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Oil production in Iraq’s semi-autonomous Kurdistan Regional Government (KRG)-ruled region has continued to drop, extending a stoppage that has lasted nearly two months. Export flows to Türkiye's Ceyhan port show few signs of restarting months after Ankara halted Iraq’s 450,000 barrels per day (bpd) of exports through the Iraq-Türkiye pipeline on March 25 following an ICC ruling that Türkiye should pay Baghdad damages of $1.5 billion for unauthorized exports by the KRG.
The stoppage is estimated to have cost the KRG more than $1.5 billion, with fields that had continued producing are now offline or operating with reduced output. About 10 days ago, The Iraqi State Organization for Marketing of Oil notified the Turkish state energy company Petroleum Pipeline Corporation of resuming export and loading operations. Lat month, the Iraqi federal government and the Kurdish regional government signed an agreement to resume Kurdish oil exports via Türkiye. However, Türkiye continued to halt the oil flow, saying it wants to negotiate the arbitration before exports resume. Iraq's economy relies heavily on crude oil exports, with crude accounting for more than 90 percent of the country's revenues.
The delay in resumption of exports comes at a time when French oil and gas multinational TotalEnergies (NYSE:TTE) finally reached an agreement with the government of Iraq to start a long-delayed $27 billion energy project.
The two parties first struck the deal back in 2021 that would see Total build four oil, gas and renewables projects in southern Iraq over 25 years with an initial investment of $10 billion. Unfortunately the giant project was shelved amid disputes and squabbling between Iraqi politicians over terms of the deal.
However, last month Iraq agreed to a smaller 30% stake in the project, setting in motion a deal that could lure foreign investment back into the country. After years of instability, Iraq has been enjoying a period of relative stability, increasing the chances of foreign investors returning to the country.
"The government of Iraq confirmed the whole contract, no modification at all ... so that was for me more than good news," Total Chief Executive Patrick Pouyanne has told Reuters.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.