• Iraqi Prime Minister Sudani has ordered oil companies in the Kurdistan region to resume operations starting Thursday, aiming to restart Kurdish oil exports after a prolonged halt.
  • The move follows negotiations between Baghdad and the Kurdistan Regional Government (KRG) to reestablish flows through the Iraq-Turkey pipeline to Ceyhan port, under federal oversight.
  • This development could bolster Iraq's fiscal receipts and ease tensions between the central government and Erbil, though operational details remain unclear.

A Breakthrough in Baghdad-Erbil Oil Dispute

Iraqi Prime Minister Mohammed Shia al-Sudani has directed oil companies operating in the Kurdistan region to resume operations starting Thursday, according to a government statement. The order signals a potential restart of Kurdish oil exports, which have been suspended for months due to disputes over contractual terms and revenue sharing between Baghdad and the Kurdistan Regional Government (KRG).

Sources familiar with the matter indicate that the resumption is part of a negotiated framework to bring Kurdish oil exports under the oversight of Iraq's state oil marketer SOMO. The exports are expected to flow through the Kirkuk-Ceyhan pipeline to Turkey's Mediterranean port, a route that has been offline since March 2023 following an arbitration ruling.

"This decision reflects our commitment to overcoming obstacles and ensuring the rights of all Iraqis," a senior Iraqi oil ministry official said, speaking on condition of anonymity. The official added that technical teams are working to verify pipeline readiness and coordinate with international oil companies operating in Kurdistan.

Key Players and Economic Stakes

Major oil producers in Kurdistan, including DNO (DNO), Genel Energy, and Gulf Keystone, are likely to be directly affected. These companies have faced production cuts and revenue losses since exports were halted. A restart could provide much-needed cash flow to both the KRG and the federal government, which has struggled with budget deficits.

Analysts estimate that Kurdish oil exports could reach 400,000 barrels per day once fully operational, providing a significant boost to Iraq's overall output. However, questions remain about payment terms for past arrears and the long-term viability of the agreement.

"This is a positive step, but the devil is in the details," said an energy consultant familiar with the region. "Without clear mechanisms for revenue distribution and contract validation, the risk of future disruptions remains high."

Political and Regional Implications

The resumption order comes amid ongoing tensions between Baghdad and Erbil over oil revenue sharing and constitutional authority. Previous agreements have faltered due to disagreements over contracts signed by the KRG without federal approval.

Turkey, a key transit country for Iraqi oil, has also been involved in negotiations. Ankara has its own interests in maintaining stable oil flows through its territory and has supported dialogue between Baghdad and Erbil.

Efforts to restart exports have been complicated by legal challenges and infrastructure issues. The pipeline has been idle for over a year, and repairs may be needed before full operations resume. A spokesperson for the KRG's Ministry of Natural Resources confirmed that they are cooperating with Baghdad to implement the order but declined to provide a timeline for actual exports.

Market and Industry Reaction

Oil markets reacted mutedly to the news, with Brent crude prices holding steady near $85 per barrel. Traders noted that the resumption had been anticipated and that actual volumes may take time to materialize.

Shares of Kurdish-focused oil companies edged higher in early trading. DNO ASA rose 2.3% in Oslo, while Gulf Keystone Petroleum gained 1.8% in London.

Looking Ahead

While the order represents a breakthrough after months of deadlock, industry observers caution that implementation remains challenging. The Iraqi oil ministry is expected to issue further clarifications on the export mechanism and payment terms in the coming days.

Without a sustained agreement, the risk of renewed disruption looms large. The region's oil sector has been a pawn in broader political struggles, and any restart will require continued cooperation between Baghdad, Erbil, and international oil companies.

Correction: An earlier version of this article misstated the date of the pipeline shutdown. The Kirkuk-Ceyhan pipeline has been non-operational since March 2023.