Baghdad and Erbil to hold talks on pipeline oil exports

BAGHDAD, August 30, 2016 – Iraq’s State Oil Marketing Organisation (SOMO) and the Kurdish Regional Government (KRG) plan to hold talks on Iraq pipeline oil exports through Kurdistan and Turkey next week, Deputy Oil Minister Fayadh Al Nema said in an interview on Friday evening.

Iraq’s state-owned North Oil Company resumed pumping crude produced in the Kirkuk province into the Kurdish-controlled pipeline to Turkey last week on the instruction of Prime Minister Haider Al Abadi. The pipeline’s flow rate stands at 75,000 bpd since last week, half its rate before operations were stopped in March 2016.

Baghdad and Erbil have an ongoing dispute revolving around Kurdish oil exports that Baghdad wants to control and payments from Iraq’s government to the Kurdistan region. Kurdish oil deliveries to the central government stopped last year when Baghdad’s payments to Kurdistan fell below USD 400 million per month, while Erbil wants to receive USD 1 billion per month.

If an agreement is found between Iraq’s central government and the autonomous region of Kurdistan, the pipeline’s flow could rapidly increase to more than 100,000 bpd. The pipeline transports crude to the port of Ceyhan on the Mediterranean, where Kirkuk oil is marketed along with Kurdish oil on the international market.

Should Baghdad’s negotiations with the Kurdish government on a new oil revenue-sharing agreement fail, the Iraqi government would consider exporting its crude oil production via Iran or other alternative routes. The Iraq-Iran agreement could potentially take the form of oil swap deals; Iran could Import Iraqi crude produced in the Kirkuk province to its refineries and export an equivalent of Iranian crude on behalf of Baghdad from Iran’s ports in the Gulf.

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