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The federal Iraqi government has proposed the establishment of a new oil company that will be managed jointly by Baghdad and Erbil to operate crude oil production and exports from the semi-autonomous region of Kurdistan, Iraqi media have reported.
The proposal is part of ongoing talks between the central Iraqi government and the Kurdish government aimed at mending bilateral relations after an ill-fated independence referendum for the region a few years ago. The referendum saw Iraqi troops return to mostly self-government Kurdistan and regain control of oil fields in the region.
Kurdistan, in northern Iraq, is home to some of the country's most prolific oil fields.
"Positive understandings between the central government and the Kurdistan Region regarding the production and export of oil produced in the fields of the latter have been reached," said Iraqi oil minister Ihsan Abdul Jabbar. He added that "The ongoing talks between Baghdad and Erbil show new visions and ideas for the region to manage this file."
Iraq is OPEC's second-largest crude oil producer. As such, it was required to cut one of the largest portions of national oil outputs under the April deal reached by OPEC+. The Kurdistan region accounts for a sizeable amount of this total. As of April, the region was exporting about 500,000 bpd of crude oil. Half of these were going to Iraq's state oil marketing company, SOMO, under an earlier agreement between the central government and the one in Kurdistan.
Later in the year, when Iraq once again fell short of production targets, the Baghdad government had to ask Erbil to contribute to the compensatory cuts enforced on it by OPEC leader Saudi Arabia, by cutting production by some 120,000 bpd.
Under the new proposal, the joint company would be based in Kurdistan and will be in charge of both production and exports.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.