Daily Times

BAGHDAD/LONDON: When the Iraqi army and Iranian-backed Shi’ite militia entered a key oil processing facility in Iraq’s north to retake it from Kurdish Peshmerga forces last week, the installation was deserted and its alarm bells ringing.

Engineers and workers on the facility, which processes oil from two major fields in the Kirkuk area of predominantly Sunni Kurdistan, had fled, fearing the military advance.

“No one wanted to risk their life and decided to evacuate as stories about the Shi’ite militia and Qassem Soleimani were spreading fast,” said a senior Kurdish oil industry source, referring to the head of foreign operations for Iran’s elite Revolutionary Guards. The source declined to be identified.

Iraqi engineers arrived to the sound of alarm bells warning about system malfunctions, prompting them to immediately shut down wells. Now, they need passwords and expertise from their Kurdish counterparts to restore oil output fully.

The loss of control of Kirkuk oil fields is likely to starve the KRG of vital oil revenue and cause deep concern to global trading houses such as Vitol and Glencore, which have granted the semi-autonomous government billions of dollars in loans against future oil sales.

Baghdad’s lightning military offensive into northern Iraq came after the Kurdistan Regional Government held an independence referendum last month.

Major-General Soleimani, one of the most influential military figures in the Middle East, with reach in Syria and Lebanon, issued tough warnings to Kurdish leaders ahead of the Iraqi military advance.

“We went inside the oilfield facilities after Kurdish workers fled and we found overalls and safety boots thrown on the ground,” said an engineer from the Baghdad-run North Oil Company, who declined to be named because he was ordered not to speak publicly about the issue.

“It seems that workers took them off and escaped very quickly.”

NOC crews entered oil facilities in the Bai Hassan and Avana fields on Oct. 17 for the first time since 2014, when Peshmerga forces drove Islamic State from the area and found all crude oil stations unmanned. Peshmerga fighters had also withdrawn.

“After we discovered that some of the key equipment was missing and the control panel was ringing alarms of crude processing malfunction, we immediately shut down oil wells,” the NOC engineer said.

A week after the operation, Iraqi engineers are still struggling to resume Kirkuk’s oil production, saying they had yet to understand how to operate the equipment processing some 350,000 barrels per day.

The military offensive more than halved Kurdistan’s oil output and cut its exports to global markets via Turkey by two thirds. The drop in exports has deprived the region of more than $200 million in revenues over the past week, a Kurdish oil industry source familiar with loadings told Reuters.

It has also dealt a further blow to the region’s finances already stretched by a fight against Islamic State and a budget crisis caused by a fall in oil prices. The United States has called on both sides to resume dialogue, saying the tensions hamper efforts to fight Islamic State.

Resuming normal oil production and exports will be challenging and will take at least another week and will only succeed if Iraqi and Kurdish engineers agree to cooperate, according to both sides.

On Tuesday, NOC officials asked Kurdish engineering firm Kar Group to send back its workers, according to sources on both sides. Iraqi engineers need guidance on how to operate recently installed equipment at Bai Hassan and Avana, the sources said.

The pumping and operational stations for both oil fields are located in the city of Dahuk, which unlike Kirkuk is still under the control of the Peshmerga forces.

“Energy facilities in Kirkuk are more like a locked box and only their crew have the password,” the Iraqi engineer said.

Published in Daily Times, October 27^th 2017.