Oil companies split on resumption of Kurdish oil exports

“The continued closure of the Iraq-Turkey pipeline and delayed payments for past oil sales materially impacted all Kurdistan oil producers.”
Kirkuk-Ceyhan oil pipeline. (Credit: AFP)
Kirkuk-Ceyhan oil pipeline. (Credit: AFP)

ERBIL (Kurdistan 24) – International oil companies operating in the Kurdistan Region are divided if Kurdish oil exports will resume to Turkey.

Ankara halted the 450,000 barrels per day of Kurdish export on March 25 at the request of Baghdad after the Paris-based International Court of Arbitration of the ICC ruled that Turkey had violated an aspect of the 1973 pipeline agreement, awarding Iraq $1.5bn for the damages it had endured as the result of the breach.

Up until now, discussions involving the Kurdistan Regional Government (KRG), Turkey, and Iraq have yielded no outcomes.

The US energy company HKN Energy Ltd. (HKN) on Aug. 7 said it “has little confidence that the ITP (Iraq-Turkey Pipeline) will open soon.”

Read More: KRG hands over 50-60K barrels of oil to Baghdad since mid-June, says official

“If and when the ITP opens, it is unclear whether the KRG could provide commercial assurances to oil producers sufficient to achieve a production level of at least 400k bopd; the impact to KRG monthly transfers from the GOI (Government of Iraq) is unclear if the KRG fails to deliver the minimum volume commitment,” the HKN said.

However, the UK oil company Gulf Keystone Petroleum Limited in an update on Aug. 9 sounded more positive.

“While no official timeline has been announced, we continue to believe the suspension of Kurdistan crude exports will be temporary and that the KRG will resume oil sales payments in due course,” Jon Harris, Gulf Keystone’s Chief Executive Officer, said.

Dana Gas PJSC, based in the United Arab Emirates (UAE), in a statement on Aug. 9, said that the Company began to sell to third party local buyers as other companies shut down production in the Kurdistan region of Iraq, but did not comment on the possibility of resuming oil exports.

Furthermore, the Canadian ShaMaran Petroleum Corp said on Aug. 9 that the recent passage of the Iraq federal budget for 2023-2025, “including a production commitment from the Kurdistan Regional Government (“KRG”), should enable regular monthly budget transfers from Iraq to the KRG, as well as normalization of relations between the region and the Federal Government of Iraq.”

“The continued closure of the Iraq-Turkey pipeline and delayed payments for past oil sales materially impacted all Kurdistan oil producers during the second quarter of 2023,” Garrett Soden, President and CEO of ShaMaran, said.

“Discussions are ongoing between Ankara, Baghdad and Erbil to find a political solution.  We believe the various governments should be aligned to reopen the pipeline and to resolve the outstanding payment issues with international oil companies.”

Read More: Oil companies in Kurdistan call for resumption of oil exports

The Association of the Petroleum Industry of Kurdistan (APIKUR) in July called for a speedy reopening of the Iraq-Turkey pipeline for oil exports four months after the closure of the pipeline in March.

“To date, APIKUR member companies, which include DNO, Genel Energy, Gulf Keystone Petroleum, HKN Energy and ShaMaran Petroleum, have reduced spending plans in the region by some $400 million in 2023, with 2024 spending plans under review,” the Association said.

Recently, a KRG delegation held preliminary talks concerning the Oil and Gas Federal Law in Baghdad. Until now Baghdad uses a law from the previous Iraqi regime, due to the failure of the Iraqi parliament to pass a draft oil law in 2007.

"This potential legislation seeks a collaborative approach between the federal government, the KRG, and the oil-producing governorates, ensuring alignment with the hydrocarbon-related provisions of the Iraqi constitution," the KRG earlier said.