ERBIL, Kurdistan Region - International oil companies are confident that a deal with Erbil and Baghdad adequately addressed their concerns about payment mechanisms, an industry spokesperson told Rudaw on Saturday, hours after exports resumed through the Iraq-Turkey pipeline two and a half years after they were suspended.
"Today is a historic day," said Myles Caggins, spokesperson for the Association of the Petroleum Industry of Kurdistan (APIKUR), an umbrella group of oil producers operating in the Kurdistan Region. "This is a win-win-win situation."
After more than two years of negotiations, the Kurdistan Regional Government (KRG), Iraqi federal government and international oil companies reached an agreement earlier this week to resume exporting Kurdish oil to Turkey’s Ceyhan Port.
Kurdish oil exports through the pipeline had been suspended since March 2023, when a Paris-based arbitration court found that Ankara had violated a 1973 pipeline deal with Baghdad by allowing Erbil to independently export oil beginning in 2014.
What does the agreement contain?
The agreement defines "clearly the path of payments for the company and the responsibilities between the KRG, the government of Iraq, and the international oil companies," Caggins said.
It is "an interim agreement, or I can also use the word temporary agreement," he said, adding that it "will be reviewed, and we are working to establish long-term agreements after the 31st of December of this year. So right now, we have interim agreements, and we will have long-term agreements in the weeks ahead."
Wood McKenzie company, which was contracted by the Iraqi government as required under the amended budget law, is tasked with "evaluating the cost of production and transportation from each oil block, each oil producing location, and we expect that they will use a fair method to make these calculations. And when these calculations are complete, each company will receive its true cost of production and transportation, and the companies will receive back payment beginning today for their true cost of production and transportation,” said Caggins.
"Each of our companies has made many hundreds of millions of dollars or billions of dollars of investment, and we need to have a good, strong commercial model in the long-term contract," he said.
"There's an expectation that 230,000 barrels will be exported every day. These barrels of oil come from the APIKUR companies, but there are also other producers in the Kurdistan Region, including the Kar Group, which is one of your very proud and strong Kurdish companies. The oil will be exported through Fishkabour and out to Ceyhan and as you have reported earlier, the SOMO [Iraq's State Oil Marketing Organization] from Baghdad. SOMO has representatives at Fishkabur, and they also have representatives at Ceyhan, where the oil will be marketed to global buyers,” he said.
In addition, the Kurdistan Region "will keep 50,000 barrels of oil for local refining and local needs,” he added.
Methods of payment
An agreement over payments to the oil producers was the final hurdle after months of negotiations to restart the exports.
"One of the important parts of the agreement is adding payment surety," the APIKUR spokesperson said. "And now the companies will receive $16 per barrel for every barrel exported through the Iraq Turkey pipeline and also the 50,000 barrels that are sold locally for KRG.
"The government of Iraq will place that money into the international bank and companies will withdraw the money after reviewing their invoice, their ledger sheet for how much was exported.
"This provides a lot of transparency and also more surety for the oil cost of that covers the cost of production and transportation. Exactly, this will be an escrow account in an international bank," Caggins said.
Based on the deal, he said, the three sides are scheduled to meet in 30 days "to have another agreement for the repayment of the past due debts."
