In a move that has been expected for some months now, the Kurdistan Regional Government (KRG) has defied the Iraqi central government and begun exporting crude oil from the Turkish port of Ceyhan to Europe. The KRG said that a tanker loaded with a million barrels of oil left Ceyhan on Thursday night and that another 2 million barrels are in storage at the Mediterranean port.
Kurdish oil fields are believed to hold total reserves of 45 billion barrels, and a new pipeline opened late last year is capable of transporting 400,000 barrels a day from Kurdistan to Ceyhan. The KRG expects shipments to reach a million barrels a day next year and to rise to 2 million barrels a day by 2019. Current production in Kurdistan is about 200,000 barrels a day.
Though no U.S. production company has produced any oil in Kurdistan, several already have stakes in the ground and have begun exploration drilling. These are not the only U.S. companies in Kurdistan, and there are also several international companies with interests in the region.
Exxon Mobil Corp. (NYSE: XOM) signed six production-sharing contracts with the KRG in 2011, covering more than 848,000 acres. The company has surveyed four of the six blocks and has begun drilling one well, according to Exxon’s latest annual report. Exxon sold off part of its stake in Iraq’s West Qurna 1 field last year after sparring with the Baghdad government over its stake in the Kurdish fields.
Chevron Corp. (NYSE: CVX) is barred by Iraq’s central government from obtaining contracts due to its ownership of oil-exploration blocks in Kurdistan. Chevron holds 444,000 acres in Kurdistan and has begun drilling two wells.
Marathon Oil Corp. (NYSE: MRO) has acquired interests in 145,000 net acres and expects to begin producing about 30,000 barrels a day by early next year. The company has drilled several test wells on the properties, at least one of which has been plugged and abandoned and another has been suspended.
Hess Corp. (NYSE: HES) holds interests in about 429,000 net acres and has started drilling one exploration well and plans to start another this year.
This first shipment to Europe has already been declared illegitimate by the Iraqi central government and the state-run Iraqi oil company has threatened legal action, according to a report in The Wall Street Journal.
Exxon, Chevron and the others have a lot at stake here. What is now a political contest between the KRG and the Iraqi central government could heat up at any moment, turning an already uneasy situation into a dangerous one.