(Bloomberg) — Oil companies in Iraq’s Kurdistan agreed with the federal and regional governments to resume oil exports that have been halted for more than two years, paving the way for supply into a market on the brink of a glut.
Eight companies that together account for more than 90% of the Kurdistan region’s production have reached in-principle deals, according to a statement from the group representing the firms. Shipments through a pipeline to Turkey’s Mediterranean coast should begin “in the coming days,” after the deal is formally signed and ratified, it said.
The restart of exports would bring to a culmination a saga that started in March 2023 when Turkey had closed the pipeline following an arbitration court’s decision. Various attempts to open it since have run into legal and financial issues, including oil companies’ demand for clearing past dues and clarity on future payments.
The latest agreement “provides surety of payment” to the firms, according to the statement. The companies and the Kurdistan government will meet within 30 days of resuming exports to create a mechanism for settling the outstanding debts, it said.
Restarting the pipeline from Kurdistan to Turkey’s Mediterranean coast will initially bring about 230,000 barrels a day of oil to international markets, Bloomberg News reported this week. While that’s less the almost half a million a day of flows before the pipeline was shut, the new supply would come just as there’s widespread expectations of a global surplus.
The semi-autonomous Kurdistan regional government said earlier Wednesday that it had signed the agreement with all the companies, except DNO ASA, and was awaiting the federal oil ministry’s signature. Exports may start within 48 hours of a full agreement, the regional government’s spokesman Peshwa Hawrami said.
DNO said Tuesday that it wanted “agreements that ensure payment surety for both past arrears and future exports.”
The return of exports would be a boon for Iraq, after the halted pipeline that cost the country billions of dollars in lost revenue. Iraq is OPEC’s second-biggest oil producer, pumping the vast majority of its crude from the south, and has been keen to increase output in the long-term and boost revenue after years of war and internal strife.
Iraq and Kurdistan had long been in dispute over control of oil revenue from the north, but earlier this year the regional government had agreed to hand over its oil to SOMO for onward sales. That had paved the way for the federal government to release funds to the regional administration for state employees’ salaries.
Other companies operating in the Kurdistan include Gulf Keystone Petroleum Ltd., HKN Energy Ltd. ShaMaran Petroleum Corp. and Hunt Oil Co.
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