In recent years, the resumption of oil exports from the Kurdistan region of Iraq via the Turkish port of Jihan has faced numerous legal and financial hurdles. The Parliamentary Oil and Gas Committee has identified a new obstacle to the resumption of exports, prompting Baghdad to prepare for a trilateral meeting intended to address the issue.
The committee’s spokesperson, Ali Shaddad, stated that the Ministry of Oil has concluded all necessary preparations for the export of crude oil through Jihan, effectively informing the Turkish government of its readiness to resume shipments. This follows amendments to the budget law, allowing export volumes to range between 300,000 and 325,000 barrels per day.
Shaddad emphasized that recent discussions between the Ministry of Oil and the Kurdistan Regional Government highlighted the region’s request to increase its local consumption allocation from 46,000 to 110,000 barrels per day, which violates the budget ratified by the House of Representatives and complicates the re-export process via Jihan. He noted that negotiations reached an impasse due to a legal clause that rejects the proposed agreement.
He further explained that the regional government’s position indicates an inability to adhere to the export quantity specified in the budget, thus obstructing adherence to recent legal amendments and delaying the resumption of exports through Jihan. Shaddad urged the Sudanese government to ensure comprehensive enforcement of the budget law with its amendments.
From the regional perspective, there is an understanding that the laws and agreements are interpreted politically, whereas Baghdad views them in legal and technical contexts. Shaddad called for a return to specialized committees to establish a new framework for implementing the recent budget law changes. He clarified Iraq’s commitment to the OPEC agreement, which stipulates a quota of 400,000 barrels per day for northern Iraq, while acknowledging that only 300,000 barrels originate from the Kurdistan region, resulting in a shortfall of 100,000 barrels annually.
Additionally, informed sources indicated that a trilateral meeting in Baghdad is scheduled between the Federal Ministry of Oil, the Ministry of Natural Resources in the Kurdistan region, and the oil production companies operating there. This meeting aims to address the barriers hindering the resumption of oil exports.
The sources confirmed that this is the second trilateral meeting held this week regarding the oil export issue, with the intent of removing obstacles to resuming the export of Kurdish oil and reaching a final agreement swiftly.
This meeting follows another trilateral assembly on March 2, where results were presented to Prime Minister Mohammed Shia Sudani, although no definitive decision on resuming the export of Kurdistan oil was made at that time.
Under the agreement between the federal government and the Kurdistan Regional Government, the initial phase involves producing 300,000 barrels of oil daily within the region, with 185,000 barrels allocated for export through Jihan, while 115,000 barrels are designated for local consumption.
For years, the federal government has been entangled in legal disputes regarding production sharing with foreign firms in Iraqi Kurdistan, initiated by a lawsuit in 2022. However, recent cooperation between Baghdad and Erbil on contentious issues, including the compensation of regional employee salaries and the resumption of oil exports, indicates potential for resolving a crisis that has significantly impacted both governments financially.
These judicial developments stand in contrast to comments from Sudanese, who mentioned that Baghdad is waiting for the finalization of procedures to commence oil exports via Jihan.
Previously, Iraq secured an arbitration ruling against Turkey concerning the unauthorized export of crude oil from the Kurdistan region through Jihan without involving the Iraqi Oil Marketing Company “SOMO.” Following this decision, exports from the region, previously at 480,000 barrels per day, were halted on March 25, 2023.
On February 2, Parliament amended the public budget, facilitating the resumption of oil exports from the Kurdistan region to Jihan after a two-year interruption. These amendments were aimed at supporting the operational costs of international oil companies in Kurdistan and represent a critical step toward re-establishing oil exports to Turkey. Notably, the cost of extracting and transporting oil in the region has been established at $16 per barrel.
Recently, Foreign Minister Fouad Hussein remarked on the legal framework agreements forged between the Iraqi federal government and oil companies, promoting local consumption discussions and determining export volumes.
Iraq typically produces between 400,000 to 500,000 barrels per day from northern fields, inclusive of the Kurdish region, but has been hindered due to a pipeline halt directed towards Turkey.
Oil Minister Hayyan Abdul-Ghani indicated last month that Iraq is aiming to resume the flow of at least 300,000 barrels per day of crude oil once operations restart. The Iraqi administration has also begun formal procedures to have the Kurdistan Regional Government transport oil to SOMO for marketing purposes.
Hussein highlighted that Kurdish oil production is estimated at 280,000 to 300,000 barrels daily, with local consumption needs for energy generation predicted to require 110,000 to 120,000 barrels. Baghdad, however, believes that a lower volume may suffice.
The pumping of oil through pipelines presents challenges for Baghdad, particularly given its obligations to decrease crude production in accordance with OPEC Plus agreements while striving to remain compliant with these regulations.
OPEC’s production and export activities are facing intensified scrutiny, especially following recent calls from U.S. President Donald Trump for the group to lower oil prices.
According to prior analyses, it has been noted that all oil production from Iraq, whether from the south or the Kurdistan region, is accounted for within Iraq’s overall quota. Baghdad continues to seek an arrangement that will adjust its federal budget to facilitate payments to international oil companies in Kurdistan while navigating a resolution with the Kurdistan Regional Government and global oil firms regarding extraction costs.
In April 2023, the Iraqi government formalized an oil agreement with the Kurdistan Regional Government, stipulating the export of 400,000 barrels of oil per day through SOMO. This agreement also entails the appointment of a regional representative to the company and the establishment of a dedicated bank account for the region’s government to manage oil sale revenues, under the oversight of the Federal Financial Supervision Bureau.
