Oil flows through the Kurdistan Regional Government's export
system fell sharply in early August due to pipeline outages and
production declines following recent attacks on an oilfield in
northern Iraqi, a number of sources have confirmed.
While the recent pipeline outages were due to a technical glitch
which may already have been rectified, analysts expect the loss of
output from the Bai Hassan oil field, where saboteurs have damaged
production facilities and heightened concerns for future security,
to last for months.
The KRG's pipeline to Turkey, which is the only pipeline currently
exporting crude from northern Iraq, has been down for about 80 hours
so far this month, an international oil company official familiar
with pipeline operations said.
The outages have been caused by an electricity transmission
malfunction at the PS-3 pumping station in Silopi, just over the
border in Turkey, said the IOC official, an industry official in
Erbil, and an industry official at Turkey's Ceyhan port.
In July, the export pipeline sent 511,000 b/d of crude to market,
the KRG Ministry of Natural Resources reported in early August.
The pipeline first went down on the afternoon of August 5, the
Ceyhan official said. He and the IOC official said exports resumed
briefly on the morning of August 7, but only for a few hours.
Exports came back online early August 9, initially flowing at
458,000 b/d, the Ceyhan official said.
Temporarily bolstered by crude from storage built up at producing
fields during the pipeline outages, exports had risen to 573,000 b/d
by Thursday but were unlikely to stay at that rate, the official
said.
Assuming the pipeline stays online, KRG exports for the rest of this
month are expected to be significantly lower than the July average
following a July 31 attack on the 170,000-180,000 b/d Bai Hassan oil
field northwest of Kirkuk.
REPEATED SABOTAGE ATTACKS
The field lies outside the semi-autonomous Kurdistan region's
official border with the rest of Iraq, but for the past two years
has been contributing to export flows through the KRG pipeline,
after repeated sabotage attacks by insurgents closed the Iraqi
federal government's northern export pipeline. Bai Hassan has been
operated by the KRG since late 2014, following the Islamic State
group insurgency in much of northern and western Iraq that peaked in
summer of that year
The July 31 attack, which authorities have also attributed to IS,
caused the 70,000 b/d southern section of the field to be shut down,
several officials familiar with operations said. Bai Hassan South
remains offline, industry officials said.
A subsequent attack August 10 struck a different section of Bai
Hassan but had a negligible effect on production. Saboteurs also
planted improvised explosive devices along the pipeline connecting
Bai Hassan and the Avana Dome of the Kirkuk field to the KRG export
system, Kirkuk security officials said.
In response to the loss of Bai Hassan crude exports, the KRG
ministry of natural resources has redirected some crude production
previously earmarked for domestic consumption to the export
pipeline.
The 100,000 b/d Kalak refinery near Erbil, the Kurdistan regional
capital located less than 100 km north of Kirkuk, has been offline
since August 4 due to lack of feedstock, government and industry
officials in Erbil said. The refinery had been taking between 30,000
and 40,000 b/d from the KRG-operated Khurmala Dome of the Kirkuk
field, but that production has been diverted to the export pipeline.
The KRG's other major refinery, Bazian, located in the east of the
Kurdistan region, is also operating at reduced capacity due to the
crude diversions. An industry official briefed on operations at
Bazian said the refinery had recently been taking between 20,000 and
25,000 b/d of crude for processing and would likely be operating at
that level until Bai Hassan's production recovers.
Bazian's current capacity is at least 40,000 b/d. In 2014, Qaiwan
Group, the local company that owns and operates the refinery,
announced plans to increase that to 125,000 b/d by 2018.
In another setback for the KRG, which depends almost exclusively on
crude export revenues to finance government operations, the quality
of KRG export crude has suffered following the attacks on Bai
Hassan. The IOC official said recent loadings at Ceyhan, the current
delivery point for all KRG crude exports, have had a higher API
gravity, higher sulfur content and more water than usual.
--Staff, newsdesk@platts.com
--Tamsin Carlisle,
tamsin.carlisle@platts.com
--Edited by Wendy Wells,
wendy.wells@spglobal.com
© 2016 Platts, The McGraw-Hill Companies Inc. All rights reserved.
To subscribe or visit go to:
http://www.platts.com
http://www.platts.com/latest-news/oil/erbil/northern-iraq-crude-oil-exports-dive-on-pipeline-26522012