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Turkey Tries To Broker Revenue-Sharing Deal On Kurdish Oil

Turkey is in the process of brokering a deal between the central Iraqi government and the authorities of the semi-autonomous Kurdistan region on sharing the revenues from crude oil production in the northern Iraqi region.

The deal, according to Bloomberg, which cited unnamed Turkish officials, would help resume the operation of the pipeline that takes the crude from Kurdistan to the Turkish port of Ceyhan.

Kurdistan’s crude oil exports were halted on March 25 by the federal government of Iraq. The halt came after the International Chamber of Commerce ruled in favor of Iraq against Turkey in a dispute over crude flows from Kurdistan.

Iraq had argued that Turkey shouldn’t allow Kurdish oil exports via the Iraq-Turkey pipeline and the Turkish port of Ceyhan without approval from the federal government of Iraq. The ICC ruled that Turkey owned Iraq damages to the tune of $1.5 billion.

The suspension of oil flows out of northern Iraq and Kurdistan via Ceyhan forced companies to either curtail or suspend production because of limited capacity at storage tanks. At the time, this pushed oil prices higher for a while.

Iraq, OPEC’s second-largest producer after Saudi Arabia, is currently exporting oil only via its southern oil export terminals. Around 450,000 bpd of exports from the northern fields and from Kurdistan continue to be shut in due to a dispute over who should authorize the Kurdish exports.

Since then, attempts to reach a final agreement and restart the pipeline have not really stopped but they have also failed to produce any specific results. According to Turkey, the damages are an internal Iraqi matter that Baghdad and Erbil should settle. Baghdad, on the other hand, wants Turkey to collect the dues from Erbil. Erbil, finally, has laid a claim to all oil export revenues for crude produced in Kurdistan.

By Charles Kennedy for Oilprice.com

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