Explainer: Why are the oil fields of Kirkuk in Iraq so important?


BAGHDAD / ABU DHABI (Reuters) – The Iraqi oil fields in the disputed Kirkuk region have taken on new meaning after the United States reinstated oil sanctions against neighboring Iran. Washington is pressuring Baghdad to resume exports that ceased last year.

FILE PHOTO: Flames emerge from flares on oil fields in Kirkuk, Iraq, October 18, 2017. REUTERS / Alaa Al-Marjani / Photo File

Iraq intends to increase its export capacity to less than 5 million barrels per day, including one million through Kirkuk, to 8.5 million barrels per day (bpd) over the next few years. But this recovery is not simply to reactivate the tap.

WHY IS KIRKUK SO IMPORTANT?

Volume and revenues. Kirkuk export halt puts an end to Iraq's nearly 300,000 bpd spill to Turkey and international markets, resulting in a net loss of about $ 8 billion since the year's freeze last.

Most Iraqi exports come from southern fields, but Kirkuk is one of the largest and oldest oil fields in the Middle East. It is estimated that it contains about 9 billion barrels of recoverable oil.

The United States also considers Kirkuk as an option to offset the global oil supply deficit caused by the sanctions it imposed on Iran, which prohibited the purchase of oil Iranian.

Washington has lobbied Baghdad to suspend all oil deliveries to Iran and resume the flow of Kirkuk to Turkey, industry sources said.

WHAT ARE THE EXPORTS STOPPED, WHAT OBSTACLES REMAINS?

Exports are pending since October 2017, when Iraqi government forces took control of Kirkuk by semi-autonomous Kurdish authorities in northern Iraq, in response to a referendum calling for the independence of Kurdistan .

The Kurds controlled Kirkuk and his oil fields after militants from the Islamic State chased the Iraqi army in 2014, and Kurdish forces in turn expelled the militants.

The resumption of Kirkuk's exports depends on negotiations between Baghdad and the Kurds.

PHOTO FILE: An oil field is seen in the Dibis region on the outskirts of Kirkuk, Iraq, on October 17, 2017. REUTERS / Alaa Al-Marjani / Photo File

The pipeline that Baghdad once used for exports via Turkey was destroyed by the Islamic State, leaving only one pipeline in working order, built and controlled by the Kurds. The Iraqi government must use that or build a new pipeline. He considers both options.

WHO CONTROLS KIRKUK OIL FLOWS?

On paper, Baghdad. But if Iraq decides to use the Kurdish pipeline to export oil, it has to negotiate.

Kurds will likely seek a larger share of Iraqi oil revenues in return. Baghdad may also have to face the Russian Rosneft (ROSN.MM), who bought the Kurdish section of the pipeline last year.

WHEN WILL KIRKUK EXPORT THE EXPORT, AND HOW MUCH?

As soon as Baghdad and the Kurds reached an agreement, hence the pressure exerted by the United States. If no agreement is reached, Iraq will have to build the new gas pipeline, which could take about two years.

The Rosneft pipeline has been upgraded to a capacity of 1 million bpd, which could accommodate 400,000 bpd from other Kurdistan oil fields, plus the 300,000 bpj from Kirkuk, announced the Kurdish authorities.

The Iraqi authorities say they have yet to feed the local refineries – where current Kirkuk production is diverted – so if Kirkuk's exports resume, they will not exceed 100,000 barrels per day, which means that total exports via Kurdistan is only 500,000 barrels a day.

This figure would be below the peak of Kurdish exports of 700,000 barrels a day before the referendum failed and would not be enough to help Turkey reduce its dependence on Iranian oil.

DOES THE AMERICAN SANCTIONS AFFECT THE IRAQ PETROLEUM SECTOR?

Iraq and Iran traded only small quantities of oil before the new sanctions (about 30,000 barrels a day, including those of Kirkuk), but the economy of Iraq as a whole is heavily dependent on trade with Iran.

The supply of Iranian gas supplies, for example, Iraqi power stations.

Washington has granted Iraq a waiver for Iranian gas as well as for food but says it is only temporary and there is uncertainty in Baghdad.

Additional report by Ahmed Rasheed; written by John Davison; edited by Jason Neely

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