A year after the shutdown of the Iraq-Türkiye oil pipeline, the conduit that once handled about 0.5% of the global oil supply is still stuck in limbo as legal and financial hurdles impede the resumption of flows.
According to the Iraqi Oil Ministry, foreign companies in the Kurdistan Regional Government (KRG), a semi-autonomous entity controlling Iraq's north, share responsibility for the delay in restarting crude exports, as they have failed to provide revised contracts.
About 450,000 barrels per day of crude once flowed through Iraq's northern oil export route via Türkiye, and its closure has led to the loss of roughly $11 billion to $12 billion for Iraq, the Association of the Petroleum Industry of Kurdistan (APIKUR) estimates.
A restart is not being discussed at the moment, one of the sources with knowledge of the matter told Reuters on Monday.
The Kirkuk-Ceyhan pipeline has been offline since March 2023, when Ankara halted flows following an arbitration ruling by the International Chamber of Commerce (ICC).
The ICC ordered Ankara to pay Baghdad damages of $1.5 billion over what it said were unauthorized exports by KRG between 2014 and 2018.
Türkiye, on the other hand, said the ICC had recognized most of Ankara's demands. The Energy Ministry said the chamber ordered Iraq to compensate Türkiye for several violations concerning the case.
In a statement, Iraq's Oil Ministry said foreign companies and the KRG authorities have still not submitted contracts for revision to the institution.
The government is seeking to revise such deals after a court ruled ones signed with the KRG were invalid, it said in response to a statement on Saturday by the Association of the Petroleum Industry of Kurdistan (APIKUR).
A second ongoing arbitration case covers the period from 2018 onward. Iraq and Türkiye remain embroiled in a protracted legal tussle, two sources familiar with litigation said.
Meanwhile, Iraq owes Türkiye minimum payments as long as the pipeline is technically operational – estimated by consultancy Wood Mackenzie at around $25 million per month – as part of the treaty, which theoretically provides an incentive to restart flows.
However, with Iraq deepening oil export cuts as part of the OPEC+ grouping of oil-producing nations' broader mission to support oil prices, a resumption of northern flows is not on the agenda, two sources told Reuters.
APIKUR said the government of Iraq had not "taken the required actions" to reopen the pipeline.
It added that "there has been no real progress" in reopening the flow despite meetings in Baghdad in January between representatives of the Iraqi government, the KRG, and international oil companies.
APIKUR said its member companies' "current commercial terms and economic model must be maintained" and called for payment assurances for past and future oil exports.
OPEC+ compliance
Reports from the OPEC and international secondary sources showed that crude production in the Kurdistan region was between 200,000 and 225,000 barrels per day (bpd) without the knowledge or approval of the ministry, it said.
Iraq said in March it would reduce its crude exports to 3.3 million barrels a day in the coming months to compensate for having exceeded its OPEC+ quota since January, a pledge that would cut shipments by 130,000 bpd from last month.
The OPEC+ has highlighted the importance of compliance even as oil prices have rallied this year.
"The lack of compliance to the oil policy approved by the federal government risks Iraq's reputation and endangers its international commitments," the ministry said.
Political landscape
Geopolitical factors are also a stumbling block.
The Iraqi government's strained relations with the Kurds, a feature of Iraq's political landscape since Saddam Hussein was toppled in the 2003 U.S.-led invasion, have recently soured further.
The United States, which would benefit from the pipeline restart lowering oil prices, has also made a handful of attempts to help broker a deal, said Michael Knights, an Iraq expert at the Washington Institute think-tank.
But with war raging in Ukraine and Gaza, the U.S. government is spread thin, he said. "They've tried to fix this problem about five or six times. And they're tired of it."
Also key to any restart deal are the international oil companies, which can currently only sell oil locally in KRG at a significant discount.
With more than $1 billion collectively owed in overdue payments for oil delivered between October 2022 and March 2023, according to APIKUR, the group continues to push for compensation in line with their contracts.
The companies have also collectively lost more than $1.5 billion in direct revenue since the closure, the group said.
Despite several meetings, neither APIKUR nor its members have received any formal proposals or agreements from Iraqi or KRG officials that would lead to a resumption of exports, an APIKUR spokesperson said.