Iraq’s Parliamentary Finance Committee calls for new oil contract framework to resolve export deadlock

BAGHDAD — Iraq’s Parliamentary Finance Committee has put forward a new strategy to modify oil contracts between international oil companies operating in the Kurdistan region and the federal government, aiming to end the impasse that has halted oil exports through the Iraq-Turkey pipeline, the committee’s chairman said on Thursday.

Oil exports from the Kurdistan region via the Iraq-Turkey pipeline have been suspended since March 2023, following an international arbitration ruling that Turkey violated a 1973 agreement by allowing Kurdish oil exports without Baghdad’s approval.

Ongoing negotiations between the Iraqi government, the Kurdistan Regional Government and The Association of the Petroleum Industry of Kurdistan, or Apikur, which represents eight international oil firms active in the Kurdistan REgion, have stalled due to disputes over production costs.

Iraqi Prime Minister Mohammed Shia’ Al-Sudani told Bloomberg that “the Iraqi budget law sets the production cost at $8 per barrel, while the actual production cost, based on contracts with companies in the Kurdistan region, is $26 per barrel.” He added, “The oil companies have refused to renegotiate the production cost terms in their contracts,” presenting Iraq with the options of renegotiating the contracts or amending the budget law.

Finance Committee Chairman Atwan Al-Atwani, in an interview with Al-Sabah, proposed shifting away from production-sharing contracts to resolve the deadlock. “This proposal aligns with the Iraqi constitution and aims to ensure a fairer distribution of revenues,” Al-Atwani said.

“The most important issue discussed concerns oil revenues, especially how to handle oil exports and the unresolved disputes over production and transport costs, which remain a major source of contention,” Al-Atwani stated. He emphasised the need for “a clear mechanism to safeguard the rights of the people in this matter.”

The Finance Committee, currently in the Kurdistan region for discussions, emphasised the need for a solution that protects the interests of both the federal and regional governments. Al-Atwani highlighted the urgency of resolving disputes over production and transport costs, which have been a longstanding issue.

Apikur, in response to Al-Sudani’s remarks, called for a resumption of tripartite discussions, expressing a willingness to adjust contracts if a mutually agreeable solution can be found. The Kurdistan Regional Government (KRG) and APIKUR have accused Baghdad of not compensating the region for losses exceeding $19 billion, according to KRG Prime Minister Masrour Barzani.

Iraq’s Oil Ministry dismissed these claims, calling them ‘blatant interference‘ in Iraq’s internal affairs.

Prior to the pipeline’s closure, about 450,000 barrels per day were exported.