Kirkuk Oilfields


Tehran-Baghdad sign One-Year Oil Swap Deal

Iraqi Oil Minister Jabar Ali al-Luaibi [Allibi, Luiebi] said on Sunday that a deal signed with Tehran to swap up to 60,000 barrels per day of crude produced from the northern Iraqi Kirkuk oilfield for Iranian oil is for one year.

This is an agreement for one year and then we will see after that whether to renew it,” Luaibi told reporters in Kuwait City on the sidelines of an Arab oil ministerial meeting, Reuters reported.

The agreement signed on Friday by the two OPEC countries provides for Iran to deliver to Iraq’s southern ports “oil of the same characteristics and in the same quantities” as those it would receive from Kirkuk.

The deal in effect allows Iraq to resume sales of Kirkuk crude, which have been halted since Iraqi forces took back control of the fields from the Kurds in October.

Between 30,000 and 60,000 bpd of Kirkuk crude will be delivered by tanker trucks to the border area of Kermanshah, where Iran has a refinery.

The two countries are planning to build a pipeline to carry the oil from Kirkuk, so as to avoid trucking the crude.

The pipeline could replace the existing export route from Kirkuk via Turkey and the Mediterranean by pipeline.

(Sources: Tasnim, under Creative Commons licence; Iraqi Ministry of Oil)

Tehran-Baghdad sign One-Year Oil Swap Deal

Iraqi Oil Minister Jabar Ali al-Luaibi [Allibi, Luiebi] said on Sunday that a deal signed with Tehran to swap up to 60,000 barrels per day of crude produced from the northern Iraqi Kirkuk oilfield for Iranian oil is for one year.

This is an agreement for one year and then we will see after that whether to renew it,” Luaibi told reporters in Kuwait City on the sidelines of an Arab oil ministerial meeting, Reuters reported.

The agreement signed on Friday by the two OPEC countries provides for Iran to deliver to Iraq’s southern ports “oil of the same characteristics and in the same quantities” as those it would receive from Kirkuk.

The deal in effect allows Iraq to resume sales of Kirkuk crude, which have been halted since Iraqi forces took back control of the fields from the Kurds in October.

Between 30,000 and 60,000 bpd of Kirkuk crude will be delivered by tanker trucks to the border area of Kermanshah, where Iran has a refinery.

The two countries are planning to build a pipeline to carry the oil from Kirkuk, so as to avoid trucking the crude.

The pipeline could replace the existing export route from Kirkuk via Turkey and the Mediterranean by pipeline.

(Sources: Tasnim, under Creative Commons licence; Iraqi Ministry of Oil)

New Pipeline to Export Kirkuk Oil via Ceyhan

By John Lee.

Iraq’s Oil Ministry has announced that it will build a new pipeline from Baiji to Fishkabur, enabling Kirkuk oil to be exported again from Turkey’s Ceyhan port (pictured).

Kirkuk’s oil was previously being exported via the Kurdistan Regional Government’s (KRG) pipeline to Ceyhan, but this has been on hold since Baghdad took control of the area.

Plans to rehabilitate Baghdad’s existing oil pipeline to Turkey, which was badly damaged by militants in 2014, have been scrapped.

(Sourced: Ministry of Oil, Rudaw)

Plans to increase Kirkuk Oil Output to 1m bpd

By John Lee.

Oil Minister Jabar Ali al-Luaibi [Allibi, Luiebi] (pictured) has said that Iraq plans to increase oil production at the Kirkuk oilfields to one million barrels per day.

According to Reuters, exports from Kirkuk have been on hold since Iraqi forces took back control of them from the Kurds last month.

At least three months will be needed to repair the old pipeline to Ceyhan port in Turkey. The main 600,000 bpd Kirkuk-Ceyhan pipeline had been offline since March 2014 following insurgent attacks.

(Source: Reuters)

Rosneft in the Kurdish Region: Moscow’s Balancing Act

By Ahmed Tabaqchali. Originally published by Iraq in Context; re-published by Iraq Business News with permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Between February 2017 and mid-October, Rosneft signed a number of deals with the Kurdish Regional Government (KRG) that established for it, and by extension for Russia, a major position as both an investor and stakeholder in the Kurdish Region of Iraq (KRI)’s hydrocarbon resources and infrastructure.

The move was interpreted, especially by the KRG, as implicit support for the KRG in its bid for independence, especially in light of the latest deal signed following the reassertion of Iraq’s federal control over Kirkuk and other disputed territories. While there is an element of truth to this thinking, the deals are part of a wider geopolitical positioning for Russia as a major gas supplier to Europe and as an emerging power in the Middle East.

