Iraqi crude exports via Ceyhan remain halted as talks fail

Iraqi crude exports via the Turkish port of Ceyhan will remain suspended, after talks between the Kurdistan Regional Government, federal Iraqi authorities and international oil companies operating in the semiautonomous Kurdish region concluded without a deal, sources told Platts, part of S&P Global Commodity Insights, on March 3.

The KRG and Baghdad have been promising for weeks that a resumption of flows to Ceyhan through the Iraq-Turkey Pipeline was imminent, but the oil companies say they have not provided Iraqi state marketer SOMO with any crude to export, as they have yet to receive assurances about payments for money they are owed.

As well, the sides have not agreed on the scope of work an independent auditor, as required under a federal budget amendment passed in February, to evaluate the cost of production in the Kurdistan region.

Two company sources who spoke on condition of anonymity said it is vital that Baghdad agree to maintain their existing production-sharing contracts, rather than convert them to less lucrative technical service contracts, as SOMO has indicated it will seek to do./p>

The sources added that the budget law is vague in outlining the duties of the auditor, which needs to be defined before one is hired.

Federal authorities have reportedly sought to invalidate the production-sharing contracts, which the companies say have been upheld by Iraqi courts.

“As it stands right now, nothing is going to flow,” one company source said, asking not to be named due to the political sensitivity of the issue.

SOMO and Iraq’s oil ministry did not respond to requests for comment. The KRG could not be reached for comment.

As part of ongoing talks to restart exports, the international oil companies agreed to sell their oil via Iraq’s state marketer SOMO, but following the March 2 meeting, one source said the KRG has extended local sales for at least two days.

No international oil companies have so far supplied oil to SOMO, and two local Kurdish oil companies who did supply crude to the state marketer say they have not yet been paid – a point of contention at the meeting, according to a participant.

Baghdad has said it will guarantee payments for oil supplied to SOMO, but one oil company source expressed doubt, saying that a letter provided by the Ministry of Finance assuring payment is not sufficient.

According to sources at the meeting, the ministry of oil representatives also said they would only pay for Kurdish production if the barrels were exported, and the ministry would not pay the production cost – set at $16/b – for oil that is used domestically. This appears to be an ongoing point of discussion, according to the sources, with international oil companies advocating that all production is paid for by Baghdad.

Shuttered since March 2023, new pressure from US President Donald Trump to reopen the pipeline has spurred counterparts on both sides of the debate to action.

Sources close to the discussions said that direct US involvement has increased, though there were no US government officials in the meeting.

The meeting, originally scheduled for March 4, was brought forward to March 2 as Baghdad hastily seeks to reopen the pipeline.

Three of the 10 oil companies in the meeting agreed to resume exports, but the seven remaining companies were adamant that their terms be met, one source said.