Temporary deal ensures Kurdish oil exports can continue

April 4 (UPI) -- A temporary deal ensures that crude oil exports from the Kurdish north of Iraq can resume, the president of the regional government said Tuesday.

Masrour Barzani, the president of the Kurdistan Regional Government, met Tuesday in Baghdad with Iraqi President Abdul Latif Rashid to discuss matters related to the energy sector.

"The meeting witnessed praise for the agreement signed by the Kurdistan Regional Government and the federal government to export the region's oil, as well as the role played by the delegations of the two sides in reaching this agreement," a statement from the KRG read.

Energy companies working in the Kurdish provinces were ordered to send crude oil to storage facilities rather than export it through a pipeline running to the Turkish seaport at Ceyhan on the Mediterranean Sea.

Norwegian energy company DNO said the order followed "an arbitration ruling in favor of Iraq against Turkey and its state-owned pipeline operator BOTAS for transporting Kurdish oil without prior approval from Baghdad," the company explained.

The central government in Baghdad and the KRG have been at loggerheads for years. Iraq's central government filed a case at the International Chamber of Commerce in 2014, arguing Turkey was in violation of a 1973 bilateral agreement by allowing the KRG to send oil through the pipeline without Baghdad's consent.

DNO and a handful of others later halted production in the Kurdish north while government leaders discussed the export issue in Baghdad. Genel Energy has a working interest in the Tawke and Peshkabir fields alongside DNO.

Both fields combined for a production average of about 107,000 barrels of oil per day, a drop in the bucket relative to Iraq's full potential, though the outage was in part fueling a rally in crude oil prices. That rally was boosted this week by a surprise announcement from OPEC members, including Iraq, to trim production come May, ostensibly to ensure the market stabilizes.

Kurdistan's independent BasNews agency reported Tuesday that the agreement reached in Baghdad was in place only until a comprehensive hydrocarbon bill was passed in the country.

"I believe proper implementation of this agreement can become a basis for us and will help us in drafting an oil and gas bill," Barzani was quoted as saying.

Under the provisions of the agreement, Iraq's state-owned oil marketing company SOMO will sell Kurdish oil through Ceyhan and deposit the revenue in a bank counted managed by the Kurdish government and monitored by authorities in Baghdad.