Kirkuk-Ceyhan Pipeline Update
April 26, 2024
The month of March marked as the 1st full year since 400k b/d of the overall capacity for the KRG pipeline was halted, a pipeline which once handled about 0.5% of global crude supply. This pipeline flows from Northern Iraq to the Turkish port of Ceyhan. Political tensions between the Iraqi government, the autonomous Kurdistan Government (KRG) and Turkey have curtailed the ability to formulate an immediate solution to bring back the throughput, a perfect bypass of not only the Red Sea but also the Hormuz Strait and the Suez Canal.
However, the Iraqi government is planning to repair and reopen the 350k b/d Kirkuk-Ceyhan pipeline which was initially planned to resume operation by the end of April. Should pipeline operations back to normal, we calculated that an additional 350k b/d of Iraqi crude at Ceyhan would introduce approximately 9.4 Aframax demand equivalents between the Cross-Med (blue) and UKC routes (green) while push out VLCC (82%) and Suezmax (18%) AG>UKC demand through the Cape of Good Hope due to the current crisis in the Red Sea. The declining AG>UKC volume will also mitigate triangulation opportunities, pushing VLCCs to trade round-trip USG>China and Suezmaxes to the round-trip Med>East route. The reduction in sailing distances is expected to put significant downward pressure on VLCCs by a net reduction of 4.1 demand equivalent, and marginal impact on Suezmaxes by a net of 0.2 demand equivalent.
Figure 1 – Ceyhan Loadings by Discharge Location Figure 2 – Demand Equivalent Impact
Source: McQuilling Services Source: McQuilling Services
**Based on McQuilling captured spot fixtures
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