(Bloomberg) -- Iraq’s North Oil Co. is working with the Kurdish Kar Group to resume pumping at two disputed oil fields that halted output after government troops recaptured them from Kurdish forces, according to two people with knowledge of the situation.
Bai Hassan and Avana oil fields are still not exporting since forces of the central government in Baghdad overtook areas in Kirkuk province from Kurdish troops last week, said the people, who asked not to be identified because the matter isn’t public. The fields had been pumping an estimated 275,000 barrels a day before the Iraqi offensive.
NOC and Kar officials were not immediately available for comment. NOC is owned by the central government in Baghdad, and Kar Group is based in Erbil in the semi-autonomous Kurdistan Regional Government region of northern Iraq. Kar operates the crude pipeline that exports crude from the Kurdish region to Turkey.
Kirkuk, home to Iraq’s oldest-producing oil field, is a flashpoint in the power struggle between the central government and the Kurds. The government sent troops this month to retake disputed areas, including the oil-rich city of Kirkuk, that Kurdish fighters had seized in 2014 after Islamic State routed Iraqi forces. The latest military operation followed a Kurdish referendum on independence from Iraq on Sept. 25. The KRG included Kirkuk in the referendum despite competing claims to the ethnically mixed area, which lies outside the boundaries of the KRG-ruled Kurdish region.
On Wednesday, the KRG issued a statement to say it’s prepared to freeze the results of the independence referendum, observe an immediate cease-fire and hold talks with the central government.
Flows by pipeline from northern Iraq to the port of Ceyhan, Turkey, fell to 252,000 barrels a day on Wednesday from about 300,000 barrels the previous day and far below their normal daily level of 600,000 barrels, according to a port agent report and Bloomberg tanker tracking. Iraq’s central government piggybacks its exports from Kirkuk with Kurdish shipments through the Kar-operated pipeline to Turkey.
Iraq, the second-largest producer in OPEC, pumps most of its 4.47 million barrels a day from fields in the south and ships it from the Persian Gulf port of Basra. But with Iraq supplying about 14 percent of total oil rig flanges gulf coast production from the Organization of Petroleum Exporting Countries, a recovery of curtailed exports from the north could affect crude markets. Brent crude was 18 cents lower at $58.15 a barrel on Wednesday at 4:28 p.m. in London.