Iraqi government asks KRG to reduce its oil export in line with OPEC+ production cuts

Oil production in the Kurdistan Region needs to be reduced to 370,000 barrels per day (bpd), as part of Iraq’s commitment to the production cuts of the group known as OPEC-Plus, Iraq’s Oil Minister, Ihsan Abdul-Jaber, said in a televised interview on Sunday.

ERBIL (Kurdistan 24) – Oil production in the Kurdistan Region needs to be reduced to 370,000 barrels per day (bpd), as part of Iraq’s commitment to the production cuts of the group known as OPEC-Plus, Iraq’s Oil Minister, Ihsan Abdul-Jaber, said in a televised interview on Sunday.

The remarks of the oil minister came in a televised interview with the Iraqi channel, al-Sharqiya.

The coronavirus pandemic has led to a sharp drop in economic activity around the world, as governments have imposed lockdowns on their populations to stop the spread of the virus. An oversupply of oil has followed, producing a dramatic drop in oil prices.

In late April, the Baghdad government and the Kurdistan Regional Government (KRG), at the ministerial-level, agreed to cut oil output, in line with an agreement among top oil producers to decrease the global supply.

"We agreed in principle that we [the Kurdistan Region] are part of Iraq, and Iraq's compliance is also our responsibility," KRG Finance Minister Awat Sheikh Janab said in response to a question from Kurdistan 24, although he revealed no further details.

Read More: Erbil, Baghdad agree to cut oil output amid OPEC+ deal

“I have notified Erbil that they need to reduce production and adhere to the OPEC+ agreement,” Abdul-Jaber said in Sunday’s interview.

Iraq has agreed to gradually cut its production by close to 23 percent, starting in May. Iraq pumps an average of 4.5 million barrels of oil a day, a portion of which is from the KRG. It is unclear how much the KRG has agreed to reduce its output.

In early January, then-Iraqi oil minister Thamer Ghadhban, who served in the short-lived government of Adil Abdul Mahdi, said he had asked oil officials to take urgent measures to comply with the cuts proposed by the group, which consists of members of the Organization of the Petroleum Exporting Countries (OPEC), along with additional non-member states, such as Russia and Mexico.

Read More: Iraq will comply with OPEC+ agreement to cut oil production: Minister

Iraq’s adherence to the productions cuts has been only “46 percent,” as it plans to reach the full implementation of the OPEC-Plus deal cuts gradually, Abdul-Jaber said. He explained that he expects the price of a barrel of oil to reach $41 in July. Oil prices are currently around $37 a barrel.

The Iraqi government is highly dependent on oil revenues, which comprise 92 percent of the budget, Iraq’s Finance Minister Ali A. Allawi explained in a recent press briefing. Baghdad’s heavy reliance on such income has made the country’s economy extremely susceptible to volatility in the international price of oil.

Editing by Laurie Mylroie