Iraqi Kurds Extend Hold Over Oil Areas Disputed With Government

Jun 16, 2014 7:24 am ET

June 16 (Bloomberg) -- Kurdish troops pushed outside their semi-autonomous enclave in northern Iraq to protect the nation’s fourth-biggest oilfield from Islamist militants and take control of areas claimed both by Kurds and the central government.

More than 100,000 Kurdish fighters, known as pershmergas, 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 in an interview in Erbil, the Kurdish region’s capital. The Kurds 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 of 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, which ISIL forces have surrounded, Yawar said. ISIL also seized part of the pipeline for oil exports from Kirkuk to Turkey, he said. Oil 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,” he said.

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Prime Minister Nouri al-Maliki’s Shiite-led government is seeking to turn back battlefield advances by ISIL, a break-away al-Qaeda Sunni Muslim group. 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 Iraq.

Oil wealth is the basis for Kurdish economic independence. The Kurdistan Regional Government, which controls 45 billion barrels of proven crude reserves, has attracted international oil companies including Exxon Mobil Corp. and Total SA with financial terms many investors see as more generous than those on offer in the rest of Iraq.

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 though a separate pipeline without approval from the central government.

Kirkuk, which is also a province and the name of the oilfield, has been a central point of contention. 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 have extended control over the city, and from what we understand over the field as well,” Robin Mills, the head of consulting at Dubai-based Manaar Energy Consulting and Project Management, said late yesterday in a phone interview. “The Kurds are obviously in a much better position as long as they don’t overreach. I find it extremely hard to see how they would withdraw.”

--With assistance from Kadhim Ajrash in Baghdad.