Iraq prepares to reactivate its oil pipeline with Turkey

Iraq has long been working to rehabilitate a pipeline that would allow it to pump 350,000 barrels per day of oil to Turkey by the end of this month, an Iraqi deputy Oil Minister told Reuters. 

However, this ambitious initiative could be opposed by foreign oil companies and the Kurdistan Regional Government (KRG). 

Reactivating the Turkish Kirkuk-Ceyhan pipeline, which has been out of operation for a decade, would represent a competitive route for a pipeline from Kurdistan that has been stalled for a year due to stalled talks between Baghdad and the KRG on resuming exports. 

Baghdad considers production-sharing agreements between the Kurds and foreign companies, which use the Kurdistan government's pipeline, to be illegal. 

The Iraqi government will therefore ask oil companies to negotiate with it to sell their oil to Turkey through the revamped pipeline, a move that could anger the Kurds, who are almost entirely dependent on oil revenues.   

Exports through the 960-kilometre pipeline were halted in 2014 after repeated attacks by Daesh. Then, about 0.5% of the world's supply was pumped through it. 

"Repair work is ongoing and a major crude pumping station with storage facilities has been completed," said Basim Mohammed, Iraq's deputy Oil Minister. "The pipeline is likely to be operational and ready to restart flows by the end of this month," he added. 

Mohammed explained that repairing the damaged parts inside Iraq and completing the establishment of an essential pumping station will be "the first stage of operations to restore the pipeline to its full capacity".  

For its part, the Oil Ministry said last month that "the company's technical and engineering teams were able to complete maintenance and rehabilitation work on the pipeline so that pumping of petroleum products to the modern Kirkuk oil depot could resume". 

Ali Abdul Karim Mousavi, CEO of Oil Pipelines Company, confirmed earlier that the resumption of the pipeline work coincides with the operation of the Al-Shamal refinery and the increase in refining capacity of the Baiji refineries.   

On the other hand, the Kurdish pipeline was halted at the end of March 2023 after an arbitration court ruled that it violated the provisions of a 1973 treaty by facilitating oil exports from the semi-autonomous Kurdish region without Baghdad's approval.   

Negotiations to restart it failed after Turkey, the Kurdistan regional government and the federal government made conflicting claims, the news agency recalls. 

Two senior Iraqi oil officials and a government energy adviser confirmed to Reuters that Baghdad rejected a Kurdish demand that the central executive pay a transit fee of six dollars per barrel to Russian oil company Rosneft, part owner of the pipeline.  

Bahjat Ahmed, a Kurdistan Region energy adviser familiar with the talks, said that "Oil Ministry officials informed the Kurdish negotiating delegation that they consider the agreement between the KRG and Rosneft to be illegal and in violation of Iraqi laws". 

Despite tensions between the Kurdish government and Baghdad, the two sides need each other. Kurdish parties help Iraqi politicians gain power and Baghdad, in turn, helps pay the salaries of government employees and Kurdish fighters. 

KRG exports flow through its pipeline to Fish Khabur on Iraq's northern border, from where the oil enters Turkey and is pumped to the port of Ceyhan on the Mediterranean coast.  

"Experimental pumping of crude oil began early last week to examine the part that passes inside Iraqi territory and showed leaks in some parts," sources at the state-owned North Oil Company told Reuters. 

Amid this situation, Iraq intends to build offshore pipelines through a new line with a capacity of two million barrels at a cost of more than $416 million to support oil exports from southern ports. 

This project will support the strengthening of crude oil export infrastructure and increase the export capacity of the Al-Faw oil depots and the port of Basra to 5 million barrels per day by the end of 2025. 

The oil industry plays an important role in shaping the future of the Iraqi economy, as Oil Minister Hayan Abdul-Ghani recently recalled.   

At the end of last year, Iraq earned oil revenues of more than 97.6 billion dollars, 7% more than the government expected.