Iraq OKs budget change aimed at resuming KRG oil flows

Market: Crude oil
03/02/25

Iraq's parliament has approved a key budget amendment that should pave the way for a restart of crude exports from the Kurdistan region in the north of the country via the Turkish Mediterranean port of Ceyhan.

The change to the draft budget law — proposed by Baghdad in November last year after protracted negotiations with the Kurdistan Regional Government (KRG) — will see oil companies operating in the semi-autonomous Kurdish region get $16/bl for their production and transportation costs, double the previous rate.

Iraqi prime minister Mohammed Shia al-Sudani called on the relevant authorities in the federal and regional governments to "immediately commence implementation of the amendment".

Disagreements between Baghdad and the KRG over commercial terms were the main reason why Kurdish crude exports have yet to resume from Ceyhan after the pipeline linking the port with oil fields in northern Iraq was closed by Turkey in March 2023. The closure followed an international arbitration ruling that said Turkey had breached a bilateral agreement with Iraq by allowing KRG crude to be exported without Baghdad's consent.

Miles Caggins, the spokesman for the Association of the Petroleum Industry of Kurdistan (Apikur), said the body "welcomes" the amendment and "remains focused on reaching agreements to restore oil exports through the Iraq-Turkey pipeline."

Apikur represents eight foreign oil companies operating in the Kurdistan region — DNO, Genel Energy, Gulf Keystone, HKN Energy, Shamaran Petroleum, Western Zagros, Mol and Hunt Oil.

Kurdish lawmaker Rebwar Orhaman said the amendment was "very significant to resolve the oil dispute between Baghdad and Erbil and will help expedite the resumption of Kurdistan oil exports to boost the country's revenues."

As part of the amendment, an international consulting firm will be tasked with auditing Kurdish production and transportation costs over a 60-day period. Iraq's federal oil ministry and its KRG counterpart will co-ordinate on appointing the auditor but if they fail to reach an agreement, the Iraqi government will make the selection unilaterally.

The 2025 budget is expected to be the final law passed by Iraq's current government and parliament before elections in October this year.

The resumption of oil flows via Ceyhan should give the Iraqi oil ministry more visibility on how much crude is being produced in the Kurdistan region, putting Baghdad in a better position to comply with its Opec+ production targets and to start compensating for past overproduction.

By Bachar Halabi

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