Iraqi Kurdistan will be ready to export its crude oil directly to world markets via Turkey within months after a new pipeline is completed, a move likely to deepen a row with Baghdad over the distribution of Iraq's hydrocarbon revenues.
The Kurdistan Regional Government (KRG) is on track to finish the pipeline in the third quarter, linking Genel Energy's Taq Taq oilfield with an existing Iraq-Turkey crude pipeline, four Turkey-based industry sources told Reuters.
Turkey has given the green light to the plan, under which oil from Taq Taq will enter the Kirkuk-Ceyhan pipeline at Fishkhabur pumping station near the Turkish border, from where it will flow directly to Turkey's southern port of Ceyhan for shipping to international markets, the sources said.
The move will help Kurdistan significantly increase its oil exports but could upset the Iraqi central government, which sees independent exports from the north as illegal and says growing trade between the KRG and Turkey threatens to split Iraq. Oil is at the heart of the fight between the Arab-led central government in Baghdad and the ethnic Kurdish-run northern enclave, which dispute control over oilfields, territory and crude revenues shared between the two regions.
Washington, wary of the divisions between Baghdad and the autonomous region, has urged passage of a long-delayed national oil law to resolve the standoff, which has intensified since the last U.S. troops left in December 2011.
"The new pipeline will be linked to the Kirkuk-Ceyhan line, said one Ankara-based industry source familiar with the matter. "Naturally, once they can export via a pipeline and no longer have to truck their oil to the border, the volumes will rise."
The new pipeline was originally designed as a gas pipeline but KRG Energy Minister Ashti Hawrami said it was to be converted to carry oil, a move which had helped Genel Energy to bring its plans of pipeline exports by 2014 forward, sources said. Genel declined to comment on the issue.
Sources said the pipeline has been laid up to Dohuk and is currently 80 percent complete. It will be able to carry up to 300,000 barrels per day (bpd) and is being built by a Turkish contractor. Kurdistan crude used to be moved to world markets through a Baghdad-controlled pipeline to Turkey, but exports via that channel dried up last year as a result of a row over payments.
Crude pumped from the Taq Taq oilfield has instead been trucked over Iraq's northern border with Turkey, bypassing Iraq's federal pipeline system. Baghdad has said it alone has the authority to control exports and sign contracts, while the Kurds say their right to do so is enshrined in Iraq's federal constitution. But Iraqi Prime Minister Nuri al-Maliki softened his tone earlier this month, saying Iraq welcomed any step towards rapprochement with Turkey on the basis of shared interests, mutual respect and good-neighborliness.
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