March 9, 2016 / 1:05 PM / a year ago

Iraqi Kurdish oil pipeline could reopen soon: sources

ISTANBUL/ANKARA (Reuters) - Turkey has partly completed a military campaign near its southeastern border, raising hopes an idled Iraqi oil pipeline nearby could soon reopen after a three-week outage that has squeezed the already cash-strapped Kurdistan region's finances.

It could still be up to a week before oil starts flowing through the pipeline that normally carries 600,000 barrels per day (bpd) to Turkey's Mediterranean port of Ceyhan as the military sweep for mines and unrest in the region persists.

The longer it takes for flows to resume, the deeper the crisis for Kurdistan, an autonomous region within Iraq that is already on the verge of insolvency and depends almost entirely on revenue from its oil exports through the pipeline.

The outage, one of the longest in the past two years, was caused by a deteriorating security situation in Turkey's southeast where violence has surged after a two-year ceasefire between the state and Kurdish militants broke down last July.

Turkey's military launched a large scale campaign in a handful towns in the mainly Kurdish southeast after the youth wing of the Kurdistan Workers Party (PKK) sealed off entire districts of some towns and cities and declared autonomy.

The Turkish army said late on Tuesday operations in Idil, a town in Sirnak province, through which the pipeline passes, on the border with Iraq and Syria, are complete and 114 militants had been killed. A curfew imposed weeks ago is still in effect.

"The operation in Idil has been completed last night: this is good news for the pipeline as well," a Turkish energy official said. "Turkish security forces are trying to clean the area from PKK; and they did what was targeted. Turkey will raise some security measures for the pipeline."

Turkey accused the PKK, considered a terrorist group by Turkey, the United States and the European Union, of blowing the pipeline up on Feb. 25 when pumping had already halted. The group denies the accusation.

"The explosion on the 25th has apparently caused damage in both of the pipelines, meaning by pass is no more an option and at the moment the teams are continuing their repair work, we have been told," a shipping source said.

"They are saying it would take at least another week as the mine sweeping work is far from being completed," he added.

The outage left the Kurdistan Regional Government (KRG) with just $233 million in net revenue from its oil exports in February - less than one third of what it needs to cover a bloated public payroll.

Even before the pipeline was closed, the KRG was running a multi-million dollar monthly deficit as oil prices plummeted while war with Islamic State and an influx of people displaced by violence in the rest of Iraq have increased the strain.

Writing by Isabel Coles in Erbil; editing by Susan Thomas

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