After a standoff of more than a year, Baghdad and Erbil have agreed on a deal to resume oil exports from Kirkuk. Under the deal, which the Oil Ministry has described as a ‘preliminary agreement’, Erbil has agreed to pump between 50,000 b/d and 100,000 b/d from Kirkuk to Turkey’s Mediterranean oil terminal at Ceyhan through the pipeline via the federal government’s State Organisation for Marketing of Oil (SOMO).
Oil flows were cut off from Kirkuk after federal forces took control of the governorate in October 2017 in retaliation for the Kurdish independence referendum. With the federal pipeline that runs from Kirkuk to Turkey out of action — and with the Kurds refusing to pump oil from fields that they no longer control through their own pipeline — Baghdad was left with the highly unsatisfactory option of trucking small amounts of crude from Kirkuk to Iran, while losing billions of dollars of income in the process.
Despite Baghdad’s talk of building a new pipeline, it is clear that the new government saw an advantage in working with the Kurds in order to bring Kirkuk’s oil back online. The new oil minister, Thamer Ghadban, as well as Prime Minister Adel Abdul Mahdi, were both keen to build bridges with the Kurds for the sake of bolstering oil outputs.
However, the real catalyst behind this agreement is the US, which has pushed to increase global production to offset that which is being lost by its imposition of a second round of sanctions on Iran which were enforced at the start of November.
Despite the caution on both sides, flows resumed on 16 November at a modest rate of between 50,000 b/d and 60,000 b/d. By the 24 November the North Oil Company announced that these had increased to 100,000 b/d. While this is still some way off the 300,000 b/d that was being pumped when flows were at their peak during 2017, it is an encouraging development.