In a twist that is perhaps surprising even for the labyrinth of Iraqi politics, the Kurdistan Regional Government (KRG) has found itself blindsided by a delayed parliamentary vote on oil production costs. Despite earlier agreements, the Iraqi parliament opted to hit the brakes on approving the $16-per-barrel production and transport fee proposed in November, throwing yet another wrench into a pipeline that’s been as dormant as the region’s export ambitions for almost two years.
KRG Prime Minister Masrour Barzani, fresh from rubbing elbows at Davos, lamented the unexpected development, saying, “I was very surprised.” One assumes his surprise was mildly tempered by the region’s long history of political chess moves masquerading as negotiations.
This delay is the latest in a costly deadlock over the key oil pipeline linking Kurdistan to Turkey’s Ceyhan port, capable of moving 500,000 barrels per day.
That’s no small amount of change.
At today’s Brent crude price of roughly $75, the shut-in barrels equate to $37.5 million in forgone revenue daily. For context, over the 22-month shutdown (approximately 660 days), that’s a jaw-dropping $25 billion loss.
With stakes as high as these, haggling over $16 per barrel seems less like fiscal prudence and more like a power struggle.
For the federal government in Baghdad, this prolonged impasse presents an additional conundrum: reconciling obligations under OPEC+ with its inability to maximize output. Restarting the pipeline would undoubtedly bolster national revenues. But it might also breach production caps under OPEC, landing Iraq between a rock and a hard place.
Turkey insists the pipeline is operational, citing earthquake repairs completed long ago, but the blame game continues. The question isn’t just when this gridlock will end, but how much revenue both governments can afford to lose before the region’s most lucrative resource flows freely again.
By Julianne Geiger for Oilprice.com