Iraq awaits official notice on Turkey pipeline restart
A crude oil export pipeline from Iraq to Turkey is poised to restart operations after a six-month suspension, but the flow of oil has yet to resume, despite last week’s announcement by Turkey's energy minister that the pipeline is ready for shipments. Two senior Iraqi oil officials reported that Iraq has not received official notification from Turkey regarding its readiness.
Iraq, the second-largest oil producer in OPEC, currently exports approximately 85% of its crude through southern ports. However, the northern route through Turkey still accounts for about 0.5% of global oil supply.
A senior energy adviser revealed that Iraq is awaiting discussions on "lingering financial and technical issues."
The Kurdistan Regional Government (KRG) of Iraq began independent oil exports in 2013, with KRG oil flowing through a pipeline to Fish-Khabur at the northern Iraqi border. From there, the oil enters Turkey and is pumped to the port of Ceyhan on the Mediterranean coast.
Iraq's federal government insists that state-owned marketer SOMO is the sole entity authorized to manage crude exports via Ceyhan.
Turkey suspended the pipeline due to Iraq's federal government winning the right to control loading at Ceyhan. Iraq's SOMO would need to instruct Turkey on ship-loading, or crude would accumulate in storage with no outlet.
The ICC's March 23 ruling ordered Turkey to compensate Baghdad for unauthorized oil exports from 2014 to 2018, leading to a drop in oil prices to approximately $80 per barrel. Multiple rulings have resulted in Turkey owing Iraq about $1.5 billion before interest, with a second arbitration case expected to cover the period from 2018 onward.
Moreover, the treaty governing the pipeline obliges Baghdad to pump a minimum guaranteed volume through it, resulting in a minimum payment to Turkey, irrespective of the actual crude flow, as long as the pipeline remains operational.
Iraq reported in May that the suspension in March coincided with Turkey's request to inspect the pipeline and storage tanks for any damage caused by a significant earthquake on February 6.
Both countries agreed to wait for a maintenance assessment on the pipeline's status before resuming operations while still engaging in the legal battle over arbitration awards. In April, Iraq sought a U.S. federal court's enforcement of the ICC arbitration award, with Ankara also considering legal action against Iraq.
The U.S. litigation delay and the lack of progress in resolving this issue contributed to the postponement of Turkish President Tayyip Erdogan's planned August visit to Iraq. While sources suggest that Erdogan may visit Baghdad this month, no official confirmation has been provided.
Turkish energy minister Alparslan Bayraktar surprised industry observers on October 2 by announcing the completion of maintenance on the pipeline and the impending resumption of operations. However, Baghdad has not issued an official statement on the matter, and officials have indicated that discussions are ongoing.