ERBIL, Kurdistan Region - Iraq is optimistic that talks with the Kurdistan Region on resuming oil exports, which have been halted for nearly 18 months, will yield results in the near future, an official from the federal oil ministry told Rudaw on Monday.
“Discussions are open with our brothers in the Regional government, and hopefully soon this matter will be closed,” said Basim Mohammed Khudair, the Iraqi oil ministry’s undersecretary for extraction affairs.
The undersecretary made the comments on the sidelines of the second Iraq International Exhibition and Conference for Oil Projects and Licensing Rounds in Baghdad.
“We will reach agreements with the brothers in the Region for the public interest and to provide the financial returns required to build infrastructure in line with government plans,” he added on the first day of the three-day event.
Oil exports from the Kurdistan Region through the Iraq-Turkey pipeline have been halted since March 2023, when a Paris-based arbitration court ruled in favor of Baghdad that Ankara had breached a 1973 agreement by allowing Erbil to begin independent oil exports in 2014.
Despite several rounds of talks between Kurdish, Iraqi, and Turkish officials, the exports have not resumed, and the International Oil Companies (IOCs) have suspended production.
Baghdad, Erbil, and the IOCs held a meeting in June with the goal of resolving all remaining obstacles but issued no joint statement.
Contracts and companies
Issues around contracts with the oil producers are a sticking point.
“This dossier is under discussion, and we called on the oil companies to change these contracts and participate in future projects,” Khudair said.
The IOCs and the KRG are bound by production sharing contracts (PSCs). Under the Kurdistan Region’s PSC model, the IOCs cover the entire costs of production, while the KRG receives the lion’s share of the profits from successful projects.
Baghdad has repeatedly said that the PSCs between the IOCs and the KRG are a violation of the Iraqi constitution, stressing that the contracts need to be amended into service contracts like those in federal Iraq before resuming exports.
Myles B. Caggins, spokesperson for the Association of the Petroleum Industry of Kurdistan (APIKUR), told Rudaw in late August that there was not an agreement for the restoration of oil flow through the Iraq pipeline, and the resumption of oil flow is a priority of the IOCs.
Kamal Mohammed, the KRG’s acting natural resources minister, said in June that oil companies operating in the Kurdistan Region “have invested large amounts of money in the Region’s oil fields and Baghdad should take this into consideration."
“The main obstacle before the resumption of Kurdistan Region’s oil is that the Iraqi oil ministry says the production cost is too much,” he explained. “The reason behind that is that the companies invested in the oil sector.
“However, Iraq spends trillions of dinar annually in the oil sector. Therefore, the management of the oil sector in Iraq and the Kurdistan Region are different: the sector is general in Iraq while it is private in the Region.”
Iraq has been working to bring the Kirkuk-Ceyhan pipeline back online, making repairs to damage sustained during the war with the Islamic State (ISIS). This would provide a second export route to Turkey’s Ceyhan port.
Halkwat Aziz contributed to this report from Baghdad
