International oil firms stop operations as Iraqi-Kurdish oil dispute continues
Another international oil company announced on Wednesday that it is halting operations in Iraq’s Kurdistan Region following a court ruling that halted the autonomous region’s oil exports to Turkey.
In a statement, Norwegian oil and gas operator DNO said it had begun an “orderly shutdown of its oil fields operated in the Kurdistan region of Iraq.”
A Kurdistan Regional Government (KRG) official told Al-Monitor on Wednesday that there are still differences between the Iraqi federal government and the KRG, so talks are expected to continue.
Norway’s withdrawal move came after Canada-based Forza Petroleum announced on Monday that it had suspended production at its subsidiary in the Kurdistan Region. US-based HKN Energy said the same day that “it will be shutting down operations within a week unless a solution is reached,” according to a statement. However, HKN said it may continue operations if another arrangement is found, such as a sale to local refineries in the Kurdistan Region.
Reuters also reported that UK-based Genel Energy has suspended production in the Kurdistan Region.
Background: The oil stoppage follows a ruling by the International Chamber of Commerce last Thursday. The Paris-based court ruled in favor of Iraq in its case against the KRG independently shipping oil to Turkey, according to multiple reports. On Saturday, the flow of oil from the region to Turkey stopped, pending an agreement between the parties. The court’s decision has yet to be made public, however.
Why it’s important: Companies in the Kurdistan Region have been exporting oil to Turkey for years, and the issue has long been a sore point in relations with Baghdad. The dispute came to a head in February 2022, when Iraq’s Supreme Court ruled that the KRG’s 2007 oil and gas law — the basis for its independent energy exports — was unconstitutional. The KRG rejected the ruling and began discussions with the federal government on the issue.
Several international oil service companies left the Kurdistan Region last year amid legal threats from the federal government.
The talks between the KRG and Baghdad appeared to be going well until the ruling. KRG Prime Minister Masrour Barzani expressed his confidence that the issue would be worked out soon after the decision.
Our recent understandings with Baghdad laid the groundwork for us to overturn today’s arbitration ruling.
A team from the KRG will visit Baghdad for talks tomorrow to add to the goodwill of our discussions -mb.
— Masrour Barzani (@masrourbarzani) March 25, 2023
Iraqi Kurdish news outlet Rudaw reported earlier this month that the KRG and federal officials were discussing keeping the former coalition’s oil revenues in a joint account.
An agreement has not yet been reached, and a KRG official told Al-Monitor on Wednesday that Erbil will not accept the Iraqi State Organization for Oil Marketing which has full authority over revenues from the Kurdistan Region, which the KRG bypasses.
The KRG delegation went to Baghdad on Sunday to discuss the issues related to the court’s decision.
Both the Iraqi central government and the Kurdistan Regional Government depend on oil sales for most of their income. A long-term break in oil exports would damage the region’s economy. Like other parts of Iraq, the Kurdistan Region has economic problems such as inflation, poor services and lack of job opportunities, especially in rural areas.
More information: Turkey’s Energy Ministry said Tuesday that the International Chamber of Commerce ordered Iraq to pay compensation to Turkey for unspecified violations. The ministry also claimed that the court accepted most of its demands and rejected most of Iraq’s, the official Anadolu Agency reported.
A US State Department spokesman told reporters on Monday that the United States is pushing for the resumption of oil flows from Iraq and Turkey. The spokesman added that the United States is in contact with the KRG and Iraq on the issue.