Iraqi Kurdistan condemns Iraq oil company Somo's move threatening buyers of Kurdish crude

Dispute over semi-autonomous northern Iraqi region's oil sector continues

Gas flares at the Bai Hassan oil field in Kirkuk, Iraq. AFP

Iraq's Kurdistan Regional Government (KRG) has condemned remarks by Iraq’s State Oil Marketing Organisation (Somo), which earlier this week issued a letter threatening legal action against buyers and traders of crude produced in the Kurdistan.

The letter issued by Somo is "nothing more than another drip in a stream of disinformation" published as part of a "political fight", KRG's Ministry of Natural Resources said in a statement on Friday.

"The letter is also intended to undermine the continuing good-faith dialogue between the Kurdistan Regional Government and the federal government. That dialogue seeks to and agrees [on] a plan for the future management of Iraq’s energy resources and revenue in line with the Federal Constitution," the statement said.

The letter issued by Somo cited a ruling by Iraq's Federal Court in February, which stated that the KRG must hand its crude oil supplies to Baghdad after deciding that a 2007 Kurdish law on oil production, revenue and exports was not in line with the constitution.

However, the KRG has called the decision "unconstitutional".

"The rights of the [Iraqi] Kurdistan region to develop and produce hydrocarbon resources within the boundaries of the region continues as provided by the Federal Constitution and Kurdistan law," the ministry statement said.

"Oil produced in the Kurdistan region continues to be produced, to be shipped, to be sold, to be refined and to be consumed. Investment interest remains and production is expected to increase."

The last few years have been transformational in terms of the development of Kurdistan’s oil and gas sector.

Oil production in the region amounts to more than 450,000 barrels per day.

In the first half of 2021, the region exported 77.35 million barrels through the Kurdistan export pipeline and also allocated 3.95 million barrels to local refineries, according to an official government report audited by Deloitte.

The region generated $4.1 billion in revenue from crude export sales during the period, with net revenue after payments to oil producers, pipeline operators and repayments to the buyers reaching $1.74bn.

In March, Iraqi Kurdistan's Prime Minister Masrour Barzani said the region is also capable of making up for at least part of the oil shortfall that Europe is facing.

The move was conditional on whether “our partners in Baghdad are prepared to work with us", he told the Global Energy Forum at the time.

The KRG remains "fully committed to the process of mediation and dialogue to resolve outstanding differences" with the federal government on the management of oil and gas in Iraq, the ministry said in its latest statement.