Iraqi Oil Ministry and Kurdistan Region to Discuss Oil Production and Export Agreements
The Iraqi Oil Ministry has formally invited the Ministry of Natural Resources and the Kurdistan Oil Industry Association (APICO) for a meeting in Baghdad scheduled for Tuesday. The agenda will focus on technical measures regarding oil production and exports from the Kurdistan Region.
Miles Cagins, spokesman for APICO, expressed optimism about reaching a consensus, stating, "We are hopeful that we have an agreement on paper that aligns with our demands and has been duly signed." However, APICO will only agree to oil exports under specific conditions.
Cagins elaborated that they seek a new agreement, termed the Sale and Admission agreement, which delineates the pricing structure for oil transactions, specifying both the timing and amounts to be charged.
Recent diplomatic discussions included U.S. Secretary of State, Marco Rubio, engaging with Iraqi Prime Minister Mohammed Shia Sudani in a telephone conversation. This dialogue underscored the United States’ commitment to bolstering Iraq’s economic landscape, which is particularly crucial as the U.S. aims to enhance global energy stability. Notably, three American companies are integral members of APICO, having invested billions in the Kurdistan Region’s oil sector.
Emphasizing contractual rights, Cagins asserted that oil producers expect compensation according to existing agreements. These contracts with the Kurdistan Regional Government (KRG) are deemed legal under international law and have been supported by Iraq’s Supreme Court.
Per amendments to the budget law, the Iraqi government is set to pay $16 per barrel to the Kurdistan Regional Government, which is responsible for remitting payments to oil companies. In light of this, oil producers are seeking assurances regarding their financial entitlements and are pressing for a mechanism to address outstanding debts, a responsibility of the KRG.
Another critical demand involves settling approximately $1 billion in historical loans.
Currently, the Kurdistan Region’s oil production stands at about 300,000 barrels per day, with APICO members contributing nearly 60% of this output. Producers argue that resuming oil exports is essential for increasing both corporate revenues and governmental income within Iraq and the Kurdistan Region.
APICO members highlighted the capacity to ramp up production swiftly, indicating a potential increase to 400,000 barrels per day if agreements are finalized. Cagins noted that since the suspension of oil exports in 2023, companies have faced losses estimated at around $400 million annually, along with significant investments in oil and gas infrastructure being jeopardized.
“For these companies, it is paramount that their contracts remain protected, and that the Iraqi government engages with international firms operating in the Kurdistan Region on comparable terms to those in the rest of Iraq,” stated Cagins.
The oil revenue losses are nearing $24 billion, contributing to reputational damage for Iraq due to the government’s failure to uphold its contractual obligations. Cagins pointed out that prior to the pipeline’s closure, the Kurdistan Region was responsible for 0.5% of global oil production—a vital metric given current geopolitical tensions that have impacted countries like Iran and Russia.
The Iraqi Oil Ministry reiterated its call for a meeting with KRG representatives this Tuesday to tackle contractual concerns, aiming for an aligned understanding that benefits the development of oil fields while aligning with national interests.
Despite announcements from the Oil Ministry regarding imminent oil exports, eight producers from the Kurdistan Region have stated they will withhold exports until an agreement is reached on their financial entitlements. The KRG’s oil export operations have been suspended since March 25, 2023, highlighting the urgent need for resolution.