EIA: Iraq's energy sector struggles lead to $15 billion financial loss in 2024

Shafaq News/ Iraq faces a $15 billion loss in the energy sector amidst struggles to resolve key oil issues in 2024, the US Energy Information Administration (EIA) said.

According to the EIA, Iraq suffered setbacks in several energy files, despite persistent efforts to overcome obstacles.

The resumption of oil exports from the Kurdistan region to global markets became one of the most significant challenges faced by the country, contributing to the substantial financial losses.

Negotiations led by Baghdad’s federal government with the Kurdistan Regional Government (KRG) and oil companies were unable to reach an agreement to return more than 400,000 bpd of Kurdish oil to global markets, extending the crisis for more than 21 months.

Despite the Iraqi government's approval of a budgetary measure to compensate the KRG for oil production and transportation costs, capped at $16 per barrel for foreign oil companies, this provision has not yet passed through parliament.

Kurdish oil exports stopped in March 2023 after an international arbitration court ruled in favor of Baghdad, ordering Turkiye to pay $1.5 billion for the unauthorized transport of Kurdish oil via the Ceyhan pipeline between 2014 and 2018.

Negotiations to restart the pipeline failed due to conflicting demands from the KRG, foreign oil companies, and the federal government. The halt in exports has led to financial losses for Iraq, estimated at over $15 billion by October 2024.

Complying with OPEC+ production cuts was another significant hurdle. Iraq struggled to meet its production quota under the OPEC+ agreement, with its output exceeding the allowable limit throughout 2024.

Since January, Iraq's oil production has surpassed its OPEC+ limit by about 1.44 million barrels per day. Baghdad has pledged to make up for the excess production, aiming to return to its 4 million bpd target by September 2025.

Iraq, along with seven other OPEC+ members, is part of voluntary production cuts totaling 2.2 million bpd, announced in November 2023 and extended through March 2025, with gradual returns expected over 18 months.

Additionally, Iraq participates in the extended voluntary cuts of 1.65 million bpd, implemented in May 2023 and extended until December 2026. Iraq's share of these cuts is approximately 431,000 bpd, including both the 2.2 million bpd and 1.65 million bpd cuts.