Suspension of Oil Exports from Kurdistan Causes Shutdown of Oil Fields

The suspension of oil exports from the Kurdish region of Iraq via the Turkish port of Ceyhan has caused companies operating in Kurdistan to start field shutdowns. This has resulted in Norway-based DNO ASA beginning an orderly shutdown of its oil fields in Kurdistan. The suspension of oil exports was due to the federal government of Iraq halting crude oil exports from Kurdistan. The International Chamber of Commerce also ruled in favor of Iraq against Turkey in a dispute over crude flows from Kurdistan.

DNO Begins Shutdown of Oil Fields in Kurdistan

DNO ASA, which operates the Tawke and Peshkabir fields accounting for a quarter of Kurdistan’s total exports, has started shutting down its oil fields due to the suspension of oil exports. Reports suggest that DNO had diverted oil production to storage tanks, but capacity is limited. DNO’s Executive Chairman expressed concern about the likely impact of a continuing supply disruption on oil prices at a fragile time in global financial markets.

Companies Forced to Halt Output or Move Production into Storage

The suspension of oil exports from Kurdistan has forced companies to halt output or move production into storage. Canadian-based Forza Petroleum was forced to shut down production earlier this week from the 14,500 bpd Hawler license, while Genel Energy partner in DNO’s fields halted production at Peshkabir and shut down Tawke production but will take an additional day or so.

Gulf Keystone Reduces Production and Dallas-Based HKN Energy Threatens Shutdown

Gulf Keystone Petroleum, another operator in Kurdistan, has reduced production at the Shaikan oil field and is set to suspend production after a few days. Meanwhile, Dallas-based HKN Energy, which operates the Sarsang block, said it would shut down operations “within a week if no resolution is reached” as storage facilities approach capacity.

Limited Gains in Oil Prices Due to Unexpected Draw in US Oil Stocks and Smaller-Than-Expected Output Cut in Russia

The suspension of oil exports from Kurdistan has resulted in oil prices rising due to unexpected draw in US oil stocks. U.S. crude oil stockpiles fell unexpectedly due to refineries ramping up operations and lower U.S. imports. Gasoline stocks also fell, indicating strong demand going into the summer season. Brent crude rose 0.3% to $78.91 a barrel and WTI U.S. crude rose 0.7% to $73.67.

Despite reports of stronger demand bringing hedge funds back into the market, gains were held back by news that Russian oil production fell by only 300,000 bpd in the first three weeks of March, lower than the targeted cuts of 500,000 bpd.

Talks Between Turkey, Baghdad, and KRI Ongoing to Resume Exports

Talks between Turkey, Baghdad, and the Kurdish regional government are ongoing to resume exports. However, with companies being forced to halt output or move production into storage – which is expected to reach capacity within days – the fates of many oil fields in Kurdistan remain up in the air until the situation is resolved.

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