Ankara and Istanbul, Reuters—Iraqi Kurdistan started loading oil from its new pipeline for shipment from a Turkish port on Thursday despite a dispute with Baghdad, which claims sole authority over Iraqi oil and declares any independently sold oil as ‘smuggled.’
The cargo of 1 million barrels of crude oil was being loaded on a tanker in the Mediterranean port of Ceyhan, Turkish Energy Minister Taner Yıldız told Reuters on Thursday.
“Loading will be completed today,” Yıldız said.
The export sale is likely to infuriate Baghdad, which has been at loggerheads with Erbil over the sharing of oil revenues and denounced Turkey’s courtship of the Kurds, warning that steps towards economic independence could threaten Iraq’s sovereignty.
Independent oil sales will provide the Kurdistan Regional Government (KRG) with income outside Iraq’s federal budget, which Erbil desperately needs as it battles a cash crunch. Baghdad has cut the region’s share of the budget to punish Kurds for their construction of the new pipeline.
Flows through the pipeline started last December, but Ankara had pledged it would wait for Baghdad and Erbil to resolve their differences before allowing independent oil exports.
After five months of talks and little progress, however, tanks at Ceyhan are now full with 2.5 million barrels of Kurdish oil, and Turkey decided there was no point in obstructing exports, sources familiar with the sale said.
In late 2013 after the Kurds built the pipeline, Iraq’s oil ministry instructed a US law firm to pursue legal action against any buyer of Kurdish oil.
Yıldız declined to comment on the buyer.
Officials in Baghdad and Erbil could not immediately be reached for comment.
Crude flow continues
The tanker, named United Leadership, was loading a cargo of piped Kurdish oil, an official at the GAC shipping agency in Turkey said. Reuters AIS Live ship tracking showed the tanker had arrived at Ceyhan around May 20 and was berthed at the port.
Flows through the KRG oil pipeline have ramped up since early March while Iraq’s federal oil pipeline, from the northern Kirkuk fields to Ceyhan, has been down, an industry source said. That freed up Turkish capacity to handle the Kurdish flows.
“Because the Kirkuk line was not working, KRG was able to pump around 100,000 barrels per day (bpd) at times, which filled up the storage tanks quickly,” the source said.
KRG’s new oil pipeline connects to the existing Iraqi federal pipeline on the Turkish border.
The industry source said the flow in the KRG pipeline continued as the export cargo was being loaded in Ceyhan.
Another source said the payments for the exports were likely to be deposited in Halkbank.
Iraqi Kurdistan began selling its oil independently of the federal government in 2012, transporting a small trickle of condensate and then small quantities of crude in 2013 via truck through Turkey.
A Turkish company called Powertrans has acted as the broker for the Kurdish government, selling the oil via tenders to traders.
Last week, Reuters reported that Israeli and US oil refineries had imported small cargoes of crude oil from the region.