Iraq's oil minister proposes creating Kurdish crude upstream, export company

Dubai — Iraq's oil minister has proposed creating a company to manage upstream and export operations in the semi-autonomous Kurdish region as Erbil and Baghdad hammer out an agreement to resolve their oil dispute.

The proposed company would be technically and administratively linked to the Kurdistan Regional Government and the federal oil ministry, Ihsan Ismaael told the state-owned Iraqi News Agency Oct. 13.

There is a positive understanding between Erbil and Baghdad regarding the production and exports of Kurdish oil as part of ongoing negotiations over the region's oil policy.

Erbil and Baghdad have a long running dispute over the distribution of oil revenue and the independent crude policy of the KRG, which sells and markets its own oil and has production sharing agreements with oil companies that are not recognized by the federal government.

Iraqi officials, including deputy prime minister Ali Allawi, have accused the KRG of failing to adhere to OPEC+ output cuts, prompting the federal government to make up for overproduction in the Kurdish region north of the country.

The KRG denied accusations that it is not complying with the cuts in a Sept. 24 statement.

Quota buster

Baghdad and Erbil were supposed to share the OPEC + production cuts proportionally, but SOMO figures released Sept. 10 showed the KRG achieved just 79% compliance with its quota in August, while the federal government hit 102%.

Iraq lowered its crude oil output in August to 3.578 million b/d, SOMO figures showed, but remained above the 3.404 million b/d it had pledged to hold production to under the OPEC+ supply accord during that month.

However, the OPEC+ alliance has received plans from quota busters, including Iraq, to implement extra reductions until the end of 2020. Of the 2.375 million b/d of so-called "compensation cuts," the largest volume will come from Iraq. The OPEC producer's 698,000 b/d of catch-up cuts will be divided into 203,000 b/d in September and 165,000 b/d in October, November and December, according to an internal document seen by S&P Global Platts.