OREANDA-NEWS. Data from Iraq's oil ministry show the country's apparent output reduction as part of the Opec cut agreement comes from fields operated by the Kurdistan Regional Government (KRG), with other provinces seeing a rise in output since September 2016. October 2016 is the benchmark month on which cut allocations were based.

But the federal government's estimates of output from the Kurdish region do not tally with visible exports, let alone its own KRG export figures.

The data highlight a dilemma faced by Baghdad. The federal government is determined to reassert sovereignty over the semi-autonomous north of the country. Entwined with this political aim is state-owned Somo's insistence that it exclusively should market northern oil production, including from fields owned by the KRG. Disagreement over this is stalling a deal with Erbil to allow federal access to the length of export pipeline that it controls. But if Somo succeeds in controlling all export sales, it will assume responsibility for KRG export levels and, by extension, production.

Iraq's oil ministry openly concedes its limited grasp of production levels from the northern Kurdish region. The KRG has not released a monthly output figure since November 2016. Iraq's Opec governor and Somo head Alaa al-Yasri says provision of detailed information about production from KRG-controlled fields will form part of a general agreement between Baghdad and Erbil. He said the federal ministry would make the numbers publicly available.

At that point Iraq will have to face up to consolidated national data showing output has risen in every region — when compared with September 2016 — except from the Kurdish and federal-controlled fields in the north (see table). And the problem is that its current estimates of KRG production appear low, so the new numbers may further erode assessments of Iraq's compliance with its quota under the Opec, non-Opec agreement.

Iraq pledged to cut output by 210,000 b/d from an October 2016 baseline figure determined by secondary sources, including Argus, to 4.35mn b/d until the end of 2018. Iraq has kept its output steady at around 4.36mn b/d since the fourth quarter of 2017, according to its direct submissions to the Opec Monthly Oil Market Report (MOMR).

The ministry estimates KRG-controlled production fell by 75pc between September 2016 and January 2018. For the period October 2017 to February 2018, the ministry puts KRG-controlled production at just 196,600 b/d with February as low as 154,000 b/d. Yet these figures are well below exports, which account for the bulk of production.

KRG exports from Ceyhan and Dortyol between October 2017 and February 2018 average 338,000 b/d, Argus tracking shows. The oil ministry acknowledges similar KRG export figures, pegging them at 364,000 b/d in February. Ministry officials suggest the difference between its figures for exports and production is likely a result of the KRG using stocks or imports to boost export figures.

As far as Baghdad's calculation of Kirkuk crude output operated by federal government-controlled North Oil (NOC) goes, the most-recent January figure was made up solely from production from Khabbaz, Jambur and Baba Dome, NOC director-general Farid al-Jadir said. A stated drop in output from NOC fields derives from a methodology change. Excluding Bai Hassan and Avanah Dome — which were shut in from mid-October 2017 — from the ministry's September 2017 figure, NOC production has risen by 10,000 b/d. The fields recently restarted and are currently producing up to 40,000-50,000 b/d.

These numbers matter because Iraq has faced pressure from other Opec and non-Opec participants in the cuts agreement to improve its compliance with its December 2016 pledge.

Ahead of the next joint Opec, non-Opec ministerial monitoring committee (JMMC) in April in Saudi Arabia, and a full ministerial meeting of agreement signatories in June, low production estimates for northern output and lack of transparency from Erbil may deflect attention.

But if and when Baghdad and Erbil do strike the deal that both of them need in order to attract investment, and as Baghdad strains to reach production capacity targets, consolidated national production figures will put Iraq back under the spotlight. And that may become a more uncomfortable place to be if, as Iraq's oil minister Jabbar al-Luaibi says, extensions of cuts beyond 2018 are now under discussion.