Iraq strikes deal with Kurdish region to resume oil exports, PM confirms

Deal expected to allow exports of about 230,000 barrels per day to resume

Iraqi PM Mohammed Shia Al Sudani said the agreement would ensure fair distribution of wealth. AP

Iraq's Prime Minister Mohammed Shia Al Sudani announced on Thursday that the country had reached an agreement with the semi-autonomous Kurdish region to resume oil exports.

Under the US-organised agreement, Iraq's Oil Ministry will receive crude produced from fields in Kurdistan and export it through the Iraq–Turkey pipeline, Mr Al Sudani said in a post on X.

"This ensures fair distribution of wealth, diversification of export outlets and encouragement of investment," he added, before describing the deal as "an achievement 18 years in the making".

Crude exports from the semi-autonomous region were suspended in March 2023. The new deal is expected to enable about 230,000 barrels per day of exports to resume from Iraqi Kurdistan.

US Secretary of State Marco Rubio welcomed the deal and credited the Iraqi and Kurdish leadership for their "decisive efforts".

"This agreement will strengthen the mutually beneficial economic partnership between the United States and Iraq, encourage a more stable investment environment throughout Iraq for US companies, enhance regional energy security, and reinforce Iraq’s sovereignty," Mr Rubio said in a statement.

The agreement had been widely expected, after authorities in the Kurdish region said on Wednesday that they had fulfilled their obligations in co-ordination with Baghdad to resume oil exports.

The Ministry of Natural Resources, a Kurdistan Regional Government (KRG) department, said all the relevant domestic and foreign companies, except one overseas body, signed the agreement.

Control of the development of oil resources has been a key challenge for Iraq since the 2003 US-led invasion that toppled Saddam Hussein and helped the Kurds gain official semi-autonomy.

The Kurds argued that the Iraqi constitution allowed them to sign deals bypassing Baghdad, while the federal authorities maintained this was illegal. The issue forced Baghdad to withhold the KRG's share of the budget, plunging the region into economic hardship.

The Kirkuk-Ceyhan pipeline deal, in place since 1975, allowed Baghdad to export its crude oil to the international market through Ceyhan in Turkey.

However, the pipe has been offline since March 2023, after an arbitration court ruled Turkey breached the agreement when it allowed Iraqi-Kurdistan to pump crude without Baghdad's consent. The decision also stipulated Ankara should pay Iraq $1.5 billion in damages for unauthorised KRG exports between 2014 and 2018, which Turkey is appealing.

Turkey said in late 2023 that the pipeline was ready to receive Iraq's oil but Baghdad, the KRG and independent oil producers were unable to agree on terms.

In July this year, Turkey confirmed it would not be renewing the decades-old agreement, although officials later said they were discussing a broader energy agreement covering oil, gas, petrochemicals and electricity.

Iraq is the second-largest producer of oil in the Opec group, after Saudi Arabia. Its exports stood at about 3.38 million bpd in August, the Oil Ministry said. However, exports are expected to rise after the Opec+ group decided to ease output curbs further this month.

Brent, the benchmark for two thirds of the world's oil, was largely flat, down 0.16 per cent at $69.20 a barrel at 7.39pm UAE time on Thursday. West Texas Intermediate, which tracks US crude, was trading 0.22 per cent lower, at $64.85 per barrel.