Kurdish oil exports via Ceyhan to resume as early as April 2: official

The Kurdistan Regional Government will begin exports of oil through the port of Ceyhan either April 2 or April 3, a senior official told S&P Global Commodity Insights April 2.

"The flow of oil through Ceyhan will either resume today [April 2] or tomorrow [April 3]," said the official, who did not wish to be named.

The KRG's head of foreign media affairs Lawk Ghafuri said in a statement on Twitter: "An initial agreement [between the KRG and the federal government] has been reached to resume oil exports through Ceyhan this week."

"The agreement will remain in effect until the oil and gas law is approved by Iraqi parliament."

Iraq's federal oil ministry, in a statement to the state news agency INA, confirmed it was "keen" to expedite the resumption of oil exports through Ceyhan.

Exports would resume after the ministry reviewed "new data" from the Paris-based International Court of Arbitration and after resolving "other outstanding technical issues between the center and the region."

The statement also stressed the importance of the KRG's oil revenues meeting federal budget requirements, with a decision on the resumption of exports expected soon.

Kurdish representation

The official Iraqi statement made no mention of Kurdish expectations in terms of jointly working to sell its oil with the federal government.

Kurdish local media earlier quoted an Iraqi parliamentarian that Baghdad had reached a compromise on Kurdish representation within its main oil trading arm, SOMO.

"The Iraqi oil ministry has agreed to give the [position of] vice president of SOMO to the Kurdistan Regional Government," Nehro Rwandzi, deputy chairman of the Iraqi parliament's oil and gas committee told Kurdistan24.

"The oil contracts and the way the region oil is marketed."

A new bank account overseen by the federal government is also set to be opened to manage oil revenues accrued by the KRG, according to Rwandzi.

A joint committee under the supervision of Baghdad and Erbil will also be formed to oversee the process.

Turkey suspended exports of Iraqi crude from the port of Ceyhan late March 24 in response to an international arbitration ruling that Iraqi officials say upheld Baghdad's sovereignty over oil produced by the KRG.

Following the ruling, several operators in the semiautonomous Kurdish region shut in production, halting the flow of 450,000 b/d of sour crude to Mediterranean markets.

The details of the accommodation between the two sides "is important as the share of the IOCs and the future of their contracts is uncertain," Shwan Zulal, the managing director of London based Carduchi consulting told S&P Global.

"Moreover, the KRG's debt to traders needs to be agreed on and a mechanism found to start paying it back without taking a large chunk of the KRG's revenues in the coming months and years," he said.

"Not to mention the oil sold in the local market and operations in fields like Khurmala run by local companies."

Disputed oil

The ruling from the International Court of Arbitration has not been made public, making it difficult to verify the various claims that each side has made on what it contains.

The case, which took almost a decade to decide, stems from a dispute over whether the KRG's independent oil sales violated an agreement between Iraq and Turkey over the use of a pipeline transporting the crude to Ceyhan. Baghdad has said the ruling upholds its sovereignty over crude produced in Kurdistan and that federal marketer SOMO should have the sole right to export it.

Several international energy companies operating in the KRG have suspended operations following the ruling.

Trust deficit

Bilal Wahab, a fellow at The Washington Institute, told S&P Global that "KRG's independent energy industry from Baghdad hinged on international legitimacy and Turkish facilitation."

"This recent international arbitral award compelled Turkey to comply and shutter KRG's oil exports, which in turn forced the KRG to strike a deal with Baghdad."

A trust deficit exists between the two sides, Wahad said, with the reported budget and export deal being "stopgaps" to a current crisis that denies both capitals "precious revenue and the markets much needed oil.

"A lasting solution of this decades old dispute between KRG and the federal Iraqi government is a national hydrocarbons law that delineates rights and responsibilities stipulated in the Iraqi constitution," he said.