SOMO Confirms Completion of Oil Contracts, Pushes for Resumption of Kurdistan Exports

Peregraf

The State Oil Marketing Organization (SOMO) announced on Tuesday that it has completed all contracts and commitments with companies purchasing crude oil from the Kurdistan Region, stressing that renewed exports from the Kurdistan region would restore Iraq’s role as a key supplier to Europe.

Ali Nazar Al-Shatri, SOMO’s Director General, told the Iraqi News Agency (INA) that "what occurred in the Kurdistan Region was a matter of understanding and establishing working mechanisms," adding that "the law applies to everyone." He underlined that both Baghdad and Erbil are now working within a unified framework, as "the oil produced is Iraqi oil, with the distinction being only in the relationship between the Kurdistan Regional Government (KRG) and the operating companies."

According to Al-Shatri, ongoing talks between the Iraqi Federal Government, the KRG, and producing companies aim to finalize mechanisms under the 2025 budget law to restart crude pumping to Turkey’s Ceyhan port. He confirmed that oil produced in the Kurdistan Region is currently used internally, with exports to resume once surplus volumes become available.

"The resumption of exports will restore Iraq’s prestige as a primary source for the underserved European market, especially in light of the Russia-Europe crisis," Al-Shatri said, pointing out that SOMO stands ready to receive quantities once handed over by the authorities of Kurdistan Region.

Under a recent agreement, the KRG is required to deliver at least 230,000 barrels per day to SOMO, in exchange for \$16 per barrel in cash or derivatives. At present, Kurdistan Region’s production is about 270,000 barrels per day, with 50,000 would be reserved for domestic needs and the remaining amount should be transferred to SOMO for export. Officials in Erbil have cited drone attacks as a factor limiting full delivery but apparently reiterated their commitment to hand over available volumes.

Iraqi Foreign Minister and Deputy Prime Minister Fuad Hussein said on Saturday that negotiations between Baghdad and Erbil over oil and non-oil revenues are making progress. "There is rapprochement between the KRG and the federal government," he told reporters, noting that joint committees are expected to finalize their reports this week, paving the way for Cabinet approval and the release of long-delayed KRG salary payments.

Oil exports from the Kurdistan Region and Kirkuk have been halted since March 25, 2023, following an arbitration ruling in Iraq’s favor against independent Kurdish sales via Ceyhan. The prolonged freeze has caused severe financial losses—Peregraf estimates over \$28 billion to date, with some figures suggesting Baghdad and Erbil combined losses could exceed \$50 billion.

A breakthrough agreement signed on August 11 opened the door for resumption under new terms, granting the KRG 50,000 barrels daily for domestic use while transferring the remainder to SOMO for export. Still, challenges persist, including the recovery of production after July’s drone strikes and international oil companies’ demands for guarantees on arrears and cost recovery.

Meanwhile, KRG public sector workers remain under pressure, with many only now receiving June salaries in September. Observers say that the success of ongoing talks on oil and non-oil revenues will be crucial not only for stabilizing exports but also for easing the economic hardship facing ordinary citizens.