KRG and Baghdad close to a deal to resume Iraqi oil exports to the north

    KRG and Baghdad close to a deal to resume Iraqi oil exports to the north

    LONDON/BAGHDAD – April 1, 2011 (Reuters) – The Kurdistan Regional Government and the Iraqi Federal Government (KRG), are close to a deal that will allow for the resumption of northern oil exports, four sources who were present at the talks told Reuters on Saturday.

    After losing an arbitration case brought against Baghdad, Turkey has stopped pipeline flows from Kirkuk fields in northern Iraq’s semiautonomous Kurdistan Region to its port at Ceyhan on March 25.

    The case involved Iraq accusing Turkey of violating their 1973 Pipeline Agreement by allowing the Kurdish government oil exports without Baghdad’s consent, between 2014 and 2018.

    Although the halted flow of approximately 450,000 barrels per daily (bpd), only 0.5% of global oil supply was affected, the stoppage, which forced oil companies operating in the region into halt production or move production into rapidly-filling storage tank tanks, still helped to boost oil prices to near $80/bbl last week.

    According to two sources, a senior Iraqi oil official as well as a KRG official, an initial agreement between the sides states that Iraq’s north oil exports will be jointly exported through Iraq’s state-owned marketing firm SOMO and the KRG ministry of natural resources (MNR).

    According to the KRG official, revenues will be deposited into an account managed and supervised by Baghdad by the MNR.

    Two sources claim that the preliminary agreement has been sent for approval to Iraq’s prime Minister. According to a KRG source, the deal will be confirmed by Monday.

    The KRG declined comment. The spokesperson for the Iraqi oil ministry could not be reached immediately outside of regular business hours.

    Baghdad and KRG have agreed that they will continue their meetings after oil exports resume to find solutions for other lingering issues.

    “[These include] The contracts of foreign companies operating in Kurdistan as well as the Kurdish debts,” a senior Iraqi oil official stated.

    Kurdistan, whose oil exports were at a standstill had stopped paying energy traders Vitol and Petraco for crude cargo deals worth $6 billion. Trading sources claimed that this was due to the fact that Kurdistan’s oil exports are now in limbo.

    The Turkish side has been a sticking point in the discussions thus far.

    The arbitration case regarding the 1973 pipeline agreement, for the period 2018 to 2020, remains open. One source stated that this could take up to two years to resolve.

    Three sources told Reuters that Turkey wants the case settled before reopening of the pipeline.

    According to a senior Turkish official, Turkey has not been informed about the KRG’s initial agreement with federal Iraqi officials. Discussions are ongoing.

    Rowena Edwards, Ahmed Rasheed, Orhan Coskun, and Maha el Dahan, all in London. Additional reporting by Can Sezer, Istanbul, and Ron Bousso, London. Editing by David Holmes

    Our Standards: The Thomson Reuters Trust Principles.

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