Iraq's Kurdistan region to resume oil exports April 4 amid signing of agreement with Baghdad

Iraq's semi-autonomous Kurdistan region will resume crude exports via the Turkish terminal of Ceyhan as soon as April 4 after the prime ministers in Baghdad and Erbil signed a temporary agreement that will allow the flow of over 450,000 b/d back into the Mediterranean basin.

The technical sides from Baghdad and Erbil should start "immediately" implementing the temporary agreement, Prime Minister Mohammad al-Sudani said April 4 in a joint press conference with his Kurdish counterpart Masrour Barzani in Baghdad.

"Any delay in resuming exports will clearly impact forecast fiscal revenues for 2023...which will lead to a higher deficit," Sudani said at the press conference.

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

"The Kurdistan region's oil exportation through Ceyhan will resume today," Lawk Ghafuri, a spokesman for the Kurdistan Regional Government, said on twitter.

The Turkish energy ministry and Botas, which operates the Ceyhan terminal, both declined to comment, while an assistant to the energy minister did not reply to a written query.

SOMO's exclusive role

Officials from the federal government had previously said that state oil marketer SOMO has exclusive rights to market Iraqi crude as backed by the International Chamber of Commerce's International Court of Arbitration's ruling that independent Kurdish exports through Ceyhan were in violation of a 1973 agreement between Iraq and Turkey.

The March 23 ruling from the Paris-based court has not been made public, making it difficult to verify the various claims that each side has made on what it contains.

Prior to the suspension, over 450,000 b/d of Kurdish crude flowed into Ceyhan, with about 350,000-375,000 b/d of the exports comprised of Kurdish Blend Test from KRG-controlled oil fields, with the remaining 75,000-100,000 b/d being federally-controlled Kirkuk grade.

Kirkuk crude is classified as a light sour grade with 2.24% sulfur and 34.2 API gravity, according to the Platts Periodic Table of Crude, produced by S&P Global Commodity Insights. Kurdish Blend is typically heavier than Kirkuk, though market sources said its specifications can be quite variable.

Production shut-ins

Prior to the signing of the Erbil-Baghdad agreement, production shut-ins in Kurdistan had accelerated amid the stalemate between the two sides, with international oil companies such as Oslo-listed DNO and UK-listed Gulf Keystone Petroleum starting to halt their operations in the semi-autonomous region.

Gulf Keystone Petroleum said March 31 it had started to curtail production as storage facilities had filled up.

Prior to the suspension of exports, Gulf Keystone had forecast its gross average production in Kurdistan to reach about 48,000 b/d in 2023, up from 44,202 b/d in 2022.

DNO had already started on March 29 turning the taps off at its oil fields in Kurdistan, producing around 100,000 b/d, or a quarter of Kurdish output, as local storage neared full capacity. Canada's Forza Petroleum was the first company to announce the shutdown of its 14,000 b/d production in Kurdistan.

The dispute between Baghdad and Erbil over the KRG's independent oil exports has festered for close to a decade in the court.

Iraq's own Federal Supreme Court dealt a major blow to the KRG in February 2022, ruling that a 2007 oil and gas law allowing Erbil to manage and sell crude produced within its region independently was unconstitutional. The court ordered the KRG to hand over control of its oil sector to Baghdad.