IOCs endorse export of Kurdish oil through SOMO: Spox

ERBIL, Kurdistan Region - The international oil companies (IOCs) support the export of the Kurdistan Region’s oil through Iraq's State Organization for Marketing of Oil (SOMO), the spokesperson for the companies said on Friday. 

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’s Diyar Kurda on Friday 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.”

The Kurdistan Regional Government (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. 

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. 

Caggins added that exports through SOMO and through the Iraq-Turkey Pipeline “needs to include a guarantee of either upfront payments or payments through an escrow account where the financial transactions are held in an independent banking facility or payments in kind with barrels of oil at Ceyhan port. And this arrangement could happen between the international oil companies and SOMO, and it is the best option to rapidly resolve the issue of exports through the Iraq-Turkey pipeline."

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

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 that the 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 OICs held a meeting in Baghdad on June 9. There was no joint statement from the parties.

The goal of the meeting on Sunday was to resolve all obstacles that have prevented resuming exports of Kurdistan Region’s oil since they were halted last year. 

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 repayment of billions of dollars of debts that are “unknown to the federal government.”

“APIKUR member companies are willing to consider modifications to existing contracts—if agreed between the Government of Iraq, Kurdistan Regional Government, and international oil companies—provided this is necessary to secure payment surety for past and future exports, direct payment and preservation of the current economic framework of their Production Sharing Contracts,” Caggins told Rudaw on Friday. 

Kamal Mohammed, acting minister of KRG’s natural resources ministry, said on June 6 that the oil companies operating in the Kurdistan Region “have invested large amounts of money in the Region’s oil fields and Baghdad should take this into consideration."

“The main obstacle before the resumption of Kurdistan Region’s oil is that the Iraqi oil ministry says the production cost is too much. The reason behind that is that the companies invested in the oil sector. However, Iraq spends trillions of dinar annually in the oil sector. Therefore, the management of the oil sector in Iraq and the Kurdistan Region are different: the sector is general in Iraq while it is private in the Region,” he explained.