Western energy chiefs hope for Iraqi profits as Kurdish troops take oil city of Kirkuk

Priming the pumps: Kurdistan wants to bypass Baghdad and sell oil from its own refineries directly to foreign buyers (AFP/Getty Images)

The battles raging across northern Iraq could end up benefiting the Western oil companies operating in the Kurdistan region, industry executives claimed last night.

In the short term, the current instability is making day-to-day work on the oilfields difficult for those closer to the fighting. But senior Western executives in the autonomous region said the decisive action of the Iraqi Kurdish army to take control of the northern oil city of Kirkuk would strengthen its hand in critical negotiations with Baghdad over its large oil reserves.

Kurdistan wants to be allowed to sell its oil directly abroad, bypassing the Iraqi system. The Iraqi president Nouri al-Maliki has decreed this illegal. The two-year spat escalated last month when Kurdistan started exporting oil directly from its newly built pipeline to Turkey.

However, now the Kurdish "peshmerga" army have shown themselves such an able fighting force – compared with the fleeing Iraqi troops – oil executives hope Mr al-Maliki will realise that he needs to keep the autonomous region onside.

"It seems awful talking about positives when there are hundreds of thousands of refugees, and nobody is enjoying anything that's happening here, but at the moment we're pretty comfortable with the situation," said one executive. "The Kurds have shown they would and can defend Kurdistan. They're an able force – which is a far cry from the Iraqis. Al-Maliki will see clearly that the Kurds have protected Kirkuk where his government could not."

Another oil executive close to the Kurdistan government added: "If al-Maliki wants to get the Kurdish army on his side, he knows he has to relent on allowing them oil exports. So people out here are seeing this could draw al-Maliki into the deal they wanted."

He suggested the Kurds could offer to help retake Mosul, Iraq's second city, which was overrun by the jihadist forces of the Islamic State in Iraq and the Levant (Isis), if Mr al-Maliki proved accommodating.

A liberation from the Iraqi oil system would result in greater profits for the region, which is keen to push its independent ambitions. That could also spur more activity for London Stock Exchange companies such as Genel, Gulf Keystone and Oryx, as well as giants like Exxon, Chevron and Total that are operating in the region.

However, not all executives are optimistic. One major player in the region with operations near the fighting said: "Perhaps this can create some sort of a bridge in the negotiations with Baghdad [over the Kurdish oil exports], but there are deep-seated personal animosities between the leaders. Al-Maliki is weakened but he's hardly a unifying figure." Some had already begun to question Mr al-Maliki's ability to keep a grip on Kurdistan's oil after it emerged recently that the Russian energy giant Rosneft had been buying its crude, circumventing the Baghdad ban.

Mr al-Maliki's administration has already blacklisted the Austrian trading firm OMV but neither it, nor Rosneft, works in Iraq.

Meanwhile two oil tankers, the United Leadership and United Emblem, are in a holding pattern in the Mediterranean with a million barrels each of Kurdish crude that Baghdad has managed to prevent from being unloaded.

Another executive said that Kurdistan's beefed-up security, including troop movements and roadblocks, was making it difficult to move people and machinery along the Erbil-to-Mosul road, which runs through some oilfields.