On Sunday, Iraq’s parliament voted on a key plan for the compensation of oil companies operating in the semi-autonomous Kurdistan region that would speed up the restart of crude oil exports from the region.
According to a Bloomberg report, MPs decided to allocate $16 per barrel produced in Kurdistan and transported from the field. This would facilitate negotiations between Baghdad and the regional Kurdish government in Erbil but it will not entirely settle matters because the sum per barrel is $10 lower than what oil field operators in Kurdistan are getting currently. However, $16 is a major improvement on an earlier proposal for $6 per barrel in compensation for oil producers in Kurdistan.
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Agreeing the rate of compensation for oil operators in Kurdistan is crucial for restarting exports of the commodity from the northern Iraqi region to the rest of the world. Earlier in the year, the losses that Iraq was incurring as a result of a deadlock over the $16-per-barrel stipulation were estimated at a hefty $37.5 million daily, based on a Brent crude price of $75 per barrel. That would come in at a total of $25 billion over the entire period that flows along the pipeline carrying Kurdish oil to the Turkish port of Ceyhan has been suspended.
Deliveries of Kurdish crude oil have been suspended for over a year amid a dispute between the central government in Baghdad and Turkey over who had the power to authorize these deliveries.
The impasse followed an International Chamber of Commerce ruling from March 2023. The ICC ruled in favor of Iraq, which had argued that Turkey should not allow Kurdish oil exports via the Iraq-Turkey pipeline and the Turkish port of Ceyhan without approval from the federal government of Iraq.
The original dispute then morphed into the long-running debate between Erbil and Baghdad about how to divide the oil profits between the central Iraqi government and the government of the semi-autonomous oil-rich region.
By Irina Slav for Oilprice.com
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