The ongoing disagreements over payment terms between the federal government and the Kurdistan Regional Government (KRG) have delayed the restart of a key Iraqi oil pipeline, Iraqi Prime Minister Mohammed S. Al Sudani said.

The pipeline, which exports oil to the Turkish port of Ceyhan, has been shut for over a year. The impasse stems from differing views on how much to pay international oil companies operating in the northern semi-autonomous region.

The federal government's budget allocates $8 per barrel for oil produced, while KRG contracts offer $26. This discrepancy has impacted regional output and hindered the pipeline's resumption.

"We have to balance these issues," Al Sudani told Bloomberg TV. "Do we adjust the budget or focus on prices?"

The pipeline, once responsible for 0.5% of global oil supply, has been halted since March 2023 due to legal and financial disputes. The sharing of oil revenues between the federal government and the KRG has long been a source of tension.

The stall in oil deliveries has inadvertently helped Iraq comply with its OPEC production limit. The OPEC+ coalition, which includes leading oil exporters like Russia, announced voluntary production cuts last year.

The closure of the pipeline, capable of transporting nearly half a million barrels of oil daily, is resulting in significant revenue losses. However, restarting it could pose a dilemma for Iraq, which has struggled to adhere to its OPEC+ output limit.

Al Sudani emphasized Iraq's commitment to OPEC decisions and preserving oil prices. He also highlighted the need for economic diversification, especially given the recent decline in oil prices.

The Iraq-Türkiye pipeline has been offline since March 2023 following an arbitration ruling by the International Chamber of Commerce. The ICC ordered Ankara to pay Baghdad damages over unauthorized KRG exports between 2014 and 2018.