intermediary on the international market.
However, as Kurdistan remains a part of Iraq, the decision by the Kurdistan Regional Government (KRG) to authorise the sale was condemned by the Iraqi Central Government in Baghdad, who have long held claim to full control over the region’s oil.
[quote]“If the Kurdistan Regional Government insists to move in the wrong direction, even by bartering crude without legal approval, this will worsen the situation and make it more difficult to reach an agreement (on oil revenues),” said one senior Iraqi oil official in a separate interview with Reuters.[/quote]Although the volume of Kurdish oil involved was small, industry sources said that the direct export was mainly symbolic, especially as the KRG had halted oil shipments through the Baghdad-controlled Iraq-Turkey pipeline last month over a renewed argument over payment.
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Baghdad had said last month that it would no longer pay oil companies operating in Kurdistan because the region had failed to export the volume of crude it pledged under a deal struck in September. In turn, the KRG has vowed not to resume exports through the central government’s pipeline network until federal authorities paid up – approximately $300 million.
The conflict has since affected international companies such as Exxon Mobil and Total SA, who had signed exploration contracts with the KRG without Baghdad permission.
A KRG source told AFP that the crude trade through Turkey was likely to keep going as a result, while the KRG also plans to build a new 1 million barrels per day oil pipeline to the Turkish border.
[quote]”Crude is a new component in the KRG’s ongoing barter deal with Turkey, and it’s likely to continue because Baghdad is not paying as agreed, nor is it supplying the KRG with sufficient refined products,” the KRG source said.[/quote]“This [dispute] will not resolve itself until Kurdistan has the infrastructure to allow it to export oil directly to Turkey and be independent from Baghdad,” added one foreign oil executive active in KRG territory to the Financial Times.
According to KRG forecasts, oil production in the region could rise from about 200,000 barrels a day present, to 1 million bpd by 2015 and 2 million bpd by 2019. Kurdistan’s oil production capabilities also factor in heavily into Baghdad’s own forecasts, which is to produce more than 6 million bpd by 2020.
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