ERBIL, Kurdistan Region - An agreement with the Kurdistan Regional Government (KRG) on the resumption of oil exports through the Iraq-Turkey pipeline is expected to be announced soon, a source in Iraq’s state-owned oil firm said as Kurdish oil exports have been halted for over a week.
Oil firms operating in the Kurdistan Region have stopped production or reduced output and diverted it into storage after a Paris arbitration court late March ruled that Turkey had violated an agreement with Iraq by allowing the Kurdistan Region to begin independent oil exports in 2014.
“Our discussions are ongoing and we will announce the agreement as soon as possible,” the State Oil Marketing Organization (SOMO) source told Rudaw.
Following the ruling, Erbil and Baghdad intensified negotiations to resume oil flowing into the pipeline, and both sides reached a preliminary agreement on Friday which would see oil flowing to Turkey’s Mediterranean port of Ceyhan again.
The details of the deal have not been made public, but a well-informed source told Rudaw that other meetings will be needed to clarify the KRG’s contracts with international oil companies (IOCs) as well as finding new buyers for the oil at the Turkish port. The agreement is expected to provide stability for the IOCs and buyers.
The SOMO source added that “many” issues were agreed upon by Erbil and Baghdad in the latest agreement.
Rudaw understands that the agreement consists of joint oil exports by the KRG’s Ministry of Natural Resources and Iraq’s State Organization for Marketing of Oil (SOMO). The revenue from the exports will be stored in an account managed by the KRG under the observation of the federal government in Iraq, the source added.
The suspension of the Region's oil exports from the port of Ceyhan has had a significant impact on the oil market. Oil prices rose an average of 5.7 percent in a week when the Kurdistan Region’s 400,000 barrels per day were taken out of the market.
The KRG is heavily reliant on oil revenues and an extended inability to sell its crude will severely impact its economy. The government has struggled for years to pay over a million civil servants on time and in full.
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