Already reeling from the months-long suspension of its crude exports, Iraq's semiautonomous Kurdistan region may see its lifeblood oil sector further hemmed in with the passage of the federal budget.
The budget, passed June 12 following four days of late-night voting and intense debates within Iraq's parliament -- including on controversial amendments decried by Kurdish officials -- calls for $152 billion in spending, allocated for the years 2023, 2024 and 2025.
For Kurdistan, it essentially locks in the region to handing over 400,000 b/d of its crude production to federal oil marketer SOMO, in order to receive its agreed 12.6% of federal funding. To many Kurds, it paves the way for Baghdad to take more control over the region's oil exports and budget and could complicate plans to revive shuttered crude production.
As it stands, the Kurdistan Regional Government has no way of pumping anywhere close to 400,000 b/d, with its lone pipeline outlet, to the Turkish port of Ceyhan, shuttered over a political and financial dispute between Baghdad and Ankara.
"Regardless of what is agreed in the budget and the shenanigans in Parliament, resumption of oil export via Ceyhan is key for the Kurdistan Region of Iraq's oil sector," said Shwan Zulal, managing director of London-based Carduchi Consulting. "Needless to say, Iraq is losing an enormous amount of revenues and the KRG's deficit is only growing while the dispute over oil exports is unresolved."
The KRG had previously...
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