Page 10 - MEOG Week 07 2022

MEOG POLICY & SECURITY MEOG

Iraqi court scraps Kurdish oil legislation

IRAQ IRAQ’S Federal Supreme Court this week transferred to the latter.
declared that laws regulating the oil and gas In March last year, the Iraqi Cabinet passed an
industry in the country’s northern Kurdistan agreement pegging the 2021 budget at IQD130
region were unconstitutional and said the Kurd- trillion ($89.65bn) with deficit estimated at
istan Regional Government’s (KRG) contracts IQD28.7 trillion ($19.79bn). With the country
should be voided. 97%-reliant on oil exports, the budget is based
The announcement comes as Iraq works to on an oil price of $45 per barrel with total exports
form a new government and with a final agree- averaging 3.25mn bpd.
ment yet to be reached on the 2021 budget After numerous voting delays and heated
despite there being only a few weeks before the exchanges between political factions, agree-
2022 budget is scheduled to be passed. ment was reached on major stumbling blocks,
In a ruling seen by Middle East Oil & Gas predominantly the KRG’s revenues from oil
(MEOG), the court said that the KRG should exports and non-oil revenues including customs
deliver the “entire production of oil fields in fees and taxes.
Kurdistan” to the state oil marketer Somo. As in previous budgets, the KRG will receive
It added that all of the KRG’s contracts with 12.67% of the total, with this contingent on it
international oil companies and foreign govern- handing over the net revenues from 250,000
ments covering exploration, production, exports bpd of oil exports to Somo and giving the reve-
and sales were invalid and that details should be nues to the central treasury. Kurdish oil exports
provided to the Ministry of Oil in Baghdad for have long been seen by many in Baghdad as
auditing. unconstitutional.
Erbil currently exports around 340,000 bar- A similar flare-up in early 2021 saw 113 MPs,
rels per day (bpd) of crude independently from most of them Shi’ite, write to the head of the par-
Baghdad using a pipeline which links to the liament to ask that budget article 11 be redrafted
Turkish section of the Kirkuk-Ceyhan pipe- to force Erbil to provide all output to Somo.
line via metering stations at the border town of It suggested that section 2a of article 11
Fishkhabour. should read: “The Kurdistan region will abide by
The Avanna Dome and Bai Hassan assets sending 460,000 barrels of oil per day (BOPD)
north-west of Kirkuk had been under Kurdish to SOMO, and in case of overproduction, they
control for several years until Iraqi forces retook abide by sending the excess amount to Somo as
the fields following an independence referen- well.” While the KRG was never likely to agree to
dum held by the KRG. The fields are operated this, on that occasion Erbil committed to a min-
by the federal North Oil Co. and exports via imum production level of 460,000 bpd which it
Kirkuk-Ceyhan ran at 82,120 bpd in January. said it would transfer to Somo, but never did.
Independent oil sales have been a major A glimmer of hope came by way of regular
issue for relations between Baghdad and Erbil monthly disbursements of around $135mn to
and have proven thorny enough an issue to the KRG during the second half of 2021 despite
prevent billions of dollars in budget share being the lack of a comprehensive budget agreement.™

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