The deals provide Rosneft, and by extension Russia, effective control of the KRG’s Oil & Gas infrastructure, and a controlling stake in the region’s finances in more ways than one.

Within the oil space it has established this in three ways. The first was by providing USD 1.5bn in financing via forward oil sales payable over 3-5 years. This would be payable in kind from the KRG’s exports, until recently at about 550,000-600,000 barrels per day (bbl/d). However, the loss of the Kirkuk fields takes away about 430,000 bbl/d of production or eventually about half of the KRG’s exports.

This leaves the KRG with a tiny revenue stream after payments to International Oil Companies (IOC)’s, from which to make payments on forward oil sales of up USD 3.5 bn including Rosneft’s USD 1.5bn. A complicating factor is the repayment of other KRG debt, estimated at over USD 21bn by end of 2017, which will have to be factored into debt payment sustainability.

Luaibi asks BP to Return to Kirkuk Oilfields

By John Lee.

Iraqi Oil Minister Jabar Ali al-Luaibi [Allibi, Luiebi] (pictured) has asked UK-based BP to develop the disputed Kirkuk oilfields.

The move comes just a day after Baghdad regained control of the area from Kurdish forces. Control of the field remains split between the Kurdistan Regional Government (KRG) and Baghdad’s North Oil Company (NOC).

According to the Financial Times, BP’s chief executive Bob Dudley said before lunchtime yesterday that he had not yet heard from the Iraqi oil minister, but indicated the company could be interested.

(Sources: Ministry of Oil, Financial Times)

Iran, Iraq Agree to Build Kirkuk Pipeline

Iranian Oil Minister Bijan Zanganeh said Tehran and Baghdad have reached an initial agreement to build a pipeline that would export crude oil from the northern Iraqi fields of Kirkuk via Iran.

Iran and Iraq are ready to promote their cooperation in the area of energy, Zanganeh said on Sunday after a meeting with his Iraqi counterpart Jabar al-Luaibi in the Iranian capital, Tehran.

The two sides also agreed to construct a joint pipeline to pipe Iraq’s oil through Iran, he added, noting that agreements were also reached about an international company that will carry out a feasibility study of the project.

Iran and Iraq signed a memorandum of understanding in February to study the construction of the pipeline.

The Iranian oil minister also said that the Islamic Republic would begin exporting gas to the Iraqi city of Basra in coming months.

He said there had been some problems in receiving payments for current gas exports to Iraq via banks and that Iran was receiving cash payments.

Al-Luaibi, for his part, described Tehran-Baghdad ties as “strong”, saying that they had discussed transferring Iraqi crude oil to Iranian refineries and returning byproducts to Iraq.

He added that the two ministers also reached an initial agreement to develop the oil fields that the two countries share in the near future.

Back in October last year, the managing director of the National Iranian Gas Company (NIGC) had said that the country was fully ready to start exporting gas to Iraq as soon as the Arab country opens a line of credit (LC) for the project.

Iran laid 100 kilometers of pipelines for the gas project. The two countries signed a deal on the exports of natural gas from the giant South Pars Gas Field to Iraq back in 2013.

Based on the agreement, 25 mcm of gas will be delivered to Sadr, Baghdad and al-Mansouryah power plants through a 270-kilometer pipeline.

(Source: Tasnim, under Creative Commons licence)

Mid-Yr Assessment of Oil Revenues, Budgetary Implications

By Ahmed Mousa Jiyad.

Any opinions expressed are those of the authors, and do not necessarily reflect the views of Iraq Business News.

Mid-year Assessment of Oil Export Revenues and Budgetary Implications

Iraqi data on oil exports and generated revenues for the first half of 2017 provide the material evidence to assess the impacts of the first accord of OPEC production cut on Iraq and its fiscal crisis.

During the first half of the year, Iraq’s oil export prices has been on the decline reaching the critical benchmark of $42 a barrel; deficit in oil export revenues was, partially, resulted from KRG non-compliance, and its impact on Kirkuk, with this year Budget Law, though much of that deficit was compensated by exports from the south.

And with most predictions of further decline in oil prices budgetary deficit could be deepen.

This assessment and for comparison purposes covers nine months period divided into two sub-periods: the first is pre-OPEC cut commencement, which covers the fourth quarter of 2016 (4Q2016) and the second post-OPEC cut commencement, which covers the first half 2017 (1H2017) and also the full term of first OPEC cut accord; and this second period is also divided into two quarterly periods; 1Q2017 and 2Q2017.

The paper addresses first oil price and oil exports, then assesses the budgetary implications and finally provides brief note the prospects of oil prices for the rest of the year. All data are from official/formal sources.

