Iraqi Kurdistan, a semi-autonomous region, is holding its parliamentary elections on October 20, with oil and gas policies at the center of growing divisions between its two main political parties. These elections come as a critical crude export pipeline to Turkey remains blocked, exacerbating tensions between the two major political factions.
The Kurdistan Democratic Party (KDP), which holds the offices of the president and prime minister, controls the oil-rich governorates of Erbil and Dohuk. In contrast, the Patriotic Union of Kurdistan (PUK), which holds the parliamentary speaker’s seat and the deputy prime minister’s office, governs the Sulaymaniyah governorate, including most of the region’s gas fields, such as Khor Mor, operated by UAE-based Dana Gas.
Pipeline Blockage
The KDP has been actively seeking to reopen the Iraq-Turkey pipeline, which transported approximately 400,000 barrels per day of medium sour Kurdish crude before its closure in March 2023. However, political and financial disputes between the Iraqi federal government and the Kurdistan Regional Government (KRG), as well as the oil companies operating there, have prevented exports from restarting.
The PUK has argued that crude exports have only benefited the KDP, without a response from the latter to these allegations. Opposition parties, such as the New Generation Movement and the National Stance Movement, accuse both ruling parties of stealing oil.
Gas Production and Export
In 2022, the KRG Prime Minister, Masrour Barzani, the KDP vice president, suggested that the region could export gas as an alternative to Russian supplies, a proposal rejected by the PUK. Analysts say that depending on the election results, the divided region may face difficulty forming a new government, which could exacerbate oil and gas disputes. The current parliament consists of 45 members from the KDP, 21 from the PUK, and 45 split among various smaller parties, ethnic minority groups, and independents.
Shwan Zulal, managing director of Kurdistan-focused Carduchi Consulting, told S&P Global Commodity Insights that oil exports and gas production are unlikely to change significantly unless there is a major electoral surprise, which is unlikely.
Economic and Legislative Impacts
The Kurdish economy suffered a major blow when Turkey closed the pipeline to the port of Ceyhan following an international arbitration ruling that independent marketing of the region’s crude violated a bilateral agreement between Ankara and Baghdad. This decision effectively nullified the KRG’s 2007 oil and gas law, under which the region had signed production-sharing agreements with international oil companies.
Baghdad has long opposed Kurdistan’s autonomous oil exports, claiming sovereignty over the region and occasionally reducing the KRG’s share of the federal budget to apply financial pressure. The federal government cited a 2022 Iraqi Supreme Court ruling that declared the KRG’s oil and gas law unconstitutional and ordered the region to transfer control of its energy sector to Baghdad.
The Iraqi oil ministry and federal marketer SOMO have since sought to change production-sharing contracts to profit-sharing contracts that are less lucrative to oil companies, which have protested the move.
In the face of the standoff, oil companies have sold their crude at significant discounts to international prices into a growing local market, with dozens of simple refineries popping up in the region. This has allowed production to climb back to around 250,000 barrels per day, according to Commodity Insights estimates.
Iraq, which has been overproducing its OPEC+ output quota for months and is facing pressure from other members to improve compliance, has pressured the KRG to hold its production to 140,000 barrels per day.
“Although oil is not currently exported through pipelines, all signs indicate that production is nearing peak capacity. Despite being sold at steep discounts, such revenue could offer a much-needed economic uplift if properly managed,” said Yerevan Saeed, director of the Global Kurdish Initiative for Peace at American University.
“However, both the KDP and the PUK engage in oil production and sales with minimal oversight,” he added.
The PUK did not respond to a request for comment. The KDP could not be reached.
Gas Supplies
The PUK has indicated it would be willing to seek a deal with Baghdad and enact a new Iraq oil and gas law.
PUK leader Bafel Talabani said on October 5 during the election campaign that he “will never hand over gas to an authoritarian government,” criticizing the KRG’s oil and gas policy.
The KRG did not respond to a request for comment.
Nadir Mahmoud Mohammed, a PUK parliamentary candidate, told the party’s official media that the PUK seeks to establish an agreement with the federal government.
Regarding Kurdish gas production, the PUK has been accused of using supplies to KDP-controlled areas, which are needed to keep local power generation plants operating, as leverage in negotiations with its rival party.
Disputes between the parties have delayed a 36-inch gas pipeline that was supposed to be constructed in 2022 from the Khor Mor and Chamchamal gas fields to Erbil, Saeed said.
“Sometimes even propane delivery from these fields is used as a bargaining chip in negotiations, further complicating the already tense relationship between the two parties,” he said.
Security Concerns
Mohammed Salih, a senior Fellow at the Philadelphia-based Foreign Policy Research Institute, said the government formation process after the elections will likely be lengthy and tumultuous.
“This would, at least initially, adversely affect KRG-Baghdad oil talks,” he said. “The composition of the next KRG and Kurdistan parliament could also affect the trajectory of the talks depending on the strength of the KDP and its rivals.”
Salih said security could also be impacted, depending on how Kurdish parties react to the election results.
A deterioration in the security environment could hamper efforts to attract more investment into Kurdistan’s oil and gas sector following an exodus of international majors.
The Khor Mor field has been attacked several times over the past few years, with Iran-linked groups blamed.
Political infighting and a heated election campaign could hamper governance, Saeed said.
“The next government, if ever formed, is highly unlikely to possess any leverage to negotiate a new gas or oil deal if the KDP and the PUK do not prioritize collective interests over trivial personal politics,” he said.
