Erbil-Baghdad Negotiations Advance on Oil Exports as Iraq Prepares Budget Amendments for Kurdistan’s Oil Production Costs and Revenue Sharing.
It is expected that before the end of the legislative term of Parliament, the budget amendment related to the resumption of oil production in the Kurdistan Region will be approved, according to a report published by The Kurdish Globe.
“The Kurdistan Regional Government (KRG) has been in constant contact with the Iraqi Prime Minister, and their understanding has yielded good results. We have never prevented the resumption of oil exports from the Kurdistan Region,” Peshawa Hawramany, the KRG spokesperson told a news conference.
He pointed out that what is important to the KRG is the oil companies, as they are part of this process and have contracts with the KRG. Their consent is necessary in this regard because there is a legal contract between the two sides.
Hawramany explained that the Iraqi government’s allocation of $16 for the cost of oil production in the Kurdistan Region is seen as a positive step toward resuming oil exports from the Kurdistan Region.
Regarding the details of the agreement between Erbil and Baghdad on the issue of oil exports, Dr. Sabah Subhi, a member of the Oil and Gas Committee in the Council of Representatives, told The Kurdish Globe: “In the 2023 and 2024 budget law, Article 12 addresses the ‘unification of costs’ for oil extraction across Iraq. One of its points also covers Kurdistan. Generally, the cost of oil extraction in Iraq’s regions is $8, and in some areas, it is even lower. Specifically, the issue arises from production and extraction. Currently, the Iraqi Council of Ministers intends to amend Article 12, which consists of three points. In the third point, which is set to be amended, it is proposed that oil from Kurdistan be extracted at an estimated cost of $16 until an international consulting body comes to Kurdistan to assess the cost of oil extraction in these areas. This will happen when Kurdistan’s oil is handed over to SOMO.”
“The law has been amended by the Council of Ministers and should have come to the Iraqi parliament for the first and second readings to vote on it. Article 12 of the Iraqi budget amendment should be submitted to a special committee, and we will discuss it there as the Oil, Gas, and Finance Committees are specialized in this issue. Then, the amendment will be voted on in parliament. Any amendment in parliament shall be implemented after its approval and publication in the Gazette.”
“The budget law, which includes the Kurdistan Region’s share, has been suspended because Kurdistan’s oil has not been agreed upon. Until oil is extracted, Kurdistan’s budget will remain as it is in the budget law,” he said. “This agreement will open a good door for us to be given our budget, in addition to petrodollars, investment, and sovereignty budget. Then, the Kurdistan budget will come in full because, for now, we are only receiving salaries from Baghdad.”
“This step will put Kurdistan back on the world energy map, strengthen our relations with the world, and ensure foreign companies get their rights back in Kurdistan,” he said.
The Iraqi Council of Ministers in its meeting number 45 voted on Article 12 of the budget law, paragraph 2, point (c), on the cost of oil production in the Kurdistan Region. The Iraqi Council of Ministers has initially set $16 per barrel of oil production in the Kurdistan Region. After the amendment of the budget law, a specialist company will estimate the cost of oil fields in the Kurdistan Region within 60 days.
The legislative session of the Iraqi Parliament has been extended, so the amendment is expected to be approved before the end of the legislative session.
Prime Minister Mohammed Shia Sudani chaired a meeting of the Iraqi Council of Ministers on Tuesday, November 5, 2024, approving a proposal to amend the law Article (12/b2/c) of the Triennial Budget Law No. (13 of 2023). The proposal approved by the Council of Ministers regarding the amendment of Article (12/b2/c) of the Triennial Budget Law No. (13 of 2023) includes the following points:
- The Federal Ministry of Finance shall compensate the Kurdistan Regional Government for the cost of oil production and transportation for the amount of oil produced in the Kurdistan Region by the Oil Marketing Company (SOMO) or by the Federal Ministry of Oil, as stipulated in paragraphs (a) and (b) of Article (12/b2). The fair estimated cost of production and transportation for each field will be determined by a specialized international technical consulting agency, appointed by the Federal Ministry of Oil in agreement with the Ministry of Natural Resources of the KRG. This task must be completed within 60 days of the law’s entry into force. In the event of disagreement within 60 days, the Federal Council of Ministers will appoint a consulting agency for this task.
- The advisory agency referred to in the first point shall submit the estimated cost of oil production and transportation to both the Federal Ministry of Oil and Finance and the Kurdistan Regional Government. These estimates shall be relied upon to amend the law and determine compensation. The Federal Ministry of Finance shall pay the amount to the Kurdistan Regional Government based on the estimated costs in accordance with paragraphs (a) and (b) of Article (12/b2).
- According to paragraphs (a) and (b) of the article, the oil produced in the Kurdistan Region shall be delivered directly to the Oil Marketing Company (SOMO) or the Federal Ministry of Oil. The KRG will receive $16 per barrel from the Federal Ministry of Finance. This issue will be finalized after the completion of the expert technical consultation mentioned in the first point.
The Kurdish Globe