Peregraf
The Iraqi Parliament has taken significant steps to amend the federal budget law, aiming to increase oil production in the Kurdistan Region and resume long-stalled oil exports from both Kurdistan and Kirkuk to international markets.
On Tuesday, November 26, 2024, Parliament announced its agenda, which includes the first reading of the proposed amendments to the three-year federal budget law (2023-2025). The session will also mark the first meeting chaired by the new Speaker of Parliament, Mahmoud Mashhadani.
The proposed amendments, particularly to Article 12 of the budget law, follow the Iraqi Council of Ministers' approval earlier this month to restart oil exports from the Kurdistan Region. These changes are set to adjust the cost of production and transportation for oil exported via the Kurdistan Region to $16 per barrel.
The Kurdistan Regional Government (KRG) Cabinet Secretary, Amanj Raheem, has outlined the key points of the proposed amendment to the oil law. According to the statement, the Federal Ministry of Finance will compensate the KRG for the costs associated with the production and transportation of oil produced in the Kurdistan region. This compensation will be drawn from sovereign expenditures allocated in the Iraqi federal budget.
One provision of the proposed amendment specifies that the estimated fair costs of production and transportation for each oil field will be calculated separately. This assessment will be conducted by an independent international technical consulting firm, to be selected jointly by the Federal Ministry of Oil and the KRG's Ministry of Natural Resources. The firm must be appointed within 60 days of the law's enactment. If disputes arise during this period, the Federal Council of Ministers will step in to appoint the consulting body.
While awaiting the consulting firm’s determination of production costs, "the Federal Ministry of Finance will provide interim compensation at an average rate of $16 per barrel".
The Association of the Petroleum Industry of Kurdistan (APIKUR) has welcomed the proposed amendments, highlighting their potential to resolve disputes that have hindered oil exports through the Iraq-Türkiye Pipeline (ITP) since March 2023. In a statement, APIKUR expressed optimism about recent developments, emphasizing its willingness to engage in discussions with both the federal and regional governments to finalize agreements that could stabilize Iraq’s oil export operations.
“We share the view of Iraqi Prime Minister Mohamed Shia al-Sudani and KRG Prime Minister Masrour Barzani that reopening the ITP would benefit all Iraqis,” APIKUR stated, emphasizing the national significance of restoring oil flow.
The halting of oil exports in March 2023 followed an International Court of Arbitration ruling in Paris that sided with Iraq in its complaint against Turkey. The prolonged shutdown has led to estimated losses exceeding $23 billion for Iraq and the Kurdistan Region.
The ongoing dispute has centered on the financial obligations owed to international oil companies operating in the Kurdistan Region. While the Iraqi government seeks to renegotiate the terms of payment per barrel and shift away from the Kurdistan Regional Government's (KRG) partnership-style contracts, companies have yet to agree to the proposed changes.
The amendments to the budget law are seen as a crucial step in resolving these issues and restoring oil exports, which are vital to Iraq’s economy. The next few weeks will determine whether these legislative efforts can bring long-term stability to Iraq's oil sector and rebuild trust with industry stakeholders.