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Baghdad and KRG iron out issues to resume oil exports

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Total investment in the offshore gas field has reached $12 billion and is expected to hit $15 billion in three years

Iraq’s federal government and the Kurdistan Regional Government (KRG) have ironed out technical issues essential to resuming northern oil exports from the Turkish port of Ceyhan to international markets, sources told Reuters on Monday.

Turkey halted Iraq’s 450,000 bpd of northern exports on March 25 after an arbitration ruling by the International Chamber of Commerce (ICC), which ordered Turkey to pay Baghdad damages of $1.5 billion for unauthorised exports by the KRG between 2014 and 2018.

Baghdad and Erbil, the capital of Iraq’s semi-autonomous Kurdistan region, signed a temporary agreement on April 4 to restart northern oil exports, but continued to negotiate on technical issues before engaging with Turkey, two sources said.

These included marketing, pricing and destination.

Under the planned deal, state-owned marketer Somo will sign contracts with traders under power of attorney, while KRG crude will be restricted from heading to Asia and priced against Kirkuk official selling prices (OSPs), sources said.

Iraq’s oil ministry and the KRG did not immediately respond to requests for comment.

International oil companies have been invited to Erbil for a meeting with KRG Prime Minister Masrour Barzani on Tuesday morning, two separate sources told Reuters.

Discussions will focus on preparations for resuming exports, terms and conditions for pricing crude oil sales through Somo, the proposed mechanism for paying international oil firms’ debts and their share of future oil export sales, one source said.

However, the timeline for resuming Iraq’s northern oil exports remains unclear. The ball still remains in Turkey’s court, one of the sources said.

Sources previously told Reuters that Turkey is seeking in-person negotiations with Baghdad relating to the $1.5 billion it was ordered to pay Iraq in damages in the arbitration case.

Turkey also wants to resolve a second arbitration case regarding unauthorised flows since 2018 before it restarts them, the sources said.