Eight IOCs, Baghdad and Erbil Strike Deal to Restart Kurdish Crude Exports

After 30 months of closed valves, lost revenue and finger-pointing, the pipe is about to run again. Eight international oil companies operating in the Kurdistan Region of Iraq reached an agreement in principle with the federal government in Baghdad and the Kurdistan Regional Government in Erbil to restart crude exports through the Iraq-Turkiye pipeline. The terms are blunt and specific: the companies will deliver their barrels to SOMO, Iraq's state oil marketer, and be paid a flat $16 a barrel to cover production and transport during an interim period of roughly three months.

The eight are HKN Energy, DNO, WesternZagros, Hunt Oil, Gulf Keystone Petroleum, ShaMaran Petroleum, Genel Energy and Kalegran. Together with the KRG's own share, they account for more than 90 percent of the region's output. That coverage is what makes this deal matter. A restart that left out the biggest producers would have been a headline with no oil behind it. This one has the oil.

What the $16 actually buys

The number is the whole ballgame. Under the interim mechanism, for every barrel SOMO sells, $16 is set aside for the producing companies to recover the cost of getting that barrel out of the ground and into the pipe. The rest of the sale proceeds flow to SOMO and, through it, to the Iraqi treasury. In the version described by the companies and by APIKUR, the association that represents them, that $16 lands in an escrow account and is distributed to producers in proportion to what each delivered.

It is not a return on investment and nobody is pretending it is. It is a cost-recovery figure meant to keep the operators whole enough to keep pumping while the two governments hammer out a durable payment arrangement. The companies have said for two years that they will not export without a clear, contractual guarantee of payment. Getting stiffed on invoices is exactly what soured the last arrangement. The $16 fixed rate, paid into escrow, is the mechanism that lets them say yes without betting the balance sheet on Baghdad's good intentions.

Two and a half years of a dry pipe

The Iraq-Turkiye pipeline has been shut since March 2023. The trigger was an arbitration ruling from the International Chamber of Commerce that found Turkey had breached a 1973 transit agreement by letting the KRG ship crude to the port of Ceyhan without Baghdad's sign-off. Ankara shut the line, Baghdad and Erbil each dug in, and the region's roughly 400,000 barrels a day of pipeline exports went to zero.

The cost of that standoff was not abstract. Producers wrote down assets and idled fields. The KRG struggled to pay salaries. Baghdad lost a revenue stream it counts in its budget. Some Kurdish crude kept moving by truck at heavy discounts, but that is a trickle next to a 230,000-barrel-a-day pipeline. Every month the line stayed dark, all three parties bled money and none could force the others to move. The deadlock held because breaking it required all sides to accept terms none of them loved.

The legal scaffolding that made it possible

This agreement did not appear from nowhere. It rests on an amendment to Iraq's budget law passed in February 2025, which set the framework for paying IOCs a per-barrel cost recovery figure and, crucially, moved Baghdad toward recognizing the production-sharing contracts the KRG signed with foreign operators. Recognition of those contracts has been the core of the dispute for more than a decade. Baghdad long argued the KRG had no authority to sign them; the companies argued the contracts were valid and their costs were real.

The February amendment gave both sides a document to point at. It let Baghdad say the payments follow federal law, and it let the companies say their contracts and costs are acknowledged. The $16 figure is written into that legal architecture, not improvised in a back room. That is a large part of why the operators were willing to sign this time when earlier restart attempts collapsed.

How the barrels move now

Under the arrangement, the KRG delivers roughly 190,000 barrels a day of crude to SOMO, with about 50,000 barrels a day held back for local consumption inside the region. SOMO markets the pipeline barrels through a nominated trader, and the crude reaches the Mediterranean at Ceyhan. The pipeline's working capacity in this phase is around 230,000 barrels a day.

Not every operator crossed the line at the same instant. Reporting around the announcement noted that DNO and its partner Genel had not immediately signed while other companies already had, a reminder that eight separate boards with eight separate risk appetites had to say yes independently. HKN Energy's chief executive, Russell Freeman, framed it as a shared solution rather than a surrender: he said the companies were confident they had found a win-win, and that once all stakeholders signed, exports from the Kurdistan Region would resume through the pipeline.

What to watch

The word doing the heavy lifting in every statement is interim. The $16 rate is set for about three months. That buys time; it does not settle the underlying fight over who controls Kurdish oil and how producers get paid over the life of their contracts. The escrow mechanism has to actually pay out on schedule. Producers have been burned before, and the first real test is whether money for the first liftings lands in the promised window rather than vanishing into a dispute over reconciliation.

There is also the question of what happens at the end of the interim period. If Baghdad and Erbil use the three months to convert this patch into a lasting formula, the pipeline stays open and the region's output can climb back toward pre-2023 levels. If the two sides revert to type, the same standoff that emptied the line for 30 months is waiting. For now, though, the valves are turning. After two and a half years of a dry pipe, Kurdish crude is heading to Ceyhan again, and eight companies that had all but written off the export route are loading tankers.