Oil flows through Iraqi Kurdistan to Turkey have reportedly plunged this week after Iraq’s army seized oil fields held by the Kurds since 2014.
The cause of the decline was not immediately clear, but the drop follows reports of production disruptions as major oil fields changed from Kurdish to central government control on Monday and Tuesday.
Crude oil shipments through the Iraq-Turkey Pipeline have fallen by nearly one-third their usual volumes, a shipping source told Reuters on Wednesday. Total exports through the line were at 225,000 barrels a day, the source said.
The pipeline runs through the semiautonomous Kurdish region in Iraq’s north and typically ships up to 600,000 barrels a day. Flows had already fallen to 500,000 barrels a day by Tuesday, according to Reuters.
Iraqi forces successfully took back control of oil fields in disputed territories, which the Kurds have controlled since 2014, when federal forces fled an assault by then-ascendant ISIS militants. This week’s Iraqi army operation followed three weeks of escalating tension after the Kurds held an independence referendum, defying Baghdad’s demands to scrap the vote.
The conflict has sparked concerns that output from northern fields could essentially remain stuck if the Kurds refuse to ship it through the Iraq-Turkey Pipeline.
Another pipeline to Turkey operated by Baghdad has been repeatedly bombed by ISIS militants and will take several years and hundreds of millions of dollars to repair, according to RBC Capital Markets.
“Hence, these fields changing hands could mean that these barrels end up being stranded if Baghdad and Erbil cannot conclude a pipeline access and a revenue sharing agreement — which could prove to be a tall order in the current environment,” Helima Croft, global head of commodity strategy at RBC, said in a research note. Erbil is the capital of Kurdistan.