Daily Management Review

War for Kirkuk can turn the oil market upside down


The volume of oil produced in the oil-rich Kirkuk, an Iraqi province, fell sharply due to the fact that production was stopped at two fields. This happened after the government forces pushed back the Kurdish forces in the attack on the north of Iraq in order to regain control of the disputed area.

Kurdish company KAR Group stopped producing oil in the fields of Avana and Bai Hassan, an official representative of the oil company North Oil Co. said on Monday without specifying how much oil was extracted before the production was stopped. KAR Group operates the fields, and NOC employees work with Kurds on both sides.

According to Bloomberg, this stop could affect oil production of 275,000 barrels per day. Exports from the Kirkuk oil fields are conducted through a Kurdish-controlled pipeline to Turkey. On Monday, the Turkish port of Ceyhan received oil from North Iraq and the semi-autonomous Kurdish region with a volume of 510,000 barrels per day, compared to 600,000 on Monday, according to the port agent.

Kirkuk, where Iraq's oldest oil fields are located, is a hotbed of tension in the power struggle between the central government in Baghdad and the Kurdistan Regional Government. The tension in the northern province broke out during direct military operations between the central government and the Kurdistan Regional Government on Monday after the Kurdish referendum on independence from Iraq. Kurdistan Regional Government (KRG) included Kirkuk in a referendum on September 25, despite claims to an ethnically mixed zone that is outside the borders of the Kurdish region controlled by the KRG.

Iraqi forces seized the headquarters of the administration of the province of Kirkuk on Monday, as the government in Baghdad toughened its efforts to block the establishment of the Kurdish state in the north of the country. On the way to Kirkuk, the Iraqi army and allied forces seized oil fields, an oil refinery and a military base that was under the control of the Kurds, according to the Iraqi state television. Oil Brent was 25 cents higher at $ 58.07 per barrel on Tuesday at 15:28 in Dubai. The global indicator grew by 1.1% on Monday, reaching a maximum since September 27.

Iraq, the second largest producer in OPEC, extracts most of its 4.47 million barrels per day from the fields in the south and sends them from the port of Basra in the Persian Gulf. Against the background of Iraq, which supplies about 14% of the total production of OPEC, an aggravated conflict in the north can stimulate oil markets.

Of the 275,000 barrels a day produced from the disputed Kurdish fields in Kirkuk, the Bai Hassan field delivers 195,000 barrels per day, while Avana, the central part of the giant Kirkuk field, extracts 80,000 barrels. The Iraqi federal police took control of Bai Hassan, said a police spokesman for Kirkuk.

According to information published in February, Baghdad-controlled NOC controls Baba Dome, the southern part of the Kirkuk field, as well as the neighboring fields. This is about 90,000 barrels per day, according to Western Zagros, which works in the Iraqi Kurdish region.

Baghdad exports from Kirkuk with Kurdish parties through a pipeline operated by the KRG, to the Turkish port of Ceyhan. The Kirkuk field in the Kurdish region exported about 600,000 barrels per day through the pipeline. Oil still flowed through the export line, the Ministry of Natural Resources of the KRG reported.

Recent fighting broke out after the central government and the combined KRG forces expelled Islamic state militants from much of northern Iraq earlier this year. In June 2014, Kurdish forces occupied most of the province of Kirkuk. Baghdad refuses to recognize Kurdish control over Kirkuk.

source: bloomberg.com

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