Baghdad court declares four KRG oil contracts void, service firms exit - IOR

6 Jul 2022

Quantum Commodity Intelligence - A Commercial Court in Baghdad has declared four oil contracts void this week, as the federal Oil Ministry intensifies its push to implement February's landmark ruling against the Kurdistan Regional Government (KRG) and its oil sector independence, according to the Iraq Oil Report.

In a hearing that was closed to the press, the Commercial Court handed down rulings declaring that four of the KRG's oil contracts are invalid, according to a senior Oil Ministry official.

Officials with knowledge of the proceedings told IOR the defendants in the four cases are Norway's DNO, UK-listed Genel, Canada's Western Zagros, and the US firm HKN.

The move comes amid the clampdown on oil firms operating in the semi-autonomous Kurdish region, as Iraq seeks to bring all aspects of production under Baghdad's control.

In a June 12 letter addressed to "all lead contractors and sub-contractors," which was seen by IOR, Hassan Muhammad Hassan, the director-general of the state-run Basra Oil Company (BOC), lays out two stark demands: that companies should submit a "pledge" not to work in Kurdistan and that any current contracts should be terminated within three months.

Recently, US companies Schlumberger, Baker Hughes and Halliburton have pledged to comply with a federal supreme court ruling and withdraw from Iraq's Kurdistan region.

The service companies have confirmed that they will not start new projects in the semi-autonomous Kurdistan region and are in the process of closing their existing tenders and contracts there, a ministry statement said.

Baghdad has also cracked down on oil firms buying oil directly from KRG, with refiners facing the prospect of being blacklisted by Iraq's SOMO if they continued to do business.

As a result, sources told Quantum that the Kirkuk blend crude sold by KRG is trading at double-digit discounts versus the North Sea Dated benchmark, despite Mediterranean refiners seeking alternatives to Russian barrels.

In February, Iraq's federal court deemed an oil and gas law regulating the oil industry in Iraqi Kurdistan unconstitutional and demanded that Kurdish authorities hand over crude supplies.