Iraq slams Kurdish move to offer crude for sale at Ceyhan

London (Platts)--10 Jan 2014 729 am EST/1229 GMT

Iraq's oil ministry on Friday slammed the move by the semi-autonomous Kurdistan Regional Government to offer for sale 2 million barrels of Kurdish oil piped to the Turkish port of Ceyhan, saying it was a "flagrant violation of the provisions of the Iraqi constitution."

The KRG said late Wednesday it planned to offer for sale a first parcel of 2 million barrels of crude by the end of January, followed by a further 4 million barrels by the end of February and 6 million by the end of March.

Such sales would represent the first time the northern Iraqi region would sell piped crude outside of the federal Iraqi system.

In a statement on its website, the Iraqi oil ministry said the Kurdish move amounted to smuggling.

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"The oil ministry strongly rejects the export mechanism announced by Kurdistan," it said.

It reiterated that state oil marketing company, SOMO, was the "exclusive, sole official body authorized to enter into contracts for the export of hydrocarbon resources, including crude oil and gas."

Any other exports are "considered as 'smuggled crude' and in violation of the valid laws," it said.

Since the start of January, initial volumes of crude from the DNO International-operated Tawke field were piped to the Turkish border, from where they were transited to Ceyhan through the Kirkuk-Ceyhan pipeline in Turkey.

Crude from other fields, including the Genel Energy-operated Taq Taq field, is set to follow.

A new 300,000 b/d capacity pipeline linking Taq Taq to the Fishkabour metering station on the Iraq-Turkey border was completed at the end of last year.


The Iraqi oil ministry also slammed Turkey for facilitating the sale of Kurdish crude.

"We also extend our strong protest to the Turkish government represented by the energy ministry and Botas for using the Iraq-Turkey pipeline for pumping and storing large quantities of crude oil produced in the Kurdistan region without getting the approval of the federal government of Iraq," it said.

This, it said, was "in violation of the tripartite agreement reached between Turkey, Iraq and the Kurdistan Regional Government at the beginning of December 2013."

According to the Iraqi oil ministry, the parties agreed that the Turkish government would allow the export of Kurdish crude through the Turkish pipeline system "only after obtaining the approval of the federal government of Iraq."

It also gave a strong warning to any potential buyers of the Kurdish crude.

"Companies, entities and persons involved in concluding contracts or agreements for the sale and purchase of crude oil or gas produced from fields in Kurdistan or from any of the oil and gas fields other in Iraq will face the legal consequences and will be prosecuted on the grounds that those shipments constitute smuggling."

Kurdistan has already been selling crude without Iraqi approval by having it trucked to several other ports on Turkey's Mediterranean coast.

Austria's OMV said in November it had been buying up crude trucked from Kurdistan to the Turkish ports of Mersin and Dortyol, and said it was hopeful that access to Kurdish oil would be improved through the restart of pipeline exports.

The KRG stopped pumping crude into the Iraq-operated segment of Kirkuk-Ceyhan in January 2013 because of a dispute with Baghdad over payments.

Genel said it exported an average of 29,000 b/d in the third quarter of 2013 to Turkey via truck.

UK-listed Gulf Keystone Petroleum said Thursday it has now started moving heavy crude exports by truck from its giant Shaikan field in Kurdistan to Turkey.


Ahead of the statement from the Iraqi oil ministry, US Vice President Joe Biden late Thursday urged the Kurdish President Masoud Barzani to continue dialogue with Baghdad and Ankara on the issue.

"The vice president encouraged President Barzani, as he has done with leaders in Baghdad and Ankara, to find a common way forward on the matter of energy exports and revenue sharing," Biden's office said in a statement.

The statement said President Barzani agreed to continued dialogue with the Iraqi government to seek agreement "on a path forward."

Biden also emphasized the "strong and enduring" US support for a unified and federal Iraq as defined under the Iraqi constitution.

--Stuart Elliott,
--Edited by Alisdair Bowles,

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