Iraq has halted crude exports from the Kurdish region after a court ruled in its favor in a 9 year arbitration dispute against Turkey over Kurdish oil exports, last Thursday according to a statement from Iraq’s oil ministry. Under the ruling, Turkey will shell out approximately USD 1.5 bn to Iraq, a figure far lower than Iraq had asked for, sources close to the matter told the Financial Times.

The dispute: Iraq claimed that Turkey had been in violation of a 1973 pipeline transit agreement by enabling the Kurdish government to export oil through a pipeline out of Iraq, without the Iraqi government’s consent. The 1973 pipeline agreement stipulates that the Turkish government must comply with the instructions of the Iraqi government in regards to the movement of exported crude oil from Iraq.

What does this mean? The ruling will halt oil exports out of the Kurdish region of Iraq to Turkey without the consent of Iraq's State Oil Marketing Organization(SOMO), according to the statement from the oil ministry. SOMO will be the only authorized entity to manage export operations to the port of Ceyhan.

While exports have been halted, the oil ministry will discuss mechanisms to continue exports of Iraqi oil to the port of Ceyhan. Turkey has informed Iraq that it will respect the arbitration ruling while KRG Prime Minister Masrour Barazani has tweeted that KRG will visit Baghdad to make headway in the discussions.

Background: Iraq is OPEC’s second largest producer exporting some 3.3 mn b/d, of which 75k b/d are sent from Kirkuk to the port of Ceyhan. The KRG does not disclose its production figure, but industry experts have revealed to the FT that it is about 440k b/d.

The news is also getting coverage from: Bloomberg and Reuters.

Tags: