OPEC Faced With Potential Producer Split and Calls for Managing Exports, Not Production

Some say OPEC is more interested in maintaining status quo than policy reform. File Image / Pixabay

A referendum on Kurdish independence to be staged later this month in Iraq could result in the Organization of the Petroleum Exporting Countries (OPEC) second-biggest producer splitting in two - and triggering disputes if not outright war over who owns what portion of the region's crude, say experts.

Michael Stephens, a research fellow at the Royal United Services Institute, says if Kurdish independence is declared, Iraq's relationship with its neighboring countries would be complicated "enormously": "regional interference could serve to raise tensions and potentially ignite conflict, rather than dampen down the chances."

Renad Mansour, an Iraq expert at think-tank Chatham House, added that the long-running dispute between Baghdad and Erbil over Kurdish oil exports and revenue sharing would likely escalate to skirmishes; however," an all-out war is in no-one's best interests."

Chevron, which has been operating in the Kurdistan region of Iraq since 2012, told CNBC that it "seeks to work constructively with all stakeholders in any country in which it operates (and) with regards to any referendum, it is a decision to be made by those directly involved."

Whether or not Kurish independence is likely (many economists say it is not), the issue poses another headache for OPEC public relations, which on Sunday was assailed from another front: Julian Lee, oil strategist for Bloomberg First Word, wrote that the cartel extending its production cutbacks through the end of next year won't address the problem of rebalancing the market in light of the fact it will still produce more oil than the world will need in 2018.

Instead, wrote Lee, OPEC should "base a deal on what really matters -- supply to the market, or, in a word, exports.

"If OPEC wants the market to believe it that supplies are falling, then it needs to insist on just one thing from both its members and non-member states who are participating in output curbs: published, transparent lists of cargoes, how big they are and what they are, spanning both crude and refined fuels."

But as far as the cartel's members are concerned, status quo and not policy form is the order of the day: that was made clear on Monday, when it was reported that Eulogio del Pino, oil minister for Venezuela, will visit Russia and Saudi Arabia in advance of a joint OPEC, non-OPEC monitoring ministerial committee meeting in Vienna set for September 22.

It is said that del Pino will discuss the implementation of the oil output cut deal and "the introduction of changes, if need be", according to the TASS news agency.

Last week, the International energy Agency noted that if OPEC maintains its current level of production throughout the rest of 2017 and through 2018, global stocks would not fall dramatically.