On February 2, 2025, the Iraqi Parliament ratified an amendment to Article 12 of the Budget Law. This amendment guarantees that international oil companies operating in KRI will receive compensation of USD16 per barrel, to be paid in advance. The oil shall be delivered to and sold through the State Oil Marketing Company (SOMO).
Following the enactment of this law, a technical international consultant body, to be appointed by the federal and regional governments, will have a period of 60 days to assess and determine the estimated fair cost of production and transportation with each field in the KRI. The costs shall be settled after the new prices are determined by the consultant, which shall apply retroactively from the date of commencement of delivery pursuant to this amendment.
The full amendment states as follows:
The Council of Ministers and the Republic’s President decided, based on Article 61/1 and 73/3 of the Constitution, to issue the following law:
Law on the First Amendment to Federal Budget Law for the Republic of Iraq for financial years (2023, 2024, and 2025) No. (13 of 2023)
Article 1) The provisions of Article 12-2-c of the Federal Budget Law for the Republic of Iraq for financial years (2023, 2024, and 2025) No. (13 of 2023) shall be cancelled and replaced with the following:
1- The Federal Ministry of Finance shall compensate the Kurdistan Regional Government of Iraq from sovereign expenses for production and transportation costs for the quantities of oil produced in the region received by the State Oil Marketing Company (SOMO), or the Federal Ministry of Oil, in accordance with paragraphs (a) and (b) of this clause, provided that the fair estimated costs of production and transportation are calculated for each field separately by a specialized international technical consulting body, to be determined by the Federal Ministry of Oil in agreement with the Ministry of Natural Resources in the region, within (60) days of the entry into force of this law. In the event of failure to agree within the mentioned period, the Federal Council of Ministers shall determine the aforementioned consulting body.
2- The consultant mentioned in the previous paragraph shall submit the estimated cost of production and transportation to the Federal Ministries of Oil and Finance and the Kurdistan Regional Government of Iraq, and it shall be approved for the purposes of this law. The calculation of the aforementioned compensation shall be based on the mentioned cost per barrel multiplied by the number of barrels received in accordance with paragraphs (a) and (b) of this clause, and the Federal Ministry of Finance shall pay the amounts to the Kurdistan Regional Government.
3- The delivery of oil produced in the region shall immediately commence and be delivered to the State Oil Marketing Company (SOMO) or the Federal Ministry of Oil in accordance with paragraphs (a) and (b) of this clause, and the costs of production and transportation shall be compensated by the Federal Ministry of Finance as advances, at a rate of (16) dollars per barrel, to be settled later after the completion of the aforementioned specialized technical consultant, and retroactively from the date of commencement of delivery pursuant to this amendment.
This amendment shall be effective as of the date of its publication in the official gazette.
The amendment was passed in an effort to protect the national resources, to boost the actual federal revenues, and to enable the State Oil Marketing Company to make optimal use of and diversify export outlets.
Notably, the amendment does not refer to the profits of oil sales, but rather only provides express compensation in respect of costs of production and transportation. It remains to be seen how this matter of profit and costs will be addressed by the technical consulting body in the future.
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