Iraq-Turkey pipeline to resume Kurdish oil exports after agreement

Iraq's Kurdistan region will resume oil exports through the Iraq-Turkey Pipeline on September 27, following an agreement between the federal government, KRG, and international oil companies, resolving a significant disruption. The initial phase will see 38,000 bpd from the Tawke license exported, with participating companies to receive $14 per barrel (after transport) under an agreement valid until end-2025. While operator DNO ASA and Genel Energy will continue local sales of their 30,000 bpd, DNO is expanding production at Tawke and Peshkabir, targeting 100,000 bpd by 2026, indicating renewed confidence and potential for increased regional output.

Analysis

The resumption of oil exports from Iraq's Kurdistan region through the Iraq-Turkey Pipeline, set for September 27, marks a significant de-risking event for operators in the area. Following a prolonged disruption that forced producers into discounted domestic sales, a new agreement between the Iraqi federal government, the Kurdistan Regional Government (KRG), and oil companies will initially facilitate the export of 38,000 barrels per day (bpd) from the Tawke license. Companies participating in this export arrangement will receive a fixed netback of $14 per barrel after transport costs, with a first payment anticipated in mid-December. This provides near-term revenue certainty, though the agreement's term until the end of 2025 and a planned reassessment in 2026 introduce medium-term uncertainty. Notably, the license operator DNO ASA and its partner Genel Energy will initially continue selling their own share of production, around 30,000 bpd, to local buyers. Despite this, DNO's management has signaled strong confidence by initiating an expansion program targeting 100,000 bpd by 2026, a move intended to both increase capacity and replace equipment damaged in recent drone attacks, which highlights the persistent geopolitical risks in the region.

Key Decisions for Investors

• For investors in DNO ASA and Genel Energy, the export resumption is a positive catalyst that improves the operating environment, however, it is crucial to monitor when, or if, they will shift their own production share from local sales to the export agreement to fully capitalize on access to international markets.
• The fixed $14 per barrel net payment structure provides revenue predictability for participating companies but caps their upside from potential oil price rallies until the agreement is reassessed in 2026, a factor to consider when modeling future cash flows.
• Despite the optimistic agreement, the mention of recent drone attacks serves as a reminder of the elevated geopolitical risk premium associated with assets in the region, which should be carefully weighed against the improved production outlook.