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Pipeline attack halts exports from Iraq’s Kurdish region

Source: S&P Global Platts

Iraq’s semi-autonomous Kurdish region said Oct. 31 an attack on an oil pipeline has halted exports, an incident that may help OPEC’s second largest producer in boosting compliance with its OPEC+ quota.

“The Kurdistan Regional Government strongly condemns the terrorist attack targeting the pipeline which exports oil from Kurdistan Region this Wednesday, resulting in the suspension of oil exports,” the KRG said in a statement. “The Kurdistan Regional Government believes that these acts only further destabilize the situation in the region. An investigation has already been launched to determine those behind the attack.”

The statement didn’t disclose the extend of the damage or the impact on current production.

The region produces around 450,000 b/d, most of which is exported via Turkey.

Kurdish overproduction

Iraqi officials in the federal government have in the past blamed overproduction in the Kurdish region for the country’s lax compliance with oil output cuts. A KRG spokesperson said on Oct. 22 the region is willing to comply with the cuts provided that the federal government cover its dues and expenses to the KRG due to losses from reduced production levels.

Iraq has been a habitual laggard in compliance this year, but adherence to its current 3.804 million b/d quota improved in recent months.

The producer pumped 3.74 million b/d in both August and September, below its quota, according to the latest S&P Global Platts OPEC+ survey. However, it failed to adhere to its pledge to implement compensation cuts needed to make up for overproduction in May through July.

Compensation cuts

Iraq is supposed to make 698,000 b/d of catch-up cuts from September through to December, divided into 203,000 b/d in September and 165,000 b/d in October, November and December.

Compensation cuts by 13 producers out of the 23-member OPEC+ alliance that had previously violated their quota levels remain scant, putting pressure on the alliance to do more to prop up an oil market still reeling from the impact of the COVID-19.

OPEC+ recently extended 2.375 million b/d of catch-up cuts for the rest of the year but not all members have disclosed their plans, according to an internal document seen Platts.

The dodging of so-called compensation cuts could pose another conundrum for OPEC+ as it gets closer to its next scheduled meeting on Nov. 30-Dec. 1.

OPEC and its allies in May implemented a 9.7 million b/d production cut accord. The cuts taper to 7.7 million b/d from August to December, and then down to 5.8 million b/d from 2021 through April 2022.

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