Kurdistan gives oil to Baghdad

Pipeline dispute resolved

Exports determine daily production

Iraq and the Kurdistan regional government (KRG) have reached an agreement to resume oil exports via a pipeline to Turkey, the KRG said on Thursday.

The agreement followed negotiations of more than three weeks in Erbil and ends a rift that has halted the flow of oil via the 970km Kirkuk-Ceyhan pipeline for more than two years.

Officials from the Iraqi oil ministry and the KRG’s ministry of natural resources signed the accord on Wednesday after intensive talks and field visits to Kurdistan’s oilfields, the KRG ministry said on its website.

“Under the agreement, the export quantities will be determined according to daily production at Kurdistan’s oilfields and after excluding 50,000 barrels per day for domestic use in Kurdistan,” the statement said.

Produced oil will be handed to Iraq’s state oil-marketing organisation and crude exports will resume after an agreement between the governments of Iraq and Turkey, it added.

Iraq’s oil minister Hayan Abdel Ghani said in July that after parliament approved an increase in subsidies for oil production in the northern region this year, the KRG must hand over produced oil to the federal government for export, adding that the budget set that quantity at 400,000 bpd.

In June, Baghdad accused the KRG of smuggling oil supplies and inflicting heavy losses on the country’s coffers, adding that the KRG had failed to deliver produced crude or oil export revenues to the federal government.

Iraq, OPEC’s second-largest oil producer, has been locked in a dispute with the KRG over crude exports despite Kurdistan’s support for an initial agreement to subsidise production and transport of Kurdistan’s oil at a rate of $16 a barrel.

In February, Iraq’s parliament approved a budget amendment to subsidise production costs for international oil companies operating in the KRG region in a move aimed at unblocking northern oil exports.

The amendment sets the rate at $16 a barrel, up from an earlier proposal for $7.9 for transport and production costs, which was rejected as too low by the KRG.

Oil flows through the KRG’s pipeline were halted by Turkey in March 2023 after the International Chamber of Commerce ordered Ankara to pay Baghdad damages of $1.5 billion for unauthorised exports by the KRG between 2014 and 2018.

Turkey decided in July to terminate the 52-year-old pipeline pact as from July 27 next year and some analysts believe the decision was because Ankara wants to negotiate a better agreement.