June 18, 2014 / 11:56 AM / 4 years ago

UPDATE 2-Kirkuk the elephant in the room as Kurds, Iraqis talk pipelines

* Link from Kirkuk to Kurdish pipeline needs tests

* Kurdistan borrows $3 billion to meet budget

* Region to raise oil product imports on refinery outage

* Iraq’s largest refinery shut down, militants take over (Recasts lead, adds detail, context)

By Julia Payne

LONDON, June 18 (Reuters) - Barely a week after Iraqi Kurdistan took over the Kirkuk oil field, Iraqi oil officials seemed resigned to its loss when they joined their Kurdish counterparts at a London industry conference.

Instead of tough messages over ownership of the prized giant field, the Iraqis sparred with the Kurds over pipeline logistics, as though the change of affairs was now the status quo.

The Kurdish Minister of Natural Resources, Ashti Hawrami, announced the completion of a new pipeline link on Tuesday, which could be used to export Iraq’s Kirkuk oil through its territory.

In response, Iraqi officials cast doubt over the existence of the link and stuck to their line that the Kurds of the semi-autonomous region had no right to export oil independently. But their legal threats have been falling on deaf ears as refiners have already brought Kurdish oil, which has been trucked through Turkey.

“Kurdistan of Iraq is already on its national desired border and I don’t think it will be easy to push back,” Adnan al-Janabi, a senior Sunni politician and head of Iraq’s oil and gas committee said on the first day of the conference.

The Kurds see Kirkuk as their historic capital.

“The Peshmerga is on Kurdish territory and there is no reason to get them back,” Taha Zanghana, deputy minister of natural resources of Iraqi Kurdistan, told reporters on Wednesday, speaking of Kurdish forces around Kirkuk.

Kirkuk oil has been largely trapped in Iraq after its export pipeline to Turkey was sabotaged in March and the Sunni extremist onslaught makes repairs hazardous.

The Kurdistan Regional Government (KRG) still needs Baghdad. Its small oil sales by truck and its pipeline exports from its own pipeline, which began in May, will not cover its financial needs for a while.

After the KRG completed the pipeline to Turkey by-passing the federal system, Baghdad cut the Kurds out of the budget for the last five months, forcing the northern region to take out large loans to stay afloat.

Ashti Hawrami, the Kurdish minister of natural resources, said the KRG had already borrowed $1 billion internationally against future oil sales and another $2 billion locally.


The Kurds said the new pipeline announced on Tuesday was built with the cooperation of Iraq’s North Oil Company, which runs the field, and once operational it would allow oil flows to link up with the Kurdish pipeline to Turkey.

But it still needed to be tested, Zanghana said.

Kurdish officials at the conference were unable to comment on capacity or give greater detail on the connection to its pipeline to Turkey.

The pipeline could start quickly, Zanghana added, but the region was waiting for an agreement with Baghdad.

Thamir Ghadhban, the chairman of the advisory commission to the prime minister, said that the Kurdish energy minister’s announcement was the first he had heard of such plans.

Early on Wednesday, Sunni Muslim militants began attacking Iraq’s largest refining complex at Baiji and now control 75 percent of the complex. The plant was shut down on Tuesday.

Some output from the refinery was sent to the Kurdish region, which will now have to make up for the loss.

“We were expecting that case, and we made all the preparations to supply our local demand ... It’s not the first time it has been shut down or they cut our supplies,” Zanghana said.

“We are importing products and we are swapping products for diesel and fuel oil. I think it will not be easy for us, I got calls from our distribution centres...but I’m confident that we will tackle that case.” (Editing by William Hardy)

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