Argus

The Association of the Petroleum Industry of Kurdistan (Apikur) has denied claims by Iraq's prime minister Mohammed Shia al-Sudani that international oil companies (IOCs) operating in the country's semi-autonomous Kurdistan region are not ready to amend their contracts.

Apikur points to a statement it made last week that said its members would be willing to consider modifications to existing contracts provided the matter is agreed by Iraq's federal government, the Kurdistan Regional Government (KRG) and the firms themselves.

Baghdad had proposed a middle ground agreement that would see it amend its federal budget to allow it to pay IOCs operating in Kurdistan, in return for a compromise with the KRG and the IOCs over the recovery cost for oil produced in the Kurdish region.

In an interview with Turkish state news agency Anadolu published on 31 May, al-Sudani said his government has agreed to amend the budget law but IOCs operating in Kurdistan are refusing to amend their existing contracts with the KRG.

"We have initiated acceptable settlements and legal solutions after a thorough legal study… The federal budget law requires that the cost of producing one barrel of oil in all fields be within the national average production cost, which is about $8/bl, according to the federal oil ministry," al-Sudani said in the interview.

"But the KRG's ministry of natural resources calculates the production cost at about $26/bl within the contracts signed with the operating oil companies," he added. "For these reasons, more work is needed to find a legal solution that prioritises ensuring the rights of Iraq and its people to their wealth."

His remarks suggest the two sides still have a significant gap to bridge on this issue. It also pours cold water on a recent call by Iraq's oil ministry for a meeting with its Kurdish counterpart and the IOCs to try to reach a deal and accelerate the restart of northern Iraqi crude exports via Turkey's Mediterranean Ceyhan port.

Around 470,000 b/d of crude exports from Iraq's semi-autonomous Kurdistan region have been absent from international markets since March 2023 when Turkey closed the pipeline linking oil fields in northern Iraq to Ceyhan. That move followed an international tribunal ruling which said Turkey had breached a bilateral agreement with Baghdad by allowing Kurdish crude to be exported without the federal government's consent.

Iraq's federal government is finding it difficult to strike a balance between repairing its rift with the KRG and complying with its Opec+ commitments. It recently submitted a plan outlining how it will compensate for producing above its target in the first quarter.

Opec and the wider Opec+ group are holding ministerial meetings today to discuss output targets and whether to extend the group's current voluntary crude supply cuts into the second half of the year and possibly beyond.