AJ
How International Oil Companies (IOCs) Get paid.
The $16 per barrel, outlined in Iraq’s 2025 budget amendment (approved February 2, 2025), is designated specifically for the international oil companies (IOCs) producing crude oil in the Kurdistan Region—like Hunt Oil (U.S.), HKN Energy (U.S.), Rosneft (Russia), DNO (Norway), Genel Energy (UK/Turkey), and Gulf
Keystone (UK).It’s not a payment to the Kurdistan Regional Government (KRG) itself but rather covers the production and transportation costs of these international oil companies IOCs operating under KRG licenses.How It Works
Purpose: The $16/barrel compensates IOCs for their operational expenses (drilling, extraction, transport), replacing the KRG’s previous direct payments, which have been in arrears since the Iraq-Turkey pipeline shut down in March 2023. This was a sticking point—IOCs like DNO and Genel had pushed for $21/barrel, while Baghdad initially offered $8, settling at $16 after negotiations.
Federal Oversight: Baghdad’s plan, via the Oil Ministry and SOMO (state oil marketer), is to pay these costs directly to the IOCs once exports resume through SOMO.
Revenues go into a federal treasury account (monitored by the Central Bank of Iraq), with the KRG getting its budget share afterward—not the $16 itself.
Contract Shift: This ties into Baghdad’s push to shift KRG’s production-sharing contracts (PSCs) to federal terms. The $16 ensures IOCs keep producing while aligning payments with SOMO’s export system, sidelining the KRG’s direct financial role.
Who Gets What
IOCs: Hunt, HKN, Rosneft, DNO, etc., get the $16/barrel for their costs, incentivizing them to agree to SOMO’s control. For example, DNO’s Tawke field or Gulf Keystone’s Shaikan output would see this as cost recovery.
KRG: Doesn’t pocket the $16—its cut comes from the federal budget (e.g., 12-13% of Iraq’s total revenue), based on exported oil volumes, not a direct slice of the $16.
Baghdad: Keeps the lion’s share of export profits after costs, reinforcing federal authority.
Implications
This setup means Baghdad deals with IOCs like Rosneft or Hunt Oil directly, using the $16 as a lever to enforce SOMO integration. The KRG’s role shrinks to a minority stakeholder (20-25% in most fields), with no control over the $16 payments. If the pipeline restarts, say next week, IOCs get paid Tuesday-ish from federal funds, not KRG coffers, under the current system for exports in Federal Iraq.