Pipeline Politics Is Forcing Kurdistan to Sell Oil at a Discount

Crude oil production in Iraq’s semi-autonomous region of Kurdistan is currently about 350,000 barrels per day (bpd), but it all goes to local buyers at steep discounts as the key export route via a pipeline to Turkey’s Mediterranean coast continues to be shut in.

Kurdistan’s crude output is now around 50,000 bpd lower compared to production levels before March 2023, when the pipeline to Turkey’s Ceyhan was closed due to an international dispute, according to figures provided to Argus by Myles Caggins, a spokesperson for the Association of the Petroleum Industry of Kurdistan (Apikur).

Kurdish oil flows via pipeline to Turkey, of about 450,000 bpd, ceased last year after they were shut in in March 2023 due to a dispute over who should authorize the Kurdish exports.

The impasse followed an International Chamber of Commerce ruling in March 2023 in a dispute between Turkey and Iraq regarding Kurdistan oil. The ICC ruled in favor of Iraq, which had argued that Turkey should not allow Kurdish oil exports via the Iraq-Turkey pipeline and the Turkish port of Ceyhan without approval from the federal government of Iraq.

The companies members of the Apikur association continue to produce oil in the semi-autonomous Iraqi region, but have to sell their crude to local buyers at steep discounts of around $45-$50 per barrel below international crude oil prices, Apikur’s Caggins has estimated.

“The volume of production has generally increased since the shuttering of the pipeline in March 2023. All Apikur members remain focused on ultimately having the pipeline reopened for exports,” the spokesperson told Argus.

Kurdistan hasn’t been able to export its oil via a pipeline for more than a year now, but crude continues to flow out of the semi-autonomous Iraqi region in smuggling operations, on tank trucks to the border with Iran. 

More than 1,000 such tank trucks are estimated to be transporting at least 200,000 bpd of Kurdish oil to Iran and Turkey, a Reuters investigation has found.

By Charles Kennedy for Oilprice.com

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