Another international oil company announced on Wednesday it is stopping operations in the Kurdistan Region of Iraq following a court ruling that halted the autonomous region’s oil exports to Turkey.
In a statement, the Norwegian oil and gas operator DNO said it had begun an “orderly shutdown of its operated oil fields in the Kurdistan region of Iraq."
A Kurdistan Regional Government (KRG) official told Al-Monitor on Wednesday that there are still differences between the Iraqi federal government and the KRG, so talks are expected to continue.
The Norwegian withdrawal move followed the Canada-based Forza Petroleum on Monday announcing its subsidiary in the Kurdistan Region had suspended production. The US-based HKN Energy said the same day that it “will be shutting in operations within a week if no resolution is reached,” according to a statement. However, HKN said it could continue operations if another arrangement is found, such as selling to local refineries in the Kurdistan Region.
Reuters also reported that the UK-based Genel Energy has suspended production in the Kurdistan Region.
Background: The stoppage of oil follows a ruling from the International Chamber of Commerce last Thursday. The Paris-based court ruled in Iraq’s favor regarding its case against the KRG independently sending oil to Turkey, according to multiple reports. On Saturday, oil flows from the region to Turkey stopped, pending an agreement between the parties. The court's decision has yet to be made public, however.
Why it matters: Companies in the Kurdistan Region have been exporting oil to Turkey for years, and the issue has long been a sore point in relations with Baghdad. The dispute heated up in February 2022, when the Iraqi Supreme Court ruled that the KRG’s 2007 oil and gas law — the basis for its independent energy exports — was unconstitutional. The KRG rejected the ruling and began discussions with the federal government on the issue.
Some international oil service companies left the Kurdistan Region last year amid legal threats from the federal government.
The talks between the KRG and Baghdad had seemed to be going well until the ruling. KRG Prime Minister Masrour Barzani expressed confidence that the issue would be worked out soon following the decision.
Our recent understandings with Baghdad have laid the groundwork for us to overcome the arbitration ruling today.— Masrour Barzani (@masrourbarzani) March 25, 2023
A team from the KRG will visit Baghdad for talks tomorrow to build on the goodwill of our discussions -mb.
The Kurdish Iraqi news outlet Rudaw reported earlier this month that KRG and federal officials were discussing holding the former’s oil revenues in a joint account.
An agreement has yet to be reached, and a KRG official told Al-Monitor on Wednesday that Erbil will not accept Iraq’s State Organization for Marketing of Oil having full authority over revenues from the Kurdistan Region, thus bypassing the KRG.
A KRG delegation went to Baghdad on Sunday to discuss the issues surrounding the court decision.
Both the central Iraqi government and Kurdistan Regional Government are dependent on oil sales for the bulk of their revenue. A long-term pause in oil exports would hurt the region’s economy. Like other parts of Iraq, the Kurdistan Region has economic problems such as inflation, poor services and a lack of job opportunities, particularly in rural areas.
Know more: Turkey's Energy Ministry said Tuesday that the International Chamber of Commerce ordered Iraq to pay Turkey compensation for unspecified violations. The ministry also claimed the court had accepted most of its demands and rejected most of Iraq's claims, the official Anadolu Agency reported.
A US State Department spokesperson told reporters on Monday that the United States is urging the resumption of oil flows from Iraq and Turkey. The spokesperson added that the US is engaging with the KRG and Iraq on the issue.