Baghdad Revises Oil Export Offer to KRG

By John Lee.

The Iraqi Cabinet has approved an amendment to the Budget Law, compensating the Kurdistan Regional Government (KRG) for production and transportation costs of oil produced in the region and received by the State Oil Marketing Organization (SOMO) or the Federal Ministry of Oil.

It said the Federal Ministry of Finance will compensate these costs in advance at a rate of $16 per barrel.

Oil exports via the Iraq-Turkey Pipeline (ITP) were suspended in March 2023 following a dispute between Baghdad, Erbil and Ankara.

Iraq Business News has approached the Association of the Petroleum Industry of Kurdistan (APIKUR) and the Kurdistan Regional Government (KRG) for comment.

Full statement from the Media Office of the Prime Minister:

The Council of Ministers approved a proposal to amend Article 12/Second/c of the Three-Year Budget Law No. 13 of 2023 as follows:

1. The Federal Ministry of Finance will compensate the Kurdistan Regional Government (KRG) from sovereign expenditures for the production and transportation costs of oil produced in the region and received by the State Oil Marketing Organization (SOMO) or the Federal Ministry of Oil, based on subparagraphs (a) and (b). Production and transportation costs for each field will be estimated fairly by an internationally specialized consulting entity, as agreed upon by the Federal Ministry of Oil and the KRG's Ministry of Natural Resources, within 60 days of the law's enactment. If no agreement is reached within this period, the Federal Council of Ministers will determine the consulting entity.

2. The consulting entity mentioned in the previous paragraph will submit estimated production and transportation costs to the Federal Ministries of Oil and Finance and the KRG. These will be adopted for the purposes of this law, with compensation calculated based on the estimated cost per barrel, multiplied by the number of barrels received as per subparagraphs (a) and (b). The Federal Ministry of Finance will be responsible for paying the compensation to the KRG.

3. Oil produced in the region must be immediately delivered to SOMO or the Federal Ministry of Oil, per subparagraphs (a) and (b). The Federal Ministry of Finance will compensate production and transportation costs in advance at a rate of $16 per barrel, to be settled retroactively after the completion of the aforementioned consulting entity's review.

(Source: PMO)