Until this year, oil exports from Kurdistan to Turkey occurred through road truck deliveries at a rate of 50,000 bpd. Construction was completed in late 2013 for a new pipeline linking the Kurdish Taq Taq field with Ceyhan port in Turkey. In November 2013 Turkey and Kurdistan solidified their relationship with an agreement which would allow the export of oil via this pipeline to Ceyhan port, commencing on 2 January. Baghdad and Erbil failed to reach a revenue-sharing agreement on this and on 23 May 2014 over 1.5 million barrels of oil was exported via tanker from Ceyhan port. This was followed by a second tanker on 10th June.
The agreement between Kurdistan and Turkey has been met with condemnation by the Iraqi government, which claims that all export deals must receive federal approval. The constitutional agreement between the federal government and the KRG details an 83:17 sharing of resources and national budget, however, articles 112 and 115 of the constitution state that the KRG has exclusive authority over oil and gas extracted in the region from fields that came into production after 2005.
The KRG claims that all of its current exports come from such fields. Nonetheless, on 23 May the Iraqi government requested an arbitration by the International Chamber of Commerce in Paris and seeks 250 million USD in financial damages. Recent tensions between Iraq and the KRG date back a number of months as Iraq has consistently paid approximately 10% instead of 17% of owed funds to the KRG.
Although the US, Israel, Germany, France and the Netherlands have all previously imported Kurdish oil, the internal dispute between Bagdad and Erbil has signified that neither of these tankers has been unloaded due to potential legal consequences. The dominant area of disagreement between Baghdad and Erbil rests in Kurdistan’s preference for Profit Sharing contracts with foreign oil companies, which allows them up to 20% of the profits versus Iraq’s preference for Service contracts, which only allow foreign companies 1% of the profits.