How Pipeline Outage Almost Halved North Iraq Oil Exports in February

While the oil transportation industry is continually encountering minor glitches, large scale outages can trigger catastrophic results. In February North Iraq experienced just this when oil exports dropped by almost 50% as a result of an idle pipeline.

Financially, the outage wiped US$350 million off Kurdistan’s regional revenues for the month, a blow that hit the country hard in its battle against the Islamic State.

The knock on effects of a pipeline outage

As an autonomous region, North Iraq is almost exclusively dependent on the pipeline as a form of revenue. Channelling crude from the Kurdish region and Kirkuk to the Mediterranean port of Ceyhan, the line is essentially the lifeblood of the region’s economy.

In February, Turkey's energy ministry confirmed that the line was down due to “circumstances.” While the exact cause was not disclosed, Turkish officials have openly accused the Kurdistan Workers' Party of actively sabotaging the pipeline.

During its three weeks of downtime, average flows through the pipeline were reduced to just 350,067 barrels per day.

With US$70.9 million allocated to producers, North Iraq was left with an export revenue figure of just US$233 million. According to the Ministry of Natural Resources, this is less than one third of what’s needed to cover the costs of the region’s public payroll.

The national payroll’s intrinsic dependence on oil

In the wake of the global oil price plunge coupled with a continuous battle against the Islamic State, the Kurdistan Regional Government (KRG) has been pushed to meet its payroll targets. The pipeline outage only worsened the issue, disrupting cash flow and creating major budget issues.

Athanasios Manis, a research fellow at Kurdish ‘think-tank’ entity Middle East Research Institute (MERI) voiced his concerns, commenting that "The current financial position of the KRG is unsustainable.”

With the government now scraping the bottom of its financial barrel, Kurdish officials have entered discussions with European ambassadors and a representative from Iraq's World Bank. Together they discussed how the international community can support North Iraq through the crisis, without worsening regional violence or running a multimillion dollar monthly deficit.

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Image via Flickr Creative Commons. Photo credits: Maureen