Iraq: Iraq’s Bright Oil Future Blocked By ISIS

Dec 11, 2014 | Colin Chilcoat, Oilprice.com
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Last week’s oil agreement between Baghdad and the Kurdistan Regional Government (KRG) was a milestone event and the market reaction was largely fitting – Brent crude futures dropped nearly 3 percent and regional operators all saw a considerable boost in share value as production and export growth is expected to rise across Iraq. Still, the specter that is the Islamic State (ISIS) darkens what was a bright day for Iraqi unity and remains a significant stumbling block to the country’s rise to oil-superstardom.

The deal temporarily puts an end to Baghdad and KRG’s conflicting interpretations of oil-sharing agreements spelled out in Iraq’s 2006 constitution and allows for the immediate export of Kurdish oil. In all, 300,000 barrels per day (bpd) from the still disputed Kirkuk region and 250,000 bpd from Kurdistan will travel via pipeline to Turkey, where it will be sold by the state’s oil marketing organization. For its part, Baghdad will resume budget payments to Kurdistan and provide $1 billion toward salaries and equipment for Kurdish peshmerga fighters.