Iraq, Kurdistan to work on drafting oil and gas bill amid halt via Turkey

Iraq's federal government in Baghdad and the semi-autonomous Kurdistan region will set up a committee to draft an oil and gas bill to help resolve a dispute over oil production and revenue sharing that escalated into the suspension of northern exports via Turkey since March 25.

Delegates from the governments in Baghdad and Erbil held a meeting on Aug. 5 to discuss the drafting of the bill as instructed by Prime Minister Mohammed al-Sudani, the federal oil ministry said in a statement.

The meeting was attended by the oil and foreign ministers in the federal government, with the participation of a Kurdish delegation and representatives from oil-producing provinces among other officials, the ministry said in the Aug. 5 statement.

Participants in the meeting emphasized the need to speed up the drafting of the oil and gas bill, with the participation of the Kurdistan Regional Government and the oil-producing provinces, it added.

Recommendations from the meeting included the formation of a committee to follow up on the drafting of the oil and gas bill and the presentation of a working paper based on the views of Sudani, the KRG and the oil-producing provinces in order to finalize the bill, the statement said.

KRG spokespeople couldn't be immediately reached for comment about the outcome of the Aug. 5 meeting.

Northern exports halt

A dispute between Baghdad and Erbil over oil production and revenue-sharing escalated in March, when an international court ruled against Kurdistan's independent oil exports under its own 2007 law, prompting Turkey to halt northern Iraqi oil exports via its port of Ceyhan.

Since March 25, more than 450,000 b/d of oil that usually heads to the Mediterranean remains offline amid lingering issues among Baghdad, Erbil and Ankara over the resumption of flows.

The suspension of northern exports via Ceyhan led Iraq to produce oil below its 4.22 million b/d OPEC+ quota since May, when it started implementing voluntary cuts.

OPEC's second biggest producer pumped 4.13 million b/d in June, according to the latest survey by S&P Global Commodity Insights.

Since 2007, the KRG has independently marketed its crude until an international arbitration ruling in March said such sales via Ceyhan violated a bilateral agreement between Turkey and Iraq.

As a result, the Mediterranean market has been deprived of a typically robust supply of sour crude, with operators in Kurdistan having to turn off the taps as crude storage facilities reached maximum capacity.

Revenue-sharing dispute

Baghdad claims its right to export all Iraqi oil is backed by the International Chamber of Commerce's International Court of Arbitration ruling on March 23 that has not been made public, making it difficult to verify the various claims that each side has made on what it contains.

A temporary agreement between the governments in Baghdad and Erbil on April 4 had raised hopes that flows could resume, but Ankara has yet to give an indication when it would restart exports.

Besides the oil production and exports' impasse, Erbil has disputed Baghdad's sharing of oil revenue with the semi-autonomous region after the June rubberstamping of fiscal budgets for 2023, 2024 and 2025.

The budget, which included controversial amendments decried by Kurdish officials, calls for $152 billion in spending, allocated for all three years.

Kurdistan's 2007 law

For Kurdistan, the budget law essentially locks in the region to handing over 400,000 b/d of its crude production, its main source of income, to state oil marketer SOMO to receive its agreed 12.6% of federal funding.

The oil dispute between Erbil and Baghdad stems from the interpretation of the 2005 constitution amid differences over the meaning of articles pertaining to oil and gas production and revenue sharing.

In 2007, Erbil and Baghdad began attempts to draft an encompassing oil and gas law for all regions in Iraq only to be followed over the years with various versions that never made it to parliament.

Amid the dispute in interpreting the constitution, Kurdistan went ahead in 2007 with drafting its own oil and gas law and signing agreements with international oil companies to export its crude via Ceyhan to the chagrin of the federal government.