• UN Security Council begins Iraq crisis talks
• Afren, Gulf Keystone fall on investor unease
• Fate of northern Kirkuk oil exports on ice
Kurdish forces took control of the Iraqi northern oil hub of Kirkuk on June 12 to protect the major oil field against advancing Sunni militants in a move that appeared to ease concerns over control of Kurdistan’s growing oil infrastructure.
Armed groups allied to the Islamic State of Iraq and al-Sham, known as ISIS or ISIL, have attacked a number of oil facilities across the north of Iraq since Monday, including the 320,000 b/d Baiji refinery and Bai Hassan oil field.
ISIS took over the major city of Mosul in a two-day offensive ending Tuesday, followed by a push further into the Salahaddin, Kirkuk and Diyala provinces. But Kurdish peshmerga fighters said they have moved to halt the militants advance.
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“We tightened our control of Kirkuk city and are awaiting orders to move toward the areas that are controlled by ISIL,” Brigadier General Shirko Rauf of the Kurdish peshmerga security forces told AFP.
The defensive moves means the militants are less likely to move further east to threaten oil fields being developed inside the semi-autonomous Kurdistan by foreign players. Investors watched closely developments to gauge the impact of the fighting on oil companies with material asset exposure in Kurdistan.
The UK’s Gulf Keystone Petroleum, which is developing the large Shaikan oil field south of the Tawke field in Kurdistan, stemmed further steep share price losses in London Thursday after dropping almost 9% in value on Wednesday. Afren, which is exploring two oil block on the Kurdish border with Iraq, dipped 1.7% in London after taking losses of 5% on Wednesday.
Genel, developing the potential billion barrel Taq Taq field, saw its shares regain some ground after losing almost 7% Wednesday.
By Thursday, the jihadists had forced hundreds of thousands of residents to flee towns in northern Iraq and are threatening to advance on Baghdad.
The UN Security Council on Thursday held talks on the unraveling crisis in Iraq and US President Barack Obama said his national security team was “looking at all the options”.
Market watchers have speculated that emergence of Kurdish forces to help push back the militants in Iraq could boost the prospects of resolution to the longer running dispute between Baghdad and Erbil over oil exports.
“In our view, Kurdistan has an advantage now. Iraq will cooperate with Kurdish forces to retake Mosul from Isis,” Jamal Orazbayeva at Westhouse Research said in a note “With attacks from the extremists, it will need help from Peshmerga and this could be a bargaining chip for Kurds. KRG has been consistently moving towards independent export and in my view, will continue to do so,” he said.
BP’s reservoir data analysis contract for the Kirkuk oil field has been unaffected by militant attacks across northern Iraq, a source close to the company told Platts.
BP signed an 18-month contract with Iraq’s North Oil Company (NOC) in September to help the state-owned firm boost output from the Kirkuk field, which has been in steep decline.
A spokesman for BP said the company is closely monitoring the security situation in the north of Iraq, but would not comment on its precautions in the south where it is developing the Rumaila oil field along with China National Petroleum Corp. and Iraq’s South Oil Company.
Operations at the Rumaila field continue as normal. The field produced around 1.4 million b/d in 2013, representing Iraq’s single largest oil asset.
Having once produced as much as 1.5 million b/d, Kirkuk’s production has fallen to around 200,000 b/d due largely to persistent attacks on the northern export pipeline to Turkey, a situation that Baghdad hopes to reverse.
In the short terms, however, the oil markets expect the fast deteriorating security breakdown in northern Iraq over will only extend the timeframe for the return of the country’s troubled Kirkuk export grade.
Earlier this week, market sources said that pumping of the grade, which is loaded out of the Turkish port of Ceyhan on the Mediterranean coast, was not expected to resume until August at the very earliest, and the ever-strengthening position of the jihadists in the region has only added to the grade’s uncertain future.
Kirkuk, which is a heavy, sulfurous grade that is regularly used by refiners in the Mediterranean, has been absent from the market since March 3, after insurgents blew up the part of the pipeline linking the Kirkuk field to the larger Iraq-Turkey export line which then takes the grade to Ceyhan for loading.
The instability in the region prevented repair crews from reaching the pipeline until late May, but the advancement of jihadist forces cut repairs short before the pipeline could resume operations.
Crude exports from southern Iraq have remained unaffected by the current wave of violence sweeping the country to the North.Iraq’s Basrah grade, which loads out of the Persian Gulf, has been imported into the Mediterranean region to supplement Kirkuk since the pipeline first went down in March.
– Robert Perkins and Paula VanLaningham in London with Adal Mirza in Dubai