KRG partially honouring crude supply deal with Baghdad

Iraq's semi-autonomous Kurdistan region is supplying refineries in the north of the country with 50,000 b/d of crude, a source told Argus, partially meeting its commitments even though the shut in of exports through Turkey's Ceyhan port is now in its fifth month.

Under a deal with Baghdad, the Kurdistan Regional Government (KRG) must supply at least 400,000 b/d to Iraq's storage facilities at Ceyhan, with Baghdad's state-owned Somo holding marketing rights. If oil cannot be exported through Ceyhan or other designated ports, it must be redirected for domestic refining, including refineries in the country's north.

In return, the KRG has been allocated 12.6pc of the Iraqi budget, to be paid through monthly transfers.

While the source said production could be a bit higher than the 50,000 b/d supplied to the KAR refineries, the KRG remains far from hitting the 400,000 b/d monthly target. It remains to be seen how the federal government will compensate Erbil over the current crude transfer levels.

Turkey and Iraq remain in "deliberative talks" regarding the restart of around 470,000 b/d of northern Iraqi crude exports. The pipeline that transports crude from Iraq's Kurdistan region to Ceyhan for onward delivery to export markets was shut on 25 March. Turkey ordered the halt after an arbitration court at the Paris-based International Chamber of Commerce ruled Ankara had breached a 1973 agreement with Iraq by allowing crude marketed by the KRG to be exported without Baghdad's consent. Turkey has held out on allowing a resumption while it seeks concessions from Iraq regarding the court ruling and another arbitration case.

Iraqi prime minister Mohammed Shia al-Sudani's office on 25 July said Turkish President Recep Tayyep Erdogan is scheduled to visit Baghdad, without giving a date. A source said this will not take place next week.

By Bachar Halabi