Iraqi government and Kurdish officials say deal is close to resume oil exports

Around 450,000 barrels per day have been stopped from leaving Kurdish and northern Kirkuk fields amid Iraq’s arbitration case against Turkey

Crude oil was being exported through a pipeline to the Turkish port of Ceyhan. Reuters

Baghdad and the semi-autonomous Kurdish region are still ironing out a final deal to resume crude oil exports from northern Iraq, Iraq's Oil Ministry said on Sunday.

Earlier, a Kurdish official announced both sides had reached the deal, but gave no details.

Last week, Iraq halted the operation of a pipeline, stopping about 450,000 barrels per day (bpd) being exported from the Kurdistan region and northern Kirkuk fields, after the country won a long-standing arbitration case against Turkey.

The case, filed at the Paris-based International Chamber of Commerce, centred on the legality of Kurdistan’s unilateral oil exports through Turkey, which Iraq disputed.

In its lawsuit filed in 2014, Baghdad accused Turkey of breaching a 1973 joint agreement by allowing the Kurdish Regional Government (KRG) to export oil through a pipeline to the Turkish port of Ceyhan.

In defiance of Baghdad, Erbil and Ankara continued their co-operation.

Following several meetings since late last month, “an initial agreement has been reached to resume oil exports through Ceyhan this week”, the head of the KRG's foreign media affairs, Lawk Ghafuri, said in a statement.

"This agreement will remain in effect until the oil and gas law bill is approved by Iraqi Parliament," Mr Ghafuri added, referring to the draft law both sides have been trying to approve on since 2007.

An Iraqi oil official in Baghdad denied any such agreement had been reached, saying merely that "talks were under way and the deal has not been finalised yet".

By late afternoon on Sunday, the Federal Oil Minister in Baghdad issued a statement, saying: "in light of the positive atmosphere and mutual understandings, the Ministry hopes to agree on resuming oil exports soon."

"If the final agreement is reached in accordance with the new understandings for oil exports, it will be announced in due course," the statement added.

Of the 450,000 bpd of exports halted, about 370,000 were from oilfields in Iraqi Kurdistan and 80,000 were from northern Kirkuk, a cluster of oilfields controlled by the federal government. The combined total comprises 0.5 per cent of global production.

The right to develop natural resources is one of many issues outstanding between Iraq's Kurds and the Arab-dominated central government since the 2003, US-led invasion that toppled the Saddam Hussein regime.

Since then, the Kurdish authorities have signed dozens of oil and gas deals with foreign companies and countries.

However, Baghdad has maintained that those deals are illegal because it did not approve them. The Kurds argue that the constitution allows them to strike deals without going to Iraq's federal Ministry of Oil.

Excluding output from Kurdistan, Iraq, Opec’s second-largest producer, exported an average of 3.255 million barrels a day last month.