On Tuesday, Iraq’s cabinet issued an order to the semi-autonomous Kurdish region, mandating an immediate transfer of its oil output to the state-run firm SOMO.
Simultaneously, the cabinet approved a budget measure aimed at compensating the Kurdish government for production and transport costs. It also set a $16 per barrel rate for foreign oil companies operating in Iraqi Kurdistan.
The flow of oil through the Kurdistan Regional Government’s (KRG) pipeline was halted by Turkey in March last year. This halt followed an order from the International Chamber of Commerce for Ankara to pay Baghdad damages of $1.5 billion for unauthorized exports by the KRG between 2014 and 2018. An arbitration ruling determined that Turkey had violated provisions of a 1973 treaty by facilitating oil exports from the region without the consent of the Iraqi federal government in Baghdad.
Since then, negotiations to restart the pipeline have been unsuccessful as the KRG, foreign oil companies, and the federal government have put forward conflicting demands.
The statement further indicated that Iraq’s ministry of oil, in coordination with the regional ministry of natural resources, will appoint an international technical consultant. This consultant will be tasked with “calculating the fair estimated costs of production and transportation for each field within 60 days of the law’s enactment”. In the event that no agreement is reached within this period, the Iraqi cabinet will select an international consultancy party without consulting the Kurdish authorities again.
Iraq has held foreign companies, along with the Iraqi Kurdish authorities, responsible for the delay in restarting crude exports. The reason being that they have yet to submit their contracts to the federal oil ministry for revisions and have also demanded higher production costs, which the Iraqi government has rejected.
Iraq Demands Immediate Transfer of Kurdish Region’s Oil Output to State-Run Firm and Outlines Related Measures