Brief: Iraq, Kurdistan to Resume Crude Flows to Mediterranean

Mobius Intel Brief:

Iraq and the Kurdistan Regional Government (KRG) announced plans to imminently resume between 185kb/d and 300kb/d of crude exports to Turkey’s port of Ceyhan on the Mediterranean Sea, nearly two years after flows halted on the Iraq-Turkey pipeline.

Key Intel:

• Pending Turkey’s approval, Iraqi and KRG officials’ latest commentary indicates the pipeline will begin exporting between 185kb/d and 300kb/d as early as this week. While an Iraqi statement reiterated its commitment to OPEC+ production quotas, the return of Kurdish export capacity could prematurely weaken Iraq’s compliance ahead of OPEC’s plans to begin unwinding cuts in April.

• Iraqi crude production fell to an average of 3.86 MMb/d in 2024 with the combined impact of lost export capacity and OPEC’s campaign of production cuts — its lowest annual average since 2015. Iraq reported production of 3.69 MMb/d in January— its lowest monthly average since Nov 2020. Excluding 2020, January’s output was the lowest since Oct 2015.

• Progress on the pipeline was followed by today’s announcement that BP finalized an agreement with the Iraqi government to redevelop interests in the Kirkuk fields in Northern Iraq, potentially unlocking another ~3 Bboe of resources.

• Early commentary suggests OPEC+ plans to maintain its latest timeline to begin unwinding production cuts in April. Easing OPEC cuts alongside the recovery in Iraqi/Kurdish crude exports to Turkey could offset supply impacts from the U.S. maximum pressure campaign on Iran.

• Long-term: Iraq hopes to increase production to 6 MMb/d by 2028 and has announced or approved several infrastructure projects to expand export capacity. In January, the Iraqi cabinet approved the Basra-Haditha pipeline project—funded under the Iraq-China Framework Agreement—to increase export capacity by 2.25 MMb/d to the port of Aqaba in Jordan.

ICYMI: Iraq-Turkey Pipeline

• Turkey interrupted approximately 450 kb/d of crude exports in March 2023 after an International Chamber of Commerce ruling ordered Ankara to pay $1.5 billion in damages to Baghdad for unauthorized exports between 2014 and 2018.

• The dispute prevented direct exports Iraqi/Kurdish crude exports to the Mediterranean as the Yemeni Houthis began their campaign against Red Sea vessels—attacks that ultimately forced most Middle Eastern exports to circumnavigate Africa’s Cape of Good Hope. As a result, the shutdown cost Iraq an estimated $19 billion in lost revenue and left Saudi Arabia as the only major producer with the ability to bypass Houthi-related disruptions.

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