• Only 149,778 barrels a day were sold through Iraq’s state-owned marketing company in June
  • This is down from 502,911 barrels a day in May
  • In December, Kurdistan region of northern Iraq agreed to sell 550,000 barrels a day through the state-owned marketing company

Mounting fiscal problems have led to a sharp decline in the Kurdistan Regional Government’s (KRG) oil sales through Iraq’s state-owned Oil Marketing Company (Somo), increasing tensions between Bhagdad and Erbil.

In June, only 149,778 barrels a day (b/d) were sold via Iraq’s state-owned marketing company, down from 502,911 b/d in May.

This is a long way below the 550,000 b/d the KRG committed to selling through Somo in December last year.

The decline in exports via Somo is due to a dramatic increase in direct oil sales. These rose from 74,710 b/d in May to 421,243 b/d in June.

In its report, the KRG said it “was obliged to increase direct oil sales due to the significant debt backlog arising from the budget cuts of 2014 imposed by the federal government, and the need to pay down debts accumulated in 2014 from pre-payments for oil sales”.

As part of the deal made in December, Iraq’s central government agreed to hand over its 17 per cent share of the Iraqi federal budget, something it has failed to do.

The KRG says the failure of Iraq’s central government to transfer the funding has been partly responsible for Kurdistan’s debt problems.

“The difficult economic situation facing the region has been exacerbated by the partial payments made to the KRG by the federal government,” it said.

Despite the continuing problems, the KRG said it remained committed to the deal made in 2015 and would continue to work with its counterparts in Baghdad to reach a resolution.

Overall exports from Iraqi Kurdistan in June averaged at 571,021 b/d in June, according to the monthly report published by the KRG on 2 July.

This is just 1.1 per cent less than the volume of oil exported in May, when a daily exports averaged at 577,621 barrels.

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