Iraq Update: Fighting Continues... Battle For Refinery

Here are all the latest news and updates from the rapidly-changing situation in Iraq, courtesy of Bloomberg.

FRONT-LINE FIGHTING

• Iraqi govt troops retain control of 310k b/d Baiji refinery, but facility surrounded by territory held by ISIL-led militants
• Aerial photos yday showed some storage tanks on fire
• Fierce battles near Baiji and Tal Afar airport: BBC
• Fighting continues around Tal Afar, halfway between Mosul and Syrian border
• Clashes reported between ISIL and Kurds south of Kirkuk

FOREIGN POLITICS

• U.S. to send 300 military advisors to Baghdad; lack sufficient intelligence for imminent air strikes: Gen. Dempsey
• Saudi Arabia warns against outside intervention in Iraq, blames “exclusionary policies” of Iraqi cabinet: Saudi ambassador writes in Telegraph
• ISIL hands over captured foreign workers to police

PRESSURE ON MALIKI

• Obama declines to endorse Maliki, but stops short of calling for him to step down
• Challengers emerging to replace Iraq PM: NYT

OIL PRODUCTION IN NORTHERN IRAQ

• Current output from Iraq’s northern fields cut to 30k b/d; supplying Kirkuk refinery
• Northern fields were producing ~650-700k b/d before March 2 closure of export pipeline to Turkey

IRAQ’S NORTHERN EXPORTS

• Exports from Iraq’s northern fields cut since March 2 when the Iraq-Turkey pipeline was bombed
• Exports of Kirkuk crude from Turkish port of Ceyhan fell to 24k b/d in March, zero in April: Oil Ministry
• NOTE: Iraq still exports crude from southern fields via Persian Gulf

ROLE OF KURDISTAN

• Kurdish forces have taken control of Kirkuk oil field and city after central govt forces fled
• Kurds fighting ISIL forces at Bayshir, south of Kirkuk
• Ashti Hawrami, Kurdish Regional Govt’s natural resources minister, offered to export Kirkuk via Kurdish pipelines, but was rebuffed
• Kurds to boost exports to 200k-250k b/d in July from 125k b/d now; targeting 400k b/d by end-2014

BAIJI REFINERY

• Sprawling complex of storage tanks, processing units
• Primary source of products for N Iraq; also supplies Baghdad
• Linked power plant provides electricity to region
• Represents ~40% of Iraq’s refining capacity; processes      crude delivered by pipeline and rail from Kirkuk, Ajeel (formerly Saddam) and other fields operated by North Oil Co.
• Lies on Iraq-Ceyhan pipeline; important source of fuel for both govt and ISIL
• Storage tanks full: Iraq Oil Ministry
• Capture would provide immediate source of fuel for insurgents’ vehicles and for sale in N Iraq.

OIL PRODUCTION/EXPORTS FROM SOUTHERN IRAQ

• Production in south unaffected by fighting so far
• Iraq plans to ship 2.79m b/d from Basrah Oil Terminal in July; most since before 1980-88 Iran-Iraq War
• BP, Exxon, CNPC and Petronas started to evacuate non- Iraqi staff from nation
• Shell ’monitoring the situation very carefully’: Andy Brown, head of Shell Upstream International
• Lukoil has increased security at West Qurna field, where it started production in March
• Southern oil facilities not beyond ISIL’s reach: Barclays

WHO IS ISIL?

• Islamic State in Iraq and the Levant (ISIL) is also known as Islamic State in Iraq and al-Sham (ISIS)
• A Sunni jihadist group led by Abu Bakr al-Baghdadi
• Broke away from al-Qaeda in 2013
• Want to create a Sunni caliphate across Iraq, Syria and neighboring countries
• Control large parts of northern Syria
• Well funded through sales of Syrian oil and antiquities
• Vowed to attack Baghdad and Shiite holy cities of Karbala and Najaf

WHAT IS THE CORE ISSUE?

• ISIL insurgents have overrun large parts of northern and central Iraq; Prime Minister Nouri al-Maliki’s Shiite Muslim-led govt now seeking to regain control
• 2003 U.S. invasion of Iraq and subsequent rise to power of Shiite-Muslim majority alienated Sunni Muslims; Sunnis felt marginalized under Maliki; some support ISIL
• Maliki accuses ISIL of an alliance with Saddam Hussein’s Ba’ath party
• Shiites constitute majority in southern Iraq

Source: BBG

Credit to Zero Hedge