Please click here to download the full report.

Mr Jiyad is an independent development consultant, scholar and Associate with the former Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad’s biography here.

Kirkuk’s Oil to play big role in Kurdish Independence

By Kamal Chomani for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

After decades of waiting, the Kurds are finally set to hold a referendum on independence in the fall. Massoud Barzani, the president of Iraqi Kurdistan, met June 7 with Kurdish political parties to discuss the referendum. Though the Gorran party (Movement for Change) and Kurdistan Islamic Group refused to attend the meeting, participants scheduled the referendum for Sept. 25.

The decision came soon after Barzani’s son, Masrour Barzani, unexpectedly arrived June 4 in Baghdad to meet with Iraqi Prime Minister Haider al-Abadi, though the men did not talk about the independence referendum, according to Abadi’s office. Masrour Barzani is chancellor of the Kurdistan Region Security Council, a hard-liner toward Baghdad and an outspoken supporter of the referendum who calls for “divorce from Baghdad.” A memo from Abadi’s office said they discussed military coordination to liberate Mosul from the Islamic State (IS).

The Kurdistan Regional Government (KRG), especially the Kurdistan Democratic Party (KDP) led by Massoud Barzani, supposedly favors holding the referendum, though some skeptics doubt Barzani’s true intentions. Hoshyar Abdullah, a member of the Gorran faction in the Iraqi parliament, told Al-Monitor that the referendum is “a political card” — leverage toward winning from the KDP the oil fields west of Kirkuk in northern Iraq. He said the referendum also is a tool “to distract the Kurdish people from the KRG’s failures and allow the KDP to regain positions lost in Baghdad.”

When IS advanced to Kirkuk in 2014, the KDP deployed two peshmerga brigades to protect the western oil fields. When the Patriotic Union of Kurdistan (PUK) became suspicious about the KDP’s intentions, the PUK deployed its forces in June 2014 to the oil fields north of the city to block further KDP advances. Since then, there have been tensions between the KDP and the PUK over the future of the oil fields, oil exportation and the resulting income.

Burhan Haji Sulaiman, the editor-in-chief of the leading Kirkuk weekly Hawal, a pro-PUK outlet, told Al-Monitor that deploying the peshmerga in the western oil fields amounted to “occupation.” He said that the decision reflected “the strong alliance existing between the KDP” and Abadi. “The referendum is merely for strengthening a certain political party [the KDP], and the people of Kirkuk refer to the export of their oil as ‘looting,’” Haji Sulaiman stressed.

In March, a PUK unit known as the Black Force stormed the North Oil Company pumping station to try to put pressure on Baghdad and Erbil, the Kurdistan Region capital, to build an oil refinery in Kirkuk. The move led Massoud Barzani to deploy more peshmerga forces to secure the oil fields.

A high-profile political source in Kirkuk who asked not to be identified due to the sensitivity of the issue told Al-Monitor that Massoud Barzani supports an independence referendum so he will have “strong leverage against the Iraqi government to win the oil fields west of Kirkuk during negotiations on the future of KRG-Baghdad relations.” In 2014, Kurdistan Region Prime Minister Nechirvan Barzani announced KRG’s strategy of economic self-sufficiency; however, it failed due to the fall in oil prices, the war on IS and Baghdad cutting the KRG budget. In addition, Abdullah believes the KDP does not want to give Baghdad control of the oil, “as the KDP has a deep strategic plan, which is controlling energy so as to successfully continue its quest for hegemony” and political power in Iraq and the Kurdistan Region.

Aso Mamand, the head of the PUK in Kirkuk and a member of the PUK’s political bureau, told Al-Monitor that the Iraqi government may not accept the peshmerga’s presence in Kirkuk once IS is defeated in Mosul and Hawijah. Mamand has suggested certain multiparty guarantees for Kirkuk’s future, saying, “We have suggested reaching an agreement with Baghdad, the Global Coalition to Counter IS and the Kurdistan Region.”

Hoisting the Kurdistan Region flag in Kirkuk led to conflicts between the Kurds and Turkmens. Kurdish leaders, in particular a group of PUK leaders of Kirkuk, have tried to reassure Arab and Turkmen leaders that they have “a special project” that will “prioritize Kirkuk and Kirkukis,” rather than Baghdad or Erbil.

“We want Kirkuk [governorate] to be a semi-[autonomous] region annexed with the Kurdistan Region with all its decentralized authorities that all the other components will agree on. Kirkuk’s oil should belong to Kirkuk, and the Kirkuk semi-region should have control over its oil,” Mamand said.

