Turkey prepared to market oil from Kurdish region

About 1.35 billion barrels of oil have accumulated at tanks at the Turkish port of Ceyhan, where the Kurdish region’s first pipeline independent of federal Iraq has been sending volumes since December.

Turkey said its state oil refiner could soon market crude from the Kurdish region of Iraq, signalling it is optimistic about getting a green light from Baghdad for exports or willing to go ahead without one.

About 1.35 million barrels of oil have accumulated at tanks at the Turkish port of Ceyhan, where the Kurdish region’s first pipeline independent of federal Iraq has been sending volumes since December. Once the tanks fill up – total capacity is 2.5 million barrels – exports to world markets can start, potentially with the help of the Turkish state refiner Tupras, said Taner Yildiz, the Turkish energy minister.

“We would like this to be offered to world markets,” Mr Yildiz told Turkey’s NTV Television. “Regardless of the volumes, Iraqis will auction and sell this oil at world market prices. This could be done via Tupras or brokers in other countries.”

Although Mr Yildiz has previously pledged to wait for an agreement from Baghdad before allowing Kurdish exports, negotiations have been slow to take off. Exports from the Kurdish region, where UAE companies including Dana Gas and Abu Dhabi National Energy operate, have been stop-and-go for years amid a disagreement over contracts and revenue sharing. Baghdad, which awards service contracts to foreign companies that pay a per-barrel fee, says that the Kurdish production-sharing contracts that allow companies to book reserves are unconstitutional.

Baghdad has threatened to sue Turkey for helping Kurdish exports and has retaliated against the Kurdish region by withholding part of the federal budget.

Turkey will hesitate to antagonise Iraq by allowing exports without its approval because it will want to maintain smooth foreign relations in the run-up to Turkish local elections on Sunday, said Luay Al Khatteeb, a visiting fellow at Brookings Doha Centre and the founder of the Iraq Energy Institute.

“The Turks will not dare to do anything without clear OK from Baghdad, certainly before the elections,” he said. “If they wanted to do it, they would have done it a few weeks ago. It’s already over a million barrels sitting in Ceyhan with this impasse hindering any further oil flow.”

Turkey is hedging its bets, said Shwan Zulal of Carduchi, a Kurdish-focused consultancy.

“Yildiz is keeping it open,” said Mr Zulal. “He is hinting and keeping the option of ‘without Baghdad’ open in case a deal is not struck between Erbil and Baghdad.”

Follow us on Twitter @Ind_Insights