Turkey Rejects Extension of Iraq Oil Pipeline Agreement

Turkey is resisting an extension of the agreement governing the Kirkuk-Ceyhan oil pipeline, raising new questions about the future of a key export route for Iraqi crude.

(Reuters) — Turkey does not want an extension of the existing Kirkuk-Ceyhan oil pipeline agreement under current conditions, a senior Turkish official said, after Baghdad asked Ankara to extend it for at least a year to allow time for more talks.

The decades-old Turkey-Iraq Crude Oil Pipeline Agreement, which governs exports through the pipeline, is due to expire on July 27. Baghdad and Ankara are still discussing a new draft agreement.

"There is no point in extending an agreement that has been subject to arbitration," the Turkish official, speaking on condition of anonymity, said when asked about Iraq's extension request.

Ceyhan is a crucial export outlet for Iraqi oil, with the state's main export terminal in Basra suffering from the closure of the Strait of Hormuz since U.S.-Israeli strikes on Iran in late February.

Turkey last year announced the end of the accord covering the pipeline and asked to renew it under new conditions. Turkey's proposal included a mechanism to ensure the full use of the pipeline and options, such as extending the pipeline to the south of Iraq.

The pipeline had remained offline for 2-1/2 years after an arbitration court ruled for Ankara to pay $1.5 billion in damages for unauthorised Iraqi exports Turkey received between 2014 and 2018. Flows began late last year.

There is also a second arbitration case that covers a period from 2018 onwards and an award enforcement case running in a U.S. court.

The pipeline has a capacity of almost 1.5 million barrels per day but has been working significantly below capacity due to security and other issues. Crude exports from Kirkuk to Turkey were at 177,000 barrels per day in April, according to shipping data reviewed by Reuters.