A Peshmerga soldier in Kirkuk, where nearby oil fields are pumping oil to the Kurdistan Region.
ERBIL, Kurdistan Region - A new pipeline upgrade will significantly boost Kurdish oil exports by the end of the year, according to Kurdistan Region officials.
On Tuesday the Kurdistan Regional Government confirmed that Kurdish exports of crude to Turkey are expected to reach 400,000 barrels per day (bpd) by the end of the year, up from current levels of more than 290,000bpd.
They added that this number should rise to 500,000bpd by the end of the first quarter of 2015.
Once technical upgrades in both Turkey and the Kurdistan region are fully complete, the Ministry of Natural Resources says the pipeline will reach a capacity of 700,000bpd. The KRG aims to reach one million bpd by the end of 2015.
But these figures are contingent on a number of simultaneous developments.
Norwegian oil and gas firm DNO working on a new 24-inch pipeline for the Tawke field, which will help it meet a 200,000bpd deliverability target this year. Anglo-Turkish firm Genel hopes to increase its production by 80,000bpd before 2015, according to its website.
They also factor in oil that the Iraqi federal government considers misappropriated by Kurdistan from its state-owned North Oil Company.
Oil pumped from the KRG-controlled fields in Makhmour district—the Avana dome in Kirkuk field and Bai Hassan field—are being linked by a spur to the KRG-Turkey pipeline. Oil from Avana has been flowing to the KRG for a little over a week.
Testing on the Bai Hassan branch is imminent, according to the Ministry of Natural resources.
The oil from these fields will be used by the KRG for its domestic refineries, helping the region to maintain its supply of refined products after Islamic State militants disrupted the activity of the Baiji refinery in June. The loss of Iraq’s largest refinery in June caused shortages of electricity and refined oil products, such as gasoline.
The Ministry of Natural Resources also stated that production in Avana and Bai Hassan will free up oil from its Khurmala dome for export.
The use of Kirkuk oil promises to complicate future negotiations over control of the country’s oil exports, the focus of a bitter dispute between Erbil and Baghdad that led former Prime Minister Nouri al-Maliki to cut off the region’s budget—over one billion dollars a month—in January.
Despite their disagreement, Baghdad had agreed to link Kirkuk’s Avana dome to the Khurmala field in Kurdistan after repeated insurgent attacks forced the North Oil to close its Kirkuk-Ceyhan pipeline in early March. The government was eager to resume exports of Kirkuk crude: every day its pipeline was offline, it lost revenue from the sale of 300,000bpd of oil.
“Increasing throughput capacity is commendable,” says Nat Kern, president of Foreign Reports, an oil industry consulting firm. “If Baghdad and Irbil ever reach an agreement, Iraq will need a new outlet for Kirkuk crude. If not, the KRG will need to overcome the legal obstacles Baghdad has erected so that it can develop a reliable customer base. The Obama Administration shouldn’t take sides in these legal disputes. Either way, the KRG is laying the groundwork for much higher volumes, to be exported sooner or later, for itself or for Iraq.”