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Exclusive: Iraqi Kurdistan oil pipeline export capacity to double

By Humeyra Pamuk and Orhan Coskun

DUHOK Iraq/ANKARA (Reuters) - The capacity of Iraqi Kurdistan's independent oil pipeline will almost double to at least 200,000 barrels per day by the end of this month, helping the semi-autonomous region increase exports and revenue, industry sources and officials said.

Oil revenues are a lifeline for the Kurdish Regional Government (KRG) in northern Iraq, whose peshmerga forces are being supported by U.S. air strikes in their battle against the radical Sunni militants of Islamic State.

"Work to increase the capacity will probably be completed by the end of this month. Once it is completed, pumping can increase to up to 220,000 barrels per day (bpd)," one Turkish official told Reuters.

Industry sources also said the capacity of the pipeline to Turkey, which began operating at the start of this year, was set to rise to around 200,000-220,000 bpd from 100,000-120,000 bpd before the flow stopped for upgrade work.

One of the sources said capacity could climb to 250,000 bpd in two to three months' time.

"The crude flow is set to restart when the upgrade work is finished, but the 200,000 bpd to 220,0000 bpd of crude flow will be dependent on the rising oil production in northern Iraq," one official said.

A joint venture of Anglo-Turkish company Genel Energy and Sinopec's Addax Petroleum is working to ramp up production in the Taq Taq oilfield, Iraqi Kurdistan's largest, to 140,000 bpd by the end of this month.

After months of fruitless talks with Iraq's central government, the KRG in May started to export crude on its own independent pipeline to the Turkish Mediterranean export terminal of Ceyhan.

The KRG pipeline is located at a distance from the areas controlled by Islamic militants.

The move has infuriated Baghdad, which claims the sole authority to manage Iraqi oil. It has cut allocations to the KRG in the budget and has tried to block KRG's oil sales by taking legal action. [ID:nL6N0QL31Q]

So far, 7.8 million barrels of Kurdish oil have flowed through the independent pipeline, of which 6.5 million have been loaded onto tankers for export.

The Kurds have managed to load seven export cargoes from Ceyhan, according to Turkish Energy Minister Taner Yildiz.

EXPORTS FINDING CUSTOMERS

The tricky part for Iraqi Kurdistan has so far been to find buyers to export the oil. Baghdad's persistent efforts to block sales initially deterred some customers.

Iraqi Kurdistan delivered its third major cargo of crude oil out of Ceyhan and a fourth was sailing to Croatia on Friday.

Around $350 million in oil sales have been completed or are under way from shipments sent via the KRG pipeline, a Reuters analysis of satellite tracking data shows.

One cargo of Kurdish crude aboard the United Kalavrvta tanker has been sitting off the Texas coast since late July after Baghdad asked a court to seize the vessel. The ship remains in international waters, unable to unload, while the KRG has appealed the case.

The KRG has said it plans to increase oil sales to around 1 million bpd by the end of 2015, which could give it enough economic clout to speed a move to independence.

Meanwhile, a drive earlier this month by Islamic State militants through northern Iraq to the border with the Kurdish region has alarmed Baghdad, drawn the first U.S. air strikes since the end of American occupation in 2001 and sent tens of thousands of Yazidis and Christians fleeing for their lives.

"We provide a lifeline to this region; we boost the economy. Our machines have not stopped; all our staff both expats and locals are at work. Our target is to improve production," Onder Tekeli, general manager of Taq Taq Operating Company (TTOPCO), told Reuters during a short ride inside the facility.

On Tuesday, Iraqi forces launched an offensive to drive Islamic State fighters out of Tikrit, but they halted their advance after facing fierce resistance, officers in the operations room told Reuters.

The Sunni militants' advance towards Arbil, which followed a shockingly fast seizure of Iraq's third-biggest city Mosul in June, have stunned the international community and prompted Western oil companies including ExxonMobil and Chevron to evacuate staff.

The fall in oil output from the region has been negligible, however.

(Reporting by Humeyra Pamuk and Orhan Coskun; Editing by Nick Tattersall and Jane Baird)

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