http://www.reuters.com/article/us-mideast-crisis-iraq-kurds-oil-insight/fear-of-iranian-general-left-iraqi-kurdish-oil-fields-deserted-idUSKBN1CU2CM?feedType=RSS&feedName=worldNews&utm_source=Twitter&utm_medium=Social&utm_campaign=Feed:
Reuters/worldNews (Reuters World News)
OCTOBER 25, 2017 / 5:51 PM / UPDATED 41
MINUTES AGO
Fear
of Iranian general left Iraqi Kurdish oil fields
deserted
Ahmed Rasheed, Dmitry Zhdannikov
6 MIN READ
BAGHDAD/LONDON (Reuters) - When the Iraqi army and Iranian-backed
Shi‘ite militia entered a key oil processing facility in Iraq’s north to retake it from
Kurdish Peshmerga forces last week, the installation was deserted and its alarm
bells ringing.
FILE PHOTO: An Iraqi flag is seen on a military vehicle at an oil
field in Dibis area on the outskirts of Kirkuk, Iraq October 17, 2017. REUTERS/Alaa Al-Marjani/File
Photo
Engineers and workers on the facility,
which processes oil from two major fields in the Kirkuk area of predominantly
Sunni Kurdistan, had fled, fearing the military advance.
“No one wanted to risk their life and
decided to evacuate as stories about the Shi‘ite militia and Qassem Soleimani were spreading fast,”
said a senior Kurdish oil industry source, referring to the head of foreign
operations for Iran’s
elite Revolutionary Guards.
The source declined to be identified.
Iraqi engineers arrived to the sound of alarm bells warning about system
malfunctions, prompting them to immediately shut down wells. Now, they need
passwords and expertise from their Kurdish counterparts to restore oil output
fully.
The loss of control of Kirkuk oil fields
is likely to starve the KRG of vital oil revenue and cause deep concern to
global trading houses such as Vitol and Glencore, which have granted the
semi-autonomous government billions of dollars in loans against future oil
sales.
Baghdad’s lightning military offensive into northern Iraq came after the Kurdistan
Regional Government held an independence referendum last month.
Major-General Soleimani, one of the most influential military
figures in the Middle East, with reach in Syria and Lebanon, issued tough warnings to Kurdish
leaders ahead of the Iraqi
military advance.
“We went inside the oilfield facilities
after Kurdish workers fled and we found overalls and safety boots thrown on the
ground,” said an engineer from the Baghdad-run North Oil Company, who declined to be named because he
was ordered not to speak publicly about the issue.
“It seems that workers took them off and
escaped very quickly.”
RINGING ALARMS
NOC crews entered oil facilities in the
Bai Hassan and Avana fields on Oct. 17 for the first time since 2014, when
Peshmerga forces drove Islamic State from the area and found all crude oil
stations unmanned. Peshmerga fighters had also withdrawn.
“After we discovered that some of the key
equipment was missing and the control panel was ringing alarms of crude
processing malfunction, we immediately shut down oil wells,” the NOC engineer
said.
A week after the operation, Iraqi engineers are still
struggling to resume Kirkuk’s oil production, saying they had yet to understand
how to operate the equipment processing some 350,000 barrels per day.
The military offensive more than halved
Kurdistan’s oil output and cut its exports to global markets via Turkey by two
thirds.
The drop in exports has deprived the
region of more than $200 million in revenues over the past week, a Kurdish oil
industry source familiar with loadings told Reuters.
It has also dealt a further blow to the
region’s finances already stretched by a fight against Islamic State and a
budget crisis caused by a fall in oil prices. The United States has called on
both sides to resume dialogue, saying the tensions hamper efforts to fight
Islamic State.
Resuming normal oil production and exports
will be challenging and
will take at least another week and will only succeed if Iraqi and Kurdish engineers
agree to cooperate, according to both sides.
On Tuesday, NOC officials asked Kurdish
engineering firm Kar Group to send back its workers, according to sources on
both sides. Iraqi
engineers need guidance on how to operate recently installed equipment at Bai
Hassan and Avana, the sources said.
The pumping and operational stations for
both oil fields are located in the city of Dahuk, which unlike Kirkuk is still
under the control of the Peshmerga forces.
LIKE A LOCKED BOX
“Energy facilities in Kirkuk are more like
a locked box and only their crew have the password,” the Iraqi engineer said.
Kar Group has, however, so far refrained
from going back without security guarantees, according to sources close to the
engineering company.
Kirkuk, one of the oldest and best known
oil areas in the Middle East, had long been under the control of Iraqi forces until it was
over-run by Islamic State. In 2014, it was retaken by the Peshmerga, the
official security forces of the KRG, as part of their advance on Islamic State.
That allowed Kurdistan to regain control
of an area it believes is historically Kurdish and ramp up exports from the oil
fields while borrowing billions of dollars from trading houses and Russian
state oil major Rosneft.
“We need to figure out who gets what when
the fields resume production. At the moment the potential split of revenues is
far from clear,” said the Kurdish oil industry source.
Before the referendum, Kurdistan was
exporting some 600,000 bpd of crude via Turkey, which it said had made it
almost totally economically independent as it could pay its own bills without
the need to wait for budget transfers from Baghdad.
Under the deal with Baghdad, Kurdistan was
exporting 540,000 bpd on behalf of the government in the city of Erbil and some
60,000 bpd on behalf of NOC.
With the loss of control of the Kirkuk
area, Kurdistan will be in theory left with only 250,000-300,000 bpd of its own
output, less than it needs to cover its debt obligations.
Vitol, Glencore, Petraco and Trafigura
have loaned Kurdistan some $2.5 billion and Russia’s Rosneft has loaned some
$1.2 billion. Glencore’s boss Ivan Glasenberg said last week he could not rule
out a rescheduling of the payments.
Writing by Dmitry Zhdannikov, editing by
Peter Millership and Nick Tattersall
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