Iraq Continues to Pursue Control Over Kurdish Oil Marketing

Iraq [middle east]: According to a source, a heated dispute over 400,000 b/d of crude from Iraqi Kurdistan is keeping it from reaching markets throughout the world. Only by transferring control of the oil marketing rights to the federal government in Baghdad can the problem be resolved, according to the KRG.

The International Chamber of Commerce's (ICC) court of arbitration in Paris found that Turkey had violated a 1973 bilateral agreement with Iraq by aiding the shipment of KRG crude. This has prompted Iraq and the Kurdistan Regional Government (KRG) to try to strike a compromise. Ankara consequently asked that all KRG Kirkuk mix crude shipments to Ceyhan, its only practical export route, be stopped on March 25, 2023, by its state-run pipeline operator Botas.

The initial round of negotiations between Baghdad and Erbil took place in the Iraqi capital on Monday, March 26, 2023. Unfortunately, there was little progress and the day concluded without a solution. Today's negotiations were centred on Baghdad's demand that state-owned oil company Somo (State Oil Marketing Organization) seize complete control of exports from KRG Kirkuk. In addition, Iraq has requested access to the export-related revenue accounts, albeit with only an observer position. It remains to be seen whether these conversations will be more fruitful than the prior discussions and produce the desired outcomes.

In 2022, Kirkuk Blend exports to Turkey's Tupras refiner increased noticeably to 452,000 barrels per day. Moreover 380,000 barrels of this total were marketed by the Kurdistan Regional Government (KRG), and the remaining barrels were handled by the State Oil Marketing Organization (SOMO).

It has been encouraging to see the two parties work toward peace. The region of Kurdistan's oil production, however, might suffer greatly if the current standoff continues. Forza Energy has even ceased producing entirely because there is no longer enough space to store their crude, and many other international oil companies operating in the region have begun to stockpile their produce.

A fifth Kurdistan Regional Government (KRG)-based operator, HKN Energy, has reported that if the pipeline is not restarted, production will have to stop within a week as its storage tanks are quickly approaching capacity.