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Due to pipeline outage, northern Iraq crude supply declines

In early August, oil export flow from Iraq’s Kurdistan region fell sharply due to pipeline outages. Due to recent attacks on the oilfield, production has also been declined.
While the recent pipeline outages were due to a technical glitch which may already have been rectified, analysts expect the loss of output from the Bai Hassan oil field, where saboteurs have damaged production facilities and heightened concerns for future security, to last for months.
KRG and Turkey oil pipeline was down more than 80 hours this month, as claimed by an international company. The outages have been caused by an electricity transmission malfunction at the PS-3 pumping station in Silopi, just over the border in Turkey, said the IOC official, an industry official in Erbil, and an industry official at Turkey's Ceyhan port.
The KRG Ministry of Natural Resources reported in early August that in July the export pipeline sent 511,000 b/d of crude to market. The pipeline first went down on the afternoon of August 5, the Ceyhan official said. He and the IOC official said exports resumed briefly on the morning of August 7, but only for a few hours.
Exports came back online early August 9, initially flowing at 458,000 b/d, the Ceyhan official said. He also stated that temporarily bolstered by crude from storage built up at producing fields during the pipeline outages, exports had risen to 573,000 b/d by Thursday but were unlikely to stay at that rate.
KRG exports for the rest of this month are expected to be significantly lower than the July average following a July 31 attack on the 170,000-180,000 b/d Bai Hassan oil field northwest of Kirkuk.
The field lies outside the semi-autonomous Kurdistan region's official border with the rest of Iraq, but for the past two years has been contributing to export flows through the KRG pipeline, after repeated sabotage attacks by insurgents closed the Iraqi federal government's northern export pipeline. Bai Hassan has been operated by the KRG since late 2014, following the Islamic State group insurgency in much of northern and western Iraq that peaked in summer of that year.
According to industry officials, the July 31 attack, which authorities have also attributed to IS, caused the 70,000 b/d southern section of the field to be shut down, several officials familiar with operations said. Bai Hassan South remains offline.
A subsequent attack August 10 struck a different section of Bai Hassan but had a negligible effect on production. Saboteurs also planted improvised explosive devices along the pipeline connecting Bai Hassan and the Avana Dome of the Kirkuk field to the KRG export system, Kirkuk security officials said.
In response to the loss of Bai Hassan crude exports, the KRG ministry of natural resources has redirected some crude production previously earmarked for domestic consumption to the export pipeline.
The 100,000 b/d Kalak refinery near Erbil, the Kurdistan regional capital located less than 100 km north of Kirkuk, has been offline since August 4 due to lack of feedstock, government and industry officials in Erbil said. The refinery had been taking between 30,000 and 40,000 b/d from the KRG-operated Khurmala Dome of the Kirkuk field, but that production has been diverted to the export pipeline.
The KRG's other major refinery, Bazian, located in the east of the Kurdistan region, is also operating at reduced capacity due to the crude diversions. An industry official briefed on operations at Bazian said the refinery had recently been taking between 20,000 and 25,000 b/d of crude for processing and would likely be operating at that level until Bai Hassan's production recovers. Bazian's current capacity is at least 40,000 b/d. In 2014, Qaiwan Group, the local company that owns and operates the refinery, announced plans to increase that to 125,000 b/d by 2018.
In another setback for the KRG, which depends almost exclusively on crude export revenues to finance government operations, the quality of KRG export crude has suffered following the attacks on Bai Hassan. The IOC official said recent loadings at Ceyhan, the current delivery point for all KRG crude exports, have had a higher API gravity, higher sulfur content and more water than usual.
Updated 18 Aug 2016 | Soruce: Platts | By S.Seal
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