Iraq announced Thursday it reached an agreement with the Kurdish Regional Government (KRG) to resolve a long-running dispute over crude oil exports from the northern region.
The deal could potentially end a suspension that has cost more than $25 billion in lost revenue.
The KRG will immediately begin delivering its full oil output to Iraq’s state oil marketing company, SOMO, according to a statement from Prime Minister Mohammed Shia al-Sudani’s office.
In return, the Baghdad-based Finance Ministry will provide an advance payment of $16 per barrel, either in cash or in-kind, under an amendment to the national budget law.
The agreement stipulates that KRG must supply at least 230,000 barrels per day (bpd) to SOMO, with any future increases to be determined by a joint measurement and calibration committee.
If exports are halted for any reason, the region must deliver the full quota to the Oil Ministry in Baghdad.
The KRG region currently produces 280,000 bpd, of which 50,000 is allocated for local consumption.
As part of the deal, the KRG will provide an initial payment of 120 billion Iraqi dinars ($91.6 million) for May’s non-oil revenue share that is due to the federal treasury. Final adjustments will be made after audits are completed.
The two sides agreed to form a joint team from their respective finance ministries, in Baghdad and the KRG, and audit bureaus to assess any excess in the region’s spending above budgeted allocations for 2023–2025, and to develop a plan to address discrepancies. The team is expected to submit its report to the federal Cabinet within two weeks.
The Finance Ministry will begin disbursing public-sector salaries for May to KRG employees as a first step toward implementing the agreement.
The deal marks a breakthrough in the long-standing conflict between Baghdad and Erbil over oil revenues and budget entitlements. Exports were suspended March 25, 2023.
It follows the Iraqi parliament’s February decision to compensate oil companies operating in the KRG at a rate of $16 per barrel for production and transportation, higher than earlier federal proposals.
The developments coincide with the Organization of the Petroleum Exporting Countries and its allies (OPEC+) beginning to lift production quotas, allowing member states to boost exports.
Iraqi Oil Minister Hayyan Abdul Ghani said last week the country was losing 300,000 bpd of its OPEC quota due to the stalled KRG exports.
Iraq remains committed to long-term capacity expansion and increasing oil revenues to offset the economic impact of years of war and unrest.
KRG Prime Minister Masrour Barzani said in June that the export halt had cost the region an estimated $25 billion in lost income.
By Yusuf Alioglu and Mohammad Sio
Anadolu Agency
energy@aa.com