IRAQI KURDISTAN OIL AND GAS OUTLOOK

IRAQI KURDISTAN OIL AND GAS OUTLOOK
Peschmerga forces in June 2014. Photo credit: Enno Lenze/Flickr.
on the southwestern approaches to Kirkuk, threatening
areas controlled by Peshmerga forces. But they no
longer seem to pose a direct threat to the Kurdistan
region itself. ISIS forces damaged the Khabbaz oilfield
in 2015 and may have been responsible for a fire at
Khabbaz on April 5, 2016. A series of ISIS assaults on
July 30, 2016, briefly put the Bai Hassan field, operated
by the federally owned (but now KRG-controlled)
North Oil Company, out of action, along with a nearby
gas processing plant. Production was resumed by
August 2, initially at a rate of around 100,000 b/d
compared to pre-attack output of around 170,000 b/d.
Potentially more serious, at least in the long run, are
the regular standoffs with either federal government
forces or Shia militiamen in lands bordering the south of
KRI, not least near Kirkuk. And while both Kirkuk itself
and the entirety of the giant Kirkuk oilfield is currently
under Peshmerga control, there is no likelihood that
any government that may emerge in Baghdad will
accept the status quo, particularly in the event of the
KRG declaring independence. Baghdad continues to
regard both the city and the bulk of the Kirkuk oilfield
as falling rightfully under its authority, although since
the rise of ISIS caused a collapse of federal forces in
the area, it is the KRG and its Peshmerga forces that
have exercised de facto control. Kirkuk thus remains
a massive bone of contention between the KRI and
Baghdad with its long-term future intimately bound up
with Kurdish aspirations for independence. However, in
July 2016 a major effort was reported to be under way
to try to resolve the immediate question of North Oil
Company production in areas controlled by Kurdish
forces but not acknowledged by Baghdad to be part
of the KRI. 7
In the north of KRI, where PKK fighters have set up
mountain bases from which they can strike back
into Turkey, the KRG faces a problem that is as much
diplomatic as military-related. On the one hand, it has
to stand by while Turkish warplanes—and sometimes
intruding Turkish troops—wage war in territory that
is supposed to be under KRG control; on the other,
it has to hope that the PKK fighters will not become
embroiled in the politics of the Kurdistan Region of
Iraq. For while the PKK fighters still look to Marxist
principles and rely on continuing practical support
from Moscow, the KRG’s thinking remains shaped by
the need to maintain good relations with both the US
and Turkish governments.
The Domestic Front
There is little or no political consensus within Kurdistan
beyond a shared aspiration that the region should
7 See Patrick Osgood, “New talks aim to break Kirkuk oil impasse,”
Iraq Oil Report, July 20, 2016, http://www.iraqoilreport.com/
news/new-talks-aim-break-kirkuk-oil-impasse-19380/.
6 ATLANTIC COUNCIL