Iraqi government approves proposal to amend budget law to compensate the KRG

Shafaq News/ The Iraqi Cabinet on Tuesday approved a proposal to amend Article (12/ Second/ C) of the Three-Year Budget Law No. 13 of 2023, on covering the Kurdistan Regional Government’s (KRG) oil production and transportation expenses from sovereign expenditures.

Iraqi PM’s media office revealed in a statement that “the Federal Ministry of Finance will compensate the KRG from sovereign expenditures for the production and transportation costs of oil produced in the region and received by the State Oil Marketing Organization (SOMO) or the Federal Ministry of Oil, based on subparagraphs (a) and (b). Production and transportation costs for each field will be estimated fairly by an internationally specialized consulting entity, as agreed upon by the Federal Ministry of Oil and the KRG’s Ministry of Natural Resources, within 60 days of the law’s enactment. If no agreement is reached within this period, the Federal Council of Ministers will determine the consulting entity.”

The PM media office announce that the entities aforementioned “will submit estimated production and transportation costs to the Federal Ministries of Oil and Finance and the KRG. These will be adopted for the purposes of this law, with compensation calculated based on the estimated cost per barrel, multiplied by the number of barrels received as per subparagraphs (a) and (b). The Federal Ministry of Finance will be responsible for paying the compensation to the KRG.”

Oil produced in the region must be promptly delivered to SOMO or the Federal Ministry of Oil, in accordance with subparagraphs (a) and (b). The Federal Ministry of Finance will provide an advance payment of $16 per barrel to cover production and transportation costs, with final settlement occurring retroactively after the consulting entity’s review is completed, the statement continued.