Shafaq News
After more
than two years of suspension, crude oil from the Kurdistan Region resumed
flowing through the Iraq–Turkiye pipeline at 6:00 a.m. on Saturday, with
initial exports of around 180,000–190,000 barrels per day and a target of
~230,000 bpd in the weeks ahead.
The restart
follows a tripartite understanding between Baghdad, the Kurdistan Regional
Government (KRG), and producing companies that places federal authorities in
charge of international sales while safeguarding the Region’s budget
entitlements.
General
Director of the North Oil Company, Amer Khalil, told Shafaq News the pumping
began after “a series of negotiations and follow-up by the federal leadership,”
adding that crude was received at the B3 station inside Turkiye and routed to
Ceyhan. He said volumes would “increase gradually in line with the Ministry of
Oil’s plans to support the federal budget and boost national revenues.”
The
breakthrough ends an 18-month deadlock triggered by arbitration and deep
constitutional disputes—and immediately tests whether Baghdad and Erbil can
convert a transactional deal into a durable framework for sharing authority and
revenue.
From
Arbitration Shock To Political Reset
The original
halt in March 2023 stemmed from an ICC arbitration ruling that Turkiye had
breached its obligations by loading KRG-origin crude without Baghdad’s
sign-off, prompting Ankara to close the line and exposing a long-running
Baghdad–Erbil rift over who controls exports and how to divide proceeds. The
case also ordered Turkiye to pay Iraq about $1.5 billion for earlier shipments.
In the new
setup, federal marketer SOMO oversees sales from Ceyhan; participating
producers and the KRG receive entitlements through a defined mechanism,
including in-kind allocations that can be refined or sold. The aim is to re-add
Kurdish barrels to global supply without reigniting the sovereignty showdown
that froze flows for over two years.
Read more: Iraq-Turkiye pipeline dispute: Billions in damages unresolved
Voices From
Baghdad and Erbil
Political
researcher Ahmed Yousif told Shafaq News the deal is “a necessary step to
resolve disputes between Baghdad and Erbil, especially since oil is the
backbone of Iraq’s economy and its global exports are vital.” He called the
restart “an economic breakthrough that ends a suspension which hurt the
Region’s people through delayed salaries,” and “a decisive step toward
stability.”
Wafa Karim
of the Kurdistan Democratic Party said the Region “has suffered greatly from
Baghdad’s failure to honor agreements since 2014, despite repeated
delegations.” The current accord, he argued, “serves everyone: Baghdad regains
centrally managed oil revenues, the KRG secures budget allocations including
salaries, and companies benefit from resuming exports through the Turkish port
of Ceyhan.” But he warned that without an overdue oil and gas law, no deal is
immune to collapse.
Former
Kurdish MP Abdul Salam Brewari described the restart as consistent with Article
111, which treats oil and gas revenues as belonging to all Iraqis and deposited
in the national budget, while Articles 112 and 115 allow regional roles in
managing extraction.
The core
impediment, he said, was “the centralist mindset in Baghdad,” making the
conflict “political rather than legal.”
On the
federal side, Parliamentary Oil and Gas Committee Member Kazem al-Touqi
underscored that Baghdad was bound by the budget law to settle terms, with the
KRG required to deliver 450,000 bpd in exchange for its dues. Past deadlocks,
he said, reflected “political, security, and technical factors,” from
border-revenue transfers to payroll mechanisms.
Politician
Mithal al-Alusi argued that “Iranian-aligned militias had clear influence on
government decisions,” yet credited KRG Prime Minister Masrour Barzani with
keeping channels open and “securing the right to negotiate despite pressure and
attempts to undermine Kurdish constitutional rights.”
He said the
deal “exposed efforts by some parties to cripple Kurdistan’s economy,” adding
that Kurdish leadership “prevented plans to inflame internal conflict.”
Gains,
Limits, and Lingering Risks
The Eco Iraq
Observatory estimates that granting operating companies a defined crude share
will generate roughly $3.36 million per day in additional state revenues—over
$100 million per month—while giving Baghdad greater flexibility in export
allocations.
The group
says the arrangement strengthens the federal treasury, helps Erbil reduce
chronic salary arrears, and confers added legitimacy on operators entitled to
about 50,000 bpd for refining or sale.
It projects
total regional output around 290,000 bpd, with a portion going directly to
companies. The market reaction has been swift: shares of Gulf Keystone
Petroleum and Genel Energy rose as the restart neared and was confirmed.
International
reporting further noted a phased ramp-up: initial flows near 180,000–190,000
bpd with scope to reach ~230,000 bpd, under an interim commercial framework
that channels proceeds via Ceyhan and SOMO and sets out compensation to
producers.
What The
Deal Changes—And What It Doesn’t
1)
Federal leverage up, but so is responsibility: With SOMO in control at the point of
sale, Baghdad achieves a long-sought legal and commercial consolidation. The
responsibility now is to maintain predictable payments to Erbil and
companies—on time and according to formula—to avoid a relapse into stop-start
politics. (International producers have signaled participation while
highlighting legacy arrears that still need resolution.)
2) The
KRG gains budget visibility, not full autonomy: The agreement secures a pathway for
salaries and operating finance, easing acute social pressure after long delays.
But authority over exports is no longer unilateral. The KRG’s leverage will
depend on faithful execution by Baghdad and on a legal settlement that
recognizes regional roles envisioned in the constitution, as Brewari emphasized.
3)
Companies get clarity—if the fine print holds: The in-kind entitlement model can
stabilize cash flows and revive field investment; it also requires disciplined
metering, transparent lifting schedules, and a workable escrow/payment
mechanism. Early equity gains in Kurdistan-focused stocks reflect optimism—but
investors will watch whether pledged volumes and payments materialize over the
next quarter.
The Elusive
Oil and Gas Law
All the
interviewed voices converge on one point: Iraq still lacks a modern federal oil
and gas law that codifies roles, revenue sharing, and dispute resolution across
federal and regional institutions. That vacuum turned technical disagreements
into existential political fights. A statute aligned with Articles 111–115,
paired with budget-law implementation rules and automatic stabilizers for price
swings, could lock in today’s truce and depoliticize allocations.
Without it,
the current framework remains exposed to legal challenges, fiscal stress, and
security shocks—from pipeline outages to cross-border tensions—that can once
again turn barrels into bargaining chips.
Ninety Days,
Three Tests
1)Payment
discipline: Regular,
auditable transfers to the KRG and to operators—whether cash or in-kind—will be
the immediate barometer of trust. Slippage would quickly reignite
recriminations.
2)Volume
ramp-up: Moving from ~190,000 bpd toward ~230,000 bpd requires steady
upstream operations and smooth scheduling at Ceyhan. Any disruption—technical,
legal, or security—will undermine market and domestic confidence.
3)Legislative
sequencing: Advancing an oil and gas law, even in modular form (metering,
marketing, transfers, and dispute settlement), would transform this from a
stopgap to a settlement. As KDP’s Wafa Karim put it, “without a clear oil and
gas law, no deal is immune to collapse.”
Today’s
restart is real and measurable—barrels are moving, markets are reacting, and
salaries have a clearer path. Yet the accord’s durability will be decided not
by engineering but by governance: whether Baghdad and Erbil can sustain rules
and payments that are bigger than either side’s short-term politics. If they
can, Iraq reclaims an important slice of export capacity for the global market
and relief for its citizens. If they cannot, this moment will read, in
retrospect, as one more interlude in a long battle over who controls the
country’s most valuable resource.
Written and
edited by Shafaq News staff.
