EconomyKurdistan RegionBreakingKurdistan OilIraqi Ministry Of Oil
2023-05-03 15:32Font
Iraq expects to reach an agreement with the semi-autonomous Kurdistan Regional Government to resume the flow of oil exports from the region within two weeks, Iraqi Oil Minister Hayyan Ghani said at a conference in Baghdad on Wednesday.
Turkey halted the flow of 450,000 barrels per day of northern exports through the Iraqi-Turkish pipeline on March 25 after the International Chamber of Commerce issued a ruling in an arbitration case in favor of Iraq. It is estimated that the 40-day suspension cost the KRG more than $1 billion.
The Chamber ordered Turkey to pay Baghdad $1.5 billion in compensation for damages caused by the KRG’s unauthorized export of oil between 2014 and 2018. The federal government was exporting about 75,000 barrels per day of federal crude through the Iraqi-Turkish pipeline, while the Kurdistan Regional Government exported the remaining amount.
Baghdad and the Kurdistan Regional Government signed an interim agreement on April 4 to resume northern oil exports.
But efforts to resume export flows face further setbacks at a time when the two governments are working to settle a number of aspects of the agreement.
“We have not yet reached an agreement with the Kurdish side,” the Iraqi minister said on Wednesday.
The KRG has agreed to market its crude by the state-owned Iraqi Oil Marketing Company (SOMO).
Sources said earlier that under the April 4 agreement, the KRG’s oil revenues will be deposited into a KRG-controlled bank account that Baghdad is able to review.
But there are still disagreements over the logistical aspects of the bank account.
Three sources told Reuters that the Central Bank of Iraq approved the use of a KRG bank account at Citibank in the UAE for SUMO oil sales as well as for KRG oil sales.
But politicians in Baghdad are now raising questions about the account facing opposition because of its place from members of the “coordination framework,” a gathering of Iran-allied factions, three sources said.
A bank account has not been opened, the minister said on Wednesday.
City has yet to respond to a request for comment.
“The issue (areaking an agreement) is not technical but political,” an industry source said.
However, Iraq and the Kurdistan Regional Government have made progress in other aspects.
Traders buying crude from the Kurdistan Region have received contracts from Sumo for a proposed period of up to three months, according to two sources in the sector with direct knowledge of the matter.
The two sources added that the mechanism for paying off traders’ debts has not yet been resolved.
The KRG did not respond to a request for comment.
The reaction of the Turkish government, which has to open the pipeline on its part, is ambiguous to resume pumping Iraqi exports.
Sources told Reuters earlier that Turkey was seeking direct negotiations with Baghdad regarding the compensation ordered by the International Chamber of Commerce to pay.
Turkey also wants to settle a second arbitration case involving unauthorized exports since 2018 before resuming exports, the sources added. Turkey’s elections scheduled for May 14 may cause further delays, two sources said on Wednesday.
Turkey’s energy ministry has yet to respond to a request for comment.
The loss in KRG revenue due to the cessation of oil pumping is more than $1 billion, according to calculations conducted by Reuters based on exports of 375,000 barrels per day along with the KRG’s historic discount relative to the price of Brent crude and a 40-day suspension.
The Kurdistan Oil Sector Association said in a statement on Wednesday that the loss of this important source of income is causing serious damage to the Kurdistan economy and the region’s oil and gas sector.
The association includes members, including international oil and gas companies that have direct or indirect stakes in the downstream sector of the oil or gas industry in the Kurdistan Region.
Many of them were forced to halt production in the province as a result of the pipeline shutdown.
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