Iraq is urging the Kurdistan Regional Government (KRG) to curb crude production to help Baghdad adhere with its now lower Opec+ production quota, even though it is unclear how much output there is from the semiautonomous northern territory.
A person with knowledge of the matter told Argus that Iraq's prime minister Mohammed Shia al-Sudani has sent a letter to the KRG urging it to cut output. This comes with Iraq having produced above its Opec+ quota since July and with a new, lower ceiling being implemented from this month. Baghdad's latest push comes as key Opec+ members try to convince the crude market that the alliance will deliver fully on its new round of cuts.
Latest Argus estimates put Iraq's production at 4.33mn b/d in December, 110,000 b/d above its target for that month of 4.22mn b/d. This target is now 4mn b/d until the end of March, a result of the Opec+ meeting at the end of November.
Asking the KRG to curb northern production would allow Iraq to concentrate on its output from the south, which is exported as Basrah grades. But it is unclear how much is being produced in KRG territory. State-owned Somo's December production figures, which assume no output from the northern region, put output at 4.09mn b/d. This would suggest around 240,000 b/d in the north going by Argus' estimate for whole-country production. Companies operating in the region have said output is rising.
Deal breakdown
Output from KRG territory was around 470,000 b/d — 400,000 b/d marketed by the KRG and around 70,000 b/d by Somo — before March 2023, when the export pipeline to Ceyhan, Turkey was shut by a dispute between Ankara and Baghdad.
A temporary deal in April 2023 stipulated the KRG must supply at least 400,000 b/d to Iraq's storage facilities at Ceyhan, with 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.
Erbil isn't supplying Baghdad with the quantities agreed on, the source said. Baghdad, however, is holding back budget allocations from Erbil which is effectively increasing pressure on the KRG as anger by civil servants mount over major delays in their salaries disbursement.
Iraq's federal government agreed on 14 January to allocate 618 billion dinars ($420mn) to cover for the January salaries of the Kurdistan region's civil servants, although they still haven't received them for the last 3 months of 2023.
By Bachar Halabi
