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Kurds Grab Fourth-Largest Iraq Oilfield Amid ISIL Advance

Photographer: Marwan Ibrahim/AFP/Getty Images

Kurdish Iraqi Peshmerga forces deploy their troops and armored vehicles on the outskirts of Kirkuk, Iraq. Close

Kurdish Iraqi Peshmerga forces deploy their troops and armored vehicles on the outskirts of Kirkuk, Iraq.

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Photographer: Marwan Ibrahim/AFP/Getty Images

Kurdish Iraqi Peshmerga forces deploy their troops and armored vehicles on the outskirts of Kirkuk, Iraq.

Kurdish troops were defending Iraq’s fourth-biggest oilfield against Islamist militants after deploying outside their semi-autonomous region in the country’s north to seize the deposit claimed by the central government.

More than 100,000 Kurdish fighters, known as peshmergas, are guarding a “front line” from Iraq’s eastern border with Iran to the northern town of Fishkabur near Turkey, Jabbar Yawar, Peshmerga Ministry secretary-general, said yesterday in an interview in Erbil, the Kurdish region’s capital. They now occupy areas around the contested city of Kirkuk where BP Plc has been in talks with Iraq’s government to help reverse declining output at the oilfield discovered in 1927.

Iraq’s army abandoned Kirkuk last week amid an offensive by militants from the Islamic State in Iraq and the Levant. Peshmergas now control all energy facilities and oil deposits in the Kirkuk area other than a refinery in Baiji, 50 miles (80 kilometers) to the southwest, which ISIL forces have surrounded, Yawar said. ISIL also seized part of a pipeline for oil exports from Kirkuk to Turkey, he said. Crude flows through the pipeline have been halted for security reasons since March 2, according to Iraq’s oil ministry.

“Currently all disputed areas are inside the Kurdistan region or protected by the region’s forces,” Yawar said. “It is not possible that the Iraqi government return and fill these huge areas that it left.”

OPEC Producer

Media officials at the oil ministry in Baghdad, Iraq’s capital, didn’t answer at least five phone calls for comment.

Prime Minister Nouri al-Maliki’s Shiite-led government is seeking to reverse the battlefield gains of ISIL, a breakaway al-Qaeda Sunni Muslim group that captured the northern city of Mosul on June 10 and then advanced south toward Baghdad. Sectarian strife is pushing the second-largest oil producer in the Organization of Petroleum Exporting Countries closer to civil war, three years after the U.S. withdrew its forces from the country.

Iraq, excluding the Kurdish region, holds 150 billion barrels in proven crude reserves, the world’s fifth-biggest deposits. The Kurdistan Regional Government controls 45 billion barrels and has attracted international oil companies including Exxon Mobil Corp. and Total SA with financial terms many investors see as more generous than those available in the rest of the country.

Tanker Cargoes

Brent crude capped a 4.8 percent increase last week, the biggest gain since July, as the escalating violence fanned concern that supplies may be disrupted. August futures slid 0.1 percent today to $112.78 a barrel at 7:26 a.m. in London on the ICE Futures Europe exchange. The fighting hasn’t spread to the south, which the U.S. Energy Information Administration says is home to three-quarters of Iraq’s crude output.

Maliki’s government has for years disputed with the KRG over oil revenue and territory. Tensions increased last month when the Kurds started to export crude to Turkey through a separate pipeline without approval from the central government. A tanker loaded a cargo of Kurdish crude on Turkey’s Mediterranean coast later in May.

The depth in the water of a vessel that loaded Kurdish oil on June 9 became shallower yesterday, according to ship-tracking data compiled by Bloomberg. The United Emblem’s draft decreased to 7.8 meters (26 feet) from 16 meters yesterday. The tanker’s owners didn’t answer two phone calls or an e-mail seeking comment. A ship’s draft lessens when the vessel unloads a cargo.

Kirkuk, which is also a province and the name of the oilfield, has been a flashpoint in the strained relations between Kurds and Iraqi Arabs. The field contains 8.9 billion barrels of crude reserves, according to data compiled by Bloomberg, and the KRG has criticized BP’s planned oilfield work there.

“The Kurds are obviously in a much better position as long as they don’t overreach,” Robin Mills, the head of consulting at Dubai-based Manaar Energy Consulting and Project Management, said in a June 15 phone interview. “I find it extremely hard to see how they would withdraw.”

To contact the reporters on this story: Khalid Al-Ansary in Baghdad at kalansary@bloomberg.net; Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Alexander Kwiatkowski, Bruce Stanley

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