Challenges in Kurdistan Oil Exports: A $1 Billion Impasse
The export of oil from the Kurdistan Region remains at a standstill, with approximately 115,000 barrels of oil caught in a complex dispute between Erbil and Baghdad. This situation not only affects the region’s economic stability but also involves an estimated $1 billion in outstanding debts owed by oil companies since late 2022.
Key Obstacles to Oil Export Negotiations
Sources indicate that two primary factors are hindering the resumption of oil exports from the Kurdistan Region. The first issue relates to the substantial debt incurred by oil companies due to the suspension of exports via the Turkish port, which has reached nearly $1 billion. The second obstacle centers around the daily production figures, where the oil ministry is unable to accept the full 185,000 barrels needed for export, stranding 115,000 barrels.
Budget Amendments and Financial Entitlements
Amendments to the general budget law stipulate a fixed compensation of $16 per barrel for oil produced and transported within the Kurdistan Region. The Kurdistan Regional Government (KRG) has formally requested to recover costs not only for the exported 185,000 barrels but also for the 115,000 barrels allocated for domestic refining operations.
One informed source within the discussions noted, "The KRG has sought reimbursement for the extraction of 185,000 barrels of oil for export, alongside the costs of the 115,000 barrels designated for local refineries. However, the Ministry of Oil has yet to agree to this request." Collectively, the monthly financial claim for these 115,000 barrels exceeds $55 million.
Furthermore, Bassem Grebawi, a member of the Iraqi parliament’s oil and gas committee, stated, “The Ministry of Oil is obligated to compensate based on the delivery of oil. For instance, should 400,000 barrels be delivered, the payment will reflect $16 per barrel.”
Preliminary Agreements and Compliance Expectations
Under the current preliminary agreement between Erbil and Baghdad, the initial plan includes exporting 185,000 barrels daily through the Turkish port, with the expectation of increasing this amount in the future. Grebawi emphasized, “The amendment to the general budget law is explicit: an exchange of 400,000 barrels from the Kurdistan Region in return for payments to companies must be adhered to by both Erbil and Baghdad.”
The Kurdistan Oil Industry Association (APKOR) expressed readiness to resume operations as soon as a new agreement is finalized, indicating a willingness to proceed once there are clear directives from the authorities.
In light of these developments, a representative noted that the Prime Minister Mohammed Shia Sudani is expected to make significant decisions regarding the 115,000 barrels that the Oil Ministry will not initially receive.
The budget law amendment, which took effect on February 17, requires both Erbil and Baghdad to come to an agreement within 60 days on appointing a third party to assess the pricing of oil production and export.
Conclusion
As negotiations continue, the resolution of these financial and logistical hurdles will be crucial for both the Kurdistan Region’s economy and its oil sector’s viability. The ongoing discussions highlight the intricate balance of interests that must be navigated to achieve a sustainable solution for oil exports.
