The Iraqi federal government has reached an agreement with the Kurdistan Regional Government (KRG) to resolve its dispute over crude oil exports from the north of the country.

Under the terms of the deal, the KRG will immediately begin delivering all of its exports via Iraq’s state oil marketing company, Somo, according to a statement from Prime Minister Mohammed Shia Al-Sudani’s office.

In return, the Baghdad-based Finance Ministry will provide an advance payment of $16 per barrel, either in cash or in-kind, under an amendment to the national budget law.

The agreement states that the KRG must supply at least 230,000 barrels a day (b/d) to Somo, with any future increases to be determined by a joint measurement and calibration committee.

If exports are stopped for any reason, the region must deliver the full quota to the Oil Ministry in Baghdad.

The Iraqi Kurdistan region currently produces 280,000 b/d, of which 50,000 is allocated for local consumption.

As part of the deal, the KRG will provide an initial payment of ID120bn ($91.6m) for May’s non-oil revenue share that is due to the federal treasury.

Final adjustments will be made after audits are completed, according to the prime minister’s statement.

The two sides agreed to form a joint team from their respective finance ministries and audit bureaus to assess any excess in the region’s spending above budgeted allocations for 2023-25, and to develop a plan to address discrepancies.

The team is expected to submit its report to the federal Cabinet within two weeks.

The Finance Ministry will begin disbursing public sector salaries for May to KRG employees as a first step towards implementing the agreement.