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Baghdad, Erbil take steps to restart Kurdish oil flows

  • Market: Crude oil
  • 04/02/25

Iraq's oil ministry has officially asked the Kurdistan Regional Government (KRG) to start delivering oil to state marketer Somo as part of a deal reached between Baghdad and Erbil to restart north Iraqi crude oil exports through the Turkish Mediterranean port of Ceyhan.

"The Turkish and Iraqi governments are taking the steps to prepare the Iraq-Turkey pipeline [ITP] to export crude through the port of Ceyhan," Iraq's oil minister Hayan Abdulghani told state news agency INA. He said that no less than 300,000 b/d of the Iraqi semi-autonomous Kurdish region's crude will be exported once the pipeline is back in operation. "The debts owed by the Kurdistan region are being agreed upon between the two parties," he added.

Abdulghani did not provide an official date for the resumption of exports. Iraq's oil ministry has been approached for comment.

But his remarks signal that a restart of the country's northern crude is close, made possible by Iraq's parliament approving a key budget amendment on 2 February that will see oil companies operating in the semi-autonomous Kurdish region get $16/bl for their production and transportation costs, double the previous rate.

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 agreement, the Iraqi government will make the selection unilaterally.

Opec+ commitments

Disagreement between Baghdad and the KRG over commercial terms has prevented the resumption of 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.

While 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, Baghdad may still find itself in a dilemma as regards its Opec+ commitments.

Iraq has been the biggest overproducer in Opec+ for over a year, and officials there have said a lack of visibility about output from the northern region has complicated its efforts to comply. Baghdad will now have to balance its own production alongside that of Erbil, while ensuring it adheres to its Opec+ quota and its compensation commitments.

Opec+ has come under pressure as US President Donald Trump recently called for the producer group to "bring down the cost of oil". But so far, Opec+ has not heeded those calls with its key ministerial panel agreeing on 3 February to keep its policy as is, meaning it would not see any production returned to market until at least April.


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