UPDATE 2-Oil output in Iraq's Kirkuk slumps 90 percent

Thu Sep 4, 2014 11:34am EDT

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(Releads with Kirkuk governor, adds details, background)

By Humeyra Pamuk

ISTANBUL, Sept 4 (Reuters) - Oil output in Iraq's Kirkuk has slumped to 30,000 barrels a day since June, 90 percent down on earlier this year, and a federal pipeline to the Turkish port of Ceyhan may be out of action for over a year due to sabotage, Kirkuk's governor said on Thursday.

Islamic State (IS) fighters have seized swathes of territory in lightning offensives in the arid but oil-rich north of the country, and have repeatedly attacked oil installations.

In February this year Iraqi oil production hit record highs of 2.8 million bpd nationwide, with an estimated 300,000 bpd coming from the northern province of Kirkuk.

"There have been no exports since March and the only production in Kirkuk has been the 30,000 bpd to a small refinery and enough gas to get our electrical grid going since June 8," Najmaldin Karim, Kirkuk's governor told reporters at an industry conference in Istanbul.

"I don't think there will be exports from Kirkuk to the Ceyhan pipeline any time soon. It has been sabotaged continuously and to get it all back would take at least a year or more," he added.

The federal pipeline from Kirkuk to Ceyhan has a capacity of 1.6 million bpd but has for years been operating at around a third of that, and recently even less, a Turkish official said.

Damage to the pipeline is a further blow to the beleaguered authorities in Baghdad, but will not affect the Kurdistan Regional Government (KRG), which began exporting oil in May via its own pipeline, which links to the federal Iraqi pipeline at Turkey's border, and has not been sabotaged.

Kurdistan's oil production is expected to rise to 400,000 bpd in 2014 from 250,000 bpd, according to Tony Hayward, chief executive of Anglo-Turkish Genel Energy, the region's largest producer.

Baghdad has repeatedly expressed its anger at the KRG's agreement to export oil independently through Turkey and has launched a series of legal cases to try to halt its sale.

But the Iraqi authorities have been largely powerless to stop the flow of oil through Ceyhan, which has now exceeded 10 million barrels since May, according to Turkish Energy Minister Taner Yildiz. Some $188 million had been paid into Turkish Halkbank by the Kurdish authoritiesYildiz said on Thursday in the Turkish capital, Ankara.

KURDISH PROTECTION

Iraqi government forces and Kurdish fighters have been struggling to stem the rapid advance of IS militants, and the beheading of two U.S. journalists by the group, formerly known as ISIS, has sparked growing alarm in Western capitals.

The prominent role Kurdish peshmerga fighters have played in combating IS militants has added a further twist to already complex power dynamics in the region, with Kirkuk now protected by an estimated 24,000 peshmerga troops, according to Karim.

"With the peshmerga we feel completely confident, (they) will be in Kirkuk as long as it is necessary," he said, dismissing Iraq's regular troops as a "checkpoint army".

Karim also suggested Kirkuk's oil could be channelled through the KRG pipeline, if both sides agree.

"We Kirkuk citizens, we want the oil production to continue and we can help to bring the two sides (Baghdad and Arbil) together," he said.

During recent fighting, IS has repeatedly tried to seize and hold Baiji Refinery, the largest in Kirkuk.

Damage to the facility, which was producing around 170,000 bpd before it was closed due to the violence, could take more than a year to repair, according to the Kurdistan Regional Government's (KRG) Natural Resources Minister Ashti Hawrami, who was speaking at the same conference.

Around 60 world leaders gathered on Wednesday for the start of the NATO summit in Wales, where the threat posed to Middle Eastern security by IS is expected to be discussed.

Speaking on Wednesday, President Barack Obama said the U.S. would "degrade and destroy" the group. American airstrikes recommenced in Iraq in August for the first time since the pullout of U.S. troops in 2011. (Additional reporting by Ozge Ozbilgin in Ankara; Writing by Jonny Hogg; Editing by Ece Toksabay and David Evans)

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