Iraq-Turkey oil pipeline to Ceyhan ready to restart: Turkish energy minister

A key pipeline at the center of a political and financial dispute between Baghdad and Ankara could restart "within this week", Turkey's energy minister said Oct. 2, potentially paving the way for nearly 500,000 b/d of northern Iraqi crude exports to the Mediterranean market to resume.

The Iraq-Turkey Pipeline, which takes Kurdish Blend Test and Kirkuk crude to the port of Ceyhan, has been closed since March 25 following an international arbitration court ruling, with both sides wrangling over the terms of financial penalties to be paid and other matters. Turkey has said the pipeline was damaged by earthquakes in February.

"As of today, the pipeline is ready to operate," Turkish energy minister Alpaslan Bayraktar said at the ADIPEC conference in Abu Dhabi. "Within this week, we will start the Turkey-Iraq pipeline."

Bayraktar did not provide any further details, and Iraqi officials did not immediately respond to requests for comment.

International oil companies operating in Iraq's semiautonomous Kurdistan region say they have yet to be assured that they will be properly paid under the terms of their contracts and have threatened not to resume pumping unless those guarantees are made by Baghdad.

Sour crude for the Med

The line is a vital conduit for the Kurdistan region to export the crude on which its economy relies and a key source of sour crude for refineries in the Mediterranean market. Under an agreement between Baghdad and Erbil, the Kurdistan Regional Government must hand over 400,000 b/d of its crude production to federal marketer SOMO in order to receive its share of the country's budget.

With the closure and suspension of exports, much of Kurdish production has been shut in, forcing the KRG to rely on loans from Baghdad to pay public salaries. KRG officials said August production in the region was about 70,000 to 80,000 b/d, mostly limited to local sales to refineries.

The ITP consists of two parallel lines, of 48-inch and 40-inch diameter, with a nominal capacity of 1.6 million b/d, though in the months leading up to its closure, volumes averaged around 450,000 b/d, comprising about 350,000 to 375,000 b/d of Kurdish Blend Test and 75,000 to 100,000 b/d of federally produced Kirkuk grade.

Kirkuk is classified as a light sour grade with 2.24% sulfur and 34.2 API gravity, according to the Platts Periodic Table of Oil, produced by S&P Global. Kurdish Blend is typically heavier than Kirkuk, but according to market sources, its specifications can be quite variable.

The March arbitration ruling said Turkey had improperly allowed the KRG to independently market and export its crude through the pipeline, in violation of a bilateral agreement between Baghdad and Ankara.

Turkey suspended exports from Ceyhan in the wake of the ruling, which ordered Turkey to pay $1.5 billion in damages. Turkey is seeking to reduce the fine, claiming that the arbitration ruling also awarded it $950 million in compensation, and also renegotiate the pipeline agreement, which expires in 2025, S&P Global Commodity Insights has previously reported.