He added, “If it was not for the Kirkuk oil, the KRG would not have been able even to pay the half salaries that KRG employees are receiving. The people of Kurdistan are paying the price” for ill-considered KRG oil policies, he said.

Mamand noted, “We would like to hold a referendum in Kirkuk, but there [need to be] two referendums: first, to determine whether the Kirkukis want to incorporate into the Kurdistan Region or not, and then the referendum for the independence of Kurdistan.”

Al-Monitor talked to Nahwi Saeed, an independent researcher who wrote his doctoral thesis on Kirkuk’s conflicts and future prospects. Saeed said that incorporating Kirkuk into the Kurdistan Region is considered a “red line by the Arabs and Turkmens.”

“Any unilateral attempt by the Kurdistan Region to cross this red line” will lead to violence, Saeed said. Imposing the will of one party or state on others in a deeply divided city like Kirkuk will lead to bloodshed and few solutions, he noted.

Saeed argues that the best scenario is the application of Article 140 of the Iraqi Constitution. The people of Kirkuk should decide upon the future of their governorate, and their decision should be respected regardless of which option they go for. However, he said, “Such a referendum is highly unlikely now. Therefore, the future of the Kirkuk governorate is truly caught in a catch-22 situation.”

Luay al-Khatteeb, Iraq’s Energy Institute director, told Al-Monitor the Iraqi government will claim the western oil fields after Hawijah and Mosul are liberated, as Iraq considers these oil fields to be its property and not the KRG’s.

“Baghdad turned a blind eye to the KRG exporting oil from those fields, as they didn’t want to be involved in Kirkuk conflicts and clashes,” Khatteeb said. “My advice for the whole of Iraq is for Kirkuk to declare its own region, or merge with Sulaimaniyah [city] and combine resources. Kirkuk has the richest oil fields but lacks good corridors. To secure a reliable and sustainable corridor for oil exports, there could be pipelines through Baghdad or Mosul, so Kirkuk could have a better chance to meet its local demand.”

According to Mamand, the KRG has not been committed to transparency, and Kirkuk’s share is not determined appropriately by either the KRG or the Iraqi government. The KRG exports more than 300,000 barrels per day (bpd) to Turkey, and if the Khormala gas turbine power plant’s output is included, that figure will exceed 400,000 bpd. This is in addition to the 60,000 bpd from the North Oil Company going through the KRG.

Mamand concluded, “The economic independence the KRG was claiming was through oil, and the KRG Natural Resources Ministry was aiming for 1 million bpd by the end of 2015 — however, it failed. So, I don’t know if the Iraqi government will accept taking Kirkuk’s oil forever. … Still, Kirkuk is part of Iraq and its oil is controlled by the Iraqi government. This has made us concerned.”

Conflict over Kirkuk Oil Returns

By Omar Sattarfor Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

On March 2, a military force affiliated with the Patriotic Union of Kurdistan (PUK) led by former President Jalal Talabani seized the North Oil Company in Kirkuk province.

The military force said the move was a warning for Baghdad to stop the export of the city’s oil to other cities and to start establishing a refinery in the city. The military force halted the export of oil for a brief period.

This event is linked to an agreement concluded Aug. 19, 2016, between the central government and the Kurdistan Regional Government (KRG). The agreement said that 150,000 barrels of oil will be equally exported from Baghdad and Erbil and that the proceeds will be shared.

The agreement said that the KRG will export its oil through the Kurdistan pipeline to the Turkish port of Ceyhan and will refine the oil through its Kar Oil Company.

However, the PUK did not applaud this agreement; Hero Ibrahim Ahmed, the wife of Jalal Talabani, sent a letter to Iraqi Prime Minister Haider al-Abadi on Sept. 8, 2016, stating, “The proceeds of the oil exported from Kirkuk are not being spent transparently and fairly in the Kurdistan region. These practices have denied Kirkuk its petro-dollar dues, which negatively affected the lives of the Kirkuk citizens.”

After the Baghdad government failed to respond to the PUK demands to stop the implementation of the agreement, Kurdish forces took control of the oil facilities in Kirkuk in an attempt to rearrange the oil accord by force, as per Kirkuk PUK member of parliament Mohamed Osman. Osman told Al-Monitor, “The recent military action taken by a force affiliated with the PUK was supported by Kirkuk’s political parties. The governments in Baghdad and Erbil have deprived Kirkuk of its rights.”

He pointed out that “the province’s administration and its sects wanted the payment of oil proceeds [that have been] withheld by the central government, the creation of job opportunities and the inclusion [of Kirkuk] in investment plans similar to other provinces.”