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Upheaval in Iraq threatens OPEC oil development plans

Iraq’s northern oil fields imperiled by the advance of Islamic militants have been shut down, and companies have begun evacuating workers elsewhere in the country. OPEC member’s ambitious plans to boost oil production have been thrown into doubt.
By SINAN SALAHEDDIN, Associated Pre Published: June 24, 2014
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— The turmoil in Iraq has thrown the OPEC member’s ambitious plans to boost oil production into doubt, threatening to crimp its most vital economic lifeline.

Northern oil fields imperiled by the militants’ advance have been shut down, and companies have begun evacuating workers elsewhere in the country. Iraq’s Kurdish minority has moved to solidify control over the northern oil-rich city of Kirkuk and other disputed areas, weakening Baghdad’s claims to the energy riches buried beneath while bolstering the Kurds’ aspirations of greater autonomy.

The heart of Iraq’s oil industry is in the mainly Shiite south, which so far has been spared this month’s advance by militants led by the al-Qaida spinoff group known as the Islamic State of Iraq and Syria.

The insurgents quickly took over Iraq’s second-largest city of Mosul, Saddam Hussein’s hometown of Tikrit and smaller communities in the Sunni heartland as government forces melted away. As they disappeared, Kurdish security forces pushed deeper into contested territories abutting their self-ruled northern enclave.

A senior Iraqi oil official said Baghdad has lost at least 400,000 barrels a day because of production cuts at oil fields in Kirkuk and nearby towns. Authorities also have had to shut down the Beiji refinery, which has been the scene of fierce clashes. Authorities have only been able to produce 30,000 to 40,000 barrels a day from Kirkuk fields to feed a small refinery, the official said.

Beiji refinery critical

The Beiji refinery and a nearby power plant supply Iraq with a third of its refined fuel and nearly a tenth of its electricity, according to Barclays analysts.

A major export pipeline controlled by Baghdad that traverses restive Sunni-dominated areas of northern Iraq was shut down earlier this year due to terrorist attacks.

So far, the Kurds have not approached Kirkuk’s oil fields or tried to pump oil through an independent export pipeline through Turkey that they built late last year, the oil official said.

Kurds emboldened

But their advance has left them “much more well-positioned to retain full control of the contested territories,” including Kirkuk, said Ayham Kamel, Middle East and North Africa director at Eurasia Group in London.

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