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Kurdish oil flows again

A small step for the oil trade, a giant leap for Iraq.

Kurdish President Massud Barzani (C) and Iraqi President Jalal Talabani open a ceremonial valve during an event to mark the official start of oil exports from the autonomous region of Kurdistan, in the northern Kurdish city of Arbil June 1, 2009. Iraq's Kurdistan region said it hoped to be producing 1 million barrels per day of oil within the next two to three years, despite discord with the Arab-led government in Baghdad over Iraq's oil wealth. (Safin Hamed/Reuters)

ISTANBUL — With all eyes on the pullout of U.S. troops from major Iraqi cites in June, another milestone on its road to full sovereignty passed relatively unnoticed: Iraqi Kurds exported oil to Turkey for the first time since the U.S. invaded Iraq in 2003.

Situated to the southeast of Turkey, Iraqi Kurdistan may well already have realized its potential to be the world’s newest petrostate were it not for a long-running struggle between Baghdad and the Kurdistan regional government.

Better late than never would appear to be the reigning sentiment in the international oil sector, with energy companies are scrambling to gain a foothold in Kurdish Iraq.

The restarting of exports, meantime, is a source of pride for Iraq’s Kurds, as the oil is flowing from fields that they control. 

Two oil fields are currently ready for export, Tawke, operated by Norway’s DNO International, and Taq Taq, where Addax Petroleum, listed in London and Toronto, runs a joint venture with Turkey’s Genel Enerji. The oil will be transported via the Kirkuk-Yumurtalik pipeline to the Turkish port of Ceyhan in the Mediterranean.

“It is moving softly, softly at the moment while they are sorting out contractual issues with Baghdad and seeing if the contractors get paid,” explained Peter Hitchens, oil analyst at Panmure Gordon & Co. “But if and when that works itself out you will undoubtedly see a major push of foreign investment. It’s at the cusp of going from nothing happening to becoming a major exporter of crude oil around the world.”

Even now companies including OMV, of Austria, and, it is rumored, Sinopec, are plotting billion-dollar takeovers of companies that claim title to Kurdish oil and gas. The share prices of targets such as Addax Petroleum, DNO and Heritage Oil have soared.

It’s a little early for the celebrations, however. All of these investments are being made despite continued warnings from Baghdad that the Kurdish regional government (KRG) had no right to issue oil exploration licenses without federal approval. 

“No one should doubt that what the KRG has done is in the best interests of Iraq,” Nechirvan Barzani, prime minister of the KRG, said at the ceremony in Erbil, whose attendees included KRG President Massoud Barzani and Kurdish leader and Iraqi President Jalal Talabani.

However, the government — which would enjoy a majority of the revenues from the exports — has had its hand forced by the slumping economy. Iraq is currently exporting around 1.8 million barrels per day. Oil from the Tawke field and the Taq Taq field are to reach a combined 100,000 barrels per day shortly. The KRG Ministry of Natural Resources says it will reach 250,000 bpd in exports by mid 2010.