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Iraqi Kurdistan's Oil Pipeline Capacity to Double After Upgrade

Source: Reuters 10/27/2014, Location: Middle East

Iraqi Kurdistan plans to increase the capacity of its oil pipeline via Turkey to 700,000 barrels per day (bpd) following upgrade work, industry sources and officials said.

It will raise the flow to 400,000 bpd by year-end, from a current 280,000 bpd, adding further pressure to falling world oil prices already hit by rising supply.

The Kurdistan Regional Government (KRG) has quietly pressed ahead with plans to expand oil pumping capacity in the teeth of opposition to its oil exports from theBaghdad government and as it fights Islamic State militants.

"There is further technical upgrade work ongoing right now and once that is finished, the pipeline capacity will reach its designed volume which is 700,000 bpd," one industry source said.

"I believe the work will be completed in two to three weeks," the source said.

KRG's pipeline to the Turkish port of Ceyhan, first began operating at the start of this year, angering the central government in Baghdad which claims the sole authority to manage Iraqi oil.

Baghdad, which claims the Kurdish oil shipments are illegal, has taken its refusal to allow Kurdish oil shipments to U.S. courts, blocking the discharge of one tanker off Texas earlier this year.

KRG argues that its shipments are allowed under the Iraqi constitution.

A total of 19.2 million barrels of oil have been exported via Ceyhan, Turkish officials said, and around $400 million has been deposited with Turkish state lenderHalkbank as a result.

The KRG has declined to say who is helping it arrange the deals.

In September, Reuters reported that at least 3 million barrels of Kurdish oil were on ships heading to Asia, with trade sources naming China as a possible destination.

Despite the mystery over buyers, an order book for Kurdish oil seems to have been established. At least two tankers per week were regularly lining up at Ceyhan to load Kurdish crude, Turkish officials and industry sources said.

Oil production in northern Iraqi oilfields has been on the rise, but for now there has not been enough crude to fill the upgraded capacity of the pipeline.

"We are likely to see 400,000 bpd flowing in the pipeline probably before the end of the year," another industry source said.

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