Iraq Nears Deal to Restart Oil Exports via Turkey, Final Agreement Expected in Days

Iraq Nears Agreement to Restart Oil Exports with Kurdistan and IOCs, Final Deal Expected in Days

By Mackenzie Crow

6/9, 21:39 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF

Key Takeaway

  • Iraq expects a final agreement with Kurdistan and international oil companies to restart oil exports via Turkey in days.
  • Iraqi Oil Minister Hayyan Abdul Ghani confirmed progress in negotiations, with revenue to be deposited at the Iraqi central bank.
  • The deal involves OPEC's second-largest producer, potentially impacting global oil supply and market dynamics.

Progress in Iraq-Kurdistan Oil Negotiations

Iraq, OPEC’s second-largest oil producer, is on the brink of finalizing an agreement with the semi-autonomous Kurdistan region and international oil companies (IOCs) to restart oil exports. Iraq’s oil minister, Hayyan Abdul Ghani, expressed optimism in a televised interview on the state-run Iraqiya channel, stating, “There is progress in these negotiations, and we hope that in the coming few days we will reach a final understanding in this regard.” The discussions, held in Baghdad, focused on resuming production and exports, with revenue to be deposited in an account at the Iraqi central bank.

Key Meeting Details

On Sunday, delegations from the Kurdistan Regional Government (KRG) and Iraq's federal oil ministry convened to address outstanding issues and matters of common interest. Omed Sabah, the KRG cabinet secretary, highlighted that the meeting covered the dues of IOCs operating in the region, production costs, and mechanisms to reach a “comprehensive and balanced agreement within the framework of the constitution.” The goal is to resume oil pumping through the state-owned SOMO company as soon as possible. This meeting follows an official visit by a KRG delegation and oil companies to Baghdad at the invitation of the Iraqi Oil Ministry, which had called for an expedited meeting to accelerate the restart of production and exports.

Challenges and Complications

The negotiations face several challenges, particularly concerning the production sharing contracts (PSCs) between the KRG and IOCs. Baghdad has preconditioned the IOCs' attendance at the meeting on providing copies of these contracts, which Baghdad considers illegal based on a federal court ruling. A source with knowledge of the matter confirmed, “The oil ministry does not have a copy of the IOCs' contracts with the KRG. We have never seen them.” This requirement could complicate the talks, as the IOCs have previously felt excluded from the discussions between Erbil and Baghdad.

Baghdad had proposed a middle-ground agreement to amend its federal budget to pay IOCs operating in Kurdistan, in exchange for a compromise on the recovery costs claimed by the IOCs. However, Prime Minister Mohammed Shia al-Sudani noted that while his government agreed to amend the budget law, the IOCs were refusing to amend their existing contracts with the KRG. The Association of the Petroleum Industry of Kurdistan (Apikur), representing IOCs in the region, denied these claims, stating that its members would consider contract modifications if agreed upon by Iraq's federal government, the KRG, and the firms.

Management Quotes

  • Hayyan Abdul Ghani, Iraq's Oil Minister:

    "There is a progress in these negotiations, and we hope that in the coming few days we will reach a final understanding in this regard."