Oil production in Iraqi Kurdistan is threatened after a Turkish halt to exports

Oil production in the semi-autonomous Kurdistan Region of Iraq is under threat after the halt in exports from the northern region forced companies operating there to pump crude to storage facilities with limited capacity.

Iraq was forced to stop about 450 thousand barrels per day of crude exports from the Kurdistan region of Iraq on Saturday, through an export pipeline extending from the oil fields in Kirkuk in the north of the country to the Turkish port of Ceyhan.

Oil companies operating in the region have been left in limbo pending the outcome of ongoing discussions between Ankara, Baghdad and the KRG to find a way to resume exports.

Turkey stopped pumping Iraqi crude oil from the pipeline after Iraq won an arbitration case in which it said that Turkey had violated a joint agreement after allowing the Kurdistan Regional Government to export oil to the port of Ceyhan without Baghdad’s approval.

The news supported crude prices, with Brent rising more than $3 a barrel on Monday.

Canada-based Forza Petroleum (formerly Oryx Petroleum) said on Monday that it would halt production from the 14,500-bpd “Hawler” concession in the Kurdistan region, as storage capacity was close to full.

Dallas-based HKN Energy, which operates the Sarsink complex, said it would shut down operations “within a week if no solution is found” as its storage facilities near full.

The concession area produced 43,038 barrels per day in the fourth quarter of last year.

HKN wrote to US representatives last year to warn that stopping exports through the pipeline would lead to the collapse of the Kurdistan region’s economy.

Gulf Keystone Petroleum, which operates the Sheikhan field with a production capacity of 55,000 barrels per day in the Kurdistan region of Iraq, said in a statement on Monday that its facilities have storage capacity that allows production to continue at a reduced rate over the coming days, after which the company will stop production.

The companies “DNO” and “Genel Energy”, which also operate in the region, said that they are currently storing oil in warehouses that can accommodate several days’ production.

The two companies own stakes in the “Tawki” and “Bishkabir” fields, which produced 107,000 barrels per day of oil last year.

Genel also owns stakes in the Taq Taq and Sarta fields, which produced 4,500 bpd and 4,710 bpd respectively last year, according to the company’s annual results.

While production in the “Khurmala” oil field, which is managed by the “Kurdish Kar” group, has not been affected, and it is currently about 135,000 barrels per day and is being stored, a source familiar with the field’s operations told Reuters.

“The company will remain in close contact with other oil producers in the Kurdistan Region and with relevant government officials, and will continue to closely monitor this situation,” Shamaran Petroleum, another company operating in the region, said in a statement.