Iraqi PM discusses Kurdistan Region's oil flow resumption, economic impact, 2 JUNE

Iraqi PM discusses Kurdistan Region's oil flow resumption, economic impact

ERBIL (Kurdistan24) - In an interview with Anadolu Agency (AA) on May 31, 2024, Iraqi Prime Minister Mohammed Shia al-Sudani addressed the prospects of resuming oil flow from the Kurdistan Region of Iraq (KRG).

He emphasized the significant economic impact of halting oil exports from the KRG fields.

“The stopping of pumping Iraqi oil extracted from the fields of the Kurdistan Region of Iraq (KRG) is undoubtedly a loss for Iraq, and at least it is a missed benefit that could support development plans in the provinces of the Kurdistan Region of Iraq and strengthen the overall Iraqi economy,” al-Sudani stated.

He outlined the efforts made to find acceptable settlements and legal solutions following a thorough legal study. However, he noted that the issue remains tied to legal commitments.

“The Federal Budget Law requires that the cost of producing one barrel of oil in all fields be within the national average production cost, which is about $8 per barrel, according to the Federal Ministry of Oil,” al-Sudani underlined.

He added that the KRG’s Ministry of Natural Resources calculates the production cost at about $26 per barrel under the contracts signed with operating oil companies.

“We have proposed either to amend the budget law or to amend the agreements and contracts with these companies. From this perspective, the companies stopped production, not because of a ban from the federal government, but waiting for a solution,” he explained.

Al-Sudani noted that while the companies refused to amend the contracts, the regional government agreed.

“For these reasons, more work is needed to find a legal solution that prioritizes ensuring the rights of Iraq and its people to their wealth,” he added.

This comes at a time when the Federal Ministry of Oil issued a statement, in which it called on the Ministry of Natural Resources in the Kurdistan Region and the oil companies operating in the region to hold a meeting as soon as possible, to agree to accelerate the restoration of oil production and resume its export through the Turkish port of Ceyhan.

As of March 25, 2023, crude oil exports from Kurdistan fields and Kirkuk Governorate to Turkey via the Turkish port of Ceyhan were halted.

This came after the International Arbitration Tribunal in Paris ruled that these exports were illegal, following a lawsuit filed by the federal government against Turkey in the International Court of Arbitration in Paris in 2014.

The lawsuit was due to Turkey allowing Kurdistan’s oil to flow into its territory and export it without Baghdad’s approval.

According to an agreement concluded between Baghdad and Ankara in 2010, the Iraqi Oil Marketing Company (SOMO) is the only entity authorized to export, market, and sell Iraqi oil in global markets.

Kurdistan was exporting 450,000 barrels daily to Turkey to secure the salaries of its employees and its financial revenues, due to the absence of an oil and gas law regulating the management of oil wealth in Iraq.

On April 4, 2023, Erbil and Baghdad reached a temporary agreement until the Iraqi Parliament approved the oil and gas law.

This agreement stipulated that the Kurdistan government would hand over 400,000 barrels per day to SOMO, form a four-part joint committee to supervise the sale of oil in global markets, open an independent account with the Central Bank to deposit financial revenues, and appoint a representative from the regional government to the position of assistant general manager of SOMO.

The ongoing negotiations and legal considerations are part of a broader effort to stabilize Iraq’s economy and ensure equitable distribution of resources across all regions.