BAGHDAD: Iraq halted crude exports from the semi-autonomous Kurdistan region and northern Kirkuk fields on Saturday, an oil official told Reuters, after the country won a longstanding arbitration case against Turkiye.
The decision to stop shipments of 450,000 barrels per day (bpd) of crude relates to a case from 2014, when Baghdad claimed that Turkiye violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil through a pipeline to the Turkish port of Ceyhan.
Baghdad deems KRG exports via Turkish Ceyhan port as illegal.
“Iraq was officially informed by the International Court of Arbitration [about the] final ruling on Thursday and it was in favor of Iraq,” a senior oil ministry official said.
Turkiye informed Iraq that it will respect the arbitration ruling, a source said.
Turkish shipping officials told Iraqi employees at Turkiye’s Ceyhan oil export hub that no ship will be allowed to load Kurdish crude without the approval of the Iraqi government, according to a document seen by Reuters.
Turkiye subsequently halted the pumping of Iraqi crude from the pipeline that leads to Ceyhan, a separate document seen by Reuters showed.
On Saturday, Iraq stopped pumping oil through its side of the pipeline which runs from its northern Kirkuk oil fields, one of the officials told Reuters.
Iraq had been pumping 370,000 bpd of KRG crude and 75,000 bpd of federal crude through the pipeline before it was halted, according to a source familiar with pipeline operations.
“A delegation from the oil ministry will travel to Turkiye soon to meet energy officials to agree on new mechanism to export Iraq’s northern crude oil in line with the arbitration ruling,” a second oil ministry official said.
The final hearing on the arbitration case was held in Paris in July 2022, but it took months for the arbitrators, the secretariat of the arbitration court and the International Chamber of Commerce to approve the verdict, a source familiar with the process told Reuters.
The impact on the KRG’s oil production depends heavily on the duration of the Iraqi Turkish Pipeline (ITP) closure, sources said, adding this would cause significant uncertainty to oil firms operating in the Kurdistan Region in Iraq (KRI).
A cessation of exports through the pipeline would trigger a collapse of the KRI economy, according to a letter last year to US representatives from Dallas-based HKN Energy, which operates in the region.
Turkiye would need to source more crude from Iran and Russia to make up for the loss of northern Iraqi oil, the letter said.
Analysts have warned that companies could withdraw from the region unless the environment improved.
Foreign oil firms, including HKN Energy and Gulf Keystone, have linked their investment plans this year to the reliability of KRG payments, which face months of delays.