One of the biggest oil producers in Iraqi Kurdistan has started to lower production as a legal dispute between the region’s government, Baghdad and Turkey drags on.
(Bloomberg) —
One of the biggest oil producers in Iraqi Kurdistan has started to lower production as a legal dispute between the region’s government, Baghdad and Turkey drags on.
Turkey closed a pipeline running from northern Iraq to the Mediterranean port of Ceyhan last week after a ruling from international business tribunal. The legal fight is halting roughly 400,000 barrels a day of crude exports and has helped push up global prices.
Norway’s DNO ASA has started an “orderly shutdown of its operated oil fields” in Kurdistan, it said in a statement on Wednesday. For the past four days it’s been diverting oil into storage, but space is now running out.
The US has weighed in, asking Iraq and Turkey to ensure the oil starts flowing again soon. Brent crude is up 5.4% this week to above $79 a barrel.
“It is unfortunate it has come to this given the likely impact of a continuing supply disruption on oil prices and at a fragile time in global financial markets,” said DNO’s Executive Chairman Bijan Mossavar-Rahman.
The company’s shares fell 4.1% by 9:20 a.m. in Oslo to 9.84 kroner, the lowest on a closing basis since September 2021.
The Paris-based International Chamber of Commerce backed Baghdad’s argument — part of its long-running attempt to rein in the Kurdistan Regional Government — that Kurdish oil couldn’t be shipped from Ceyhan without the Iraqi federal government’s approval. The ICC said Turkey had violated a pipeline transit agreement by allowing the KRG’s shipments to go ahead without consent from Baghdad.
Baghdad says it’s up to the KRG to break the deadlock by accepting that Iraq’s state oil-marketing firm, known as SOMO, should handle Kurdish exports.
“The ball now is in the Kurds’ court,” Asim Jihad, a spokesman for Iraq’s Federal Ministry of Oil, said in an interview on Tuesday. “What matters for the ministry is to speed up the resumption of exports.”
DNO is lowering output at the Tawke and Peshkabir fields, which together pumped 107,000 barrels a day of crude last year.
Peshkabir production was halted on Tuesday night, DNO said, adding it had drawn up plans to conduct maintenance. Tawke’s full shut down “will take an additional day or so given the much larger numbers of wells spread across some 10 kilometers,” according to DNO.
Genel Energy Plc, which is also in Kurdistan, said to Bloomberg on Wednesday that it’s continuing to send oil into storage from Taq Taq and Sarta, two fields it operates.
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