KRG awaits agreement between Iraq, IOCs for oil export resumption

ERBIL, Kurdistan Region - The Kurdistan Regional Government (KRG) awaits an agreement between the Iraqi government and the International Oil Companies (IOCs) to resume the Kurdistan Region’s oil exports, the Natural Resources Minister said on Sunday.

"The issue is related to the cost of oil production in the Kurdistan Region. Iraq allocates money for this matter annually, but the companies here have invested themselves. The amount allocated in the budget law, which is 8960 dinars (about $6.9), is being rejected by those companies operating in the oil sector in the Kurdistan Region," Kamal Mohammed, acting minister of KRG’s Natural Resources Ministry, told reporters in Erbil.

“We, as the Kurdistan Region and the Natural Resources Ministry, have no problem with exports. If they [IOCs] agree on that amount, we do not have any problem. We do not have any problem either with selling through SOMO [Iraq's State Organization for Marketing of Oil], and we also do not have a problem with modifying the oil production contracts,” he added.

According to Mohammed, the KRG’s only demand is for the oil production contracts with the IOCs to be owned by the Kurdistan Region.

The KRG initially refused to hand over its oil to SOMO, but now it is willing to do so following the suspension of its oil exports through Turkey.

In June, Myles Caggins, spokesperson for the Association of the Petroleum Industry of Kurdistan (APIKUR) - an association of oil companies working in the Kurdistan Region - told Rudaw that the association believes that the “direct sales [of the Kurdish oil] through SOMO and exports at Ceyhan port are the best option to resolve the impasse for the Iraq-Turkey Pipeline.”

Oil exports from the Kurdistan Region through the Iraq-Turkey pipeline have been halted since March 2023 after a Paris-based arbitration court ruled in favor of Baghdad against Ankara, saying the latter had breached a 1973 pipeline agreement by allowing Erbil to begin independent oil exports in 2014.

Despite several talks between Kurdish, Iraqi, and Turkish officials, the exports have yet to resume, and many international oil companies have suspended production.

Kurdish and Iraqi officials have held several rounds of discussions with the IOCs to reach an agreement to resume exports.

In March, the Iraqi Oil Ministry said that in accordance with the federal budget, the average cost for producing one barrel of oil is $6.90, while the IOCs operating in the Kurdistan Region are asking for three times that amount, as well as the repayment of billions of dollars of debts that are “unknown to the federal government.”

“Before the halt, around 400,000 barrels a day were being exported by Erbil, in addition to some 75,000 barrels of Kirkuk’s oil," the KRG said in a statement on June 5 following a weekly meeting. Prime Minister Masrour Barzani and the Kurdish negotiating team “deliberated on the efforts and measures required to resume oil exports. They agreed on the importance of continuing negotiations with the Iraqi government to find a solution and expedite the resumption of oil exports.”

Baghdad, Erbil, and the IOCs held a meeting in Baghdad on June 9. There was no joint statement from the parties.