Baghdad and Kurdistan discuss oil dispute

21 April 2010

Final agreement on exports and payments unlikely until new Iraqi government is formed

A delegation of Iraqi government officials and their Kurdistan regional government (KRG) counterparts met in Erbil last week to discuss their ongoing disputes over oil contracts and exports.

The meeting was aimed at establishing a mechanism for the payment of foreign firms operating in the semi-autonomous Kurdish region, and how to restart crude oil exports.

“The Oil Ministry has agreed in principle to start exports and payments,” Mohamammad Amin Baban, an adviser to the prime minister’s office tells MEED.

Any agreements will still have to be ratified by the new Iraqi cabinet. The KRG proposes that the Iraqi government pay international oil companies, such as Norway’s DNO, operating in the region directly for the revenue to pass through Kurdish authorities.

However, no firm deal has been reached, and a conclusion to the dispute is not expected to emerge until a new coalition government is formed. Any agreements will still have to be approved by the finance ministry and ratified by the Iraqi cabinet.

The problem, explains Baban is that the two parties hold opposite views on the contracts. The Oil Ministry demands the contracts negotiated by the KRG be amended to bring them into line with contracts made by Baghdad. In addition, the oil ministry says it is the KRG which must pay the contractors.

The KRG passed its own hydrocarbons law in 2007 and has signed oil production sharing, development and exploration contracts with more than 35 energy companies over the past two years, worth nearly $5bn.

Allowing Kurdish crude to flow back into Iraq’s export pipelines is not a technical issue, says Baban.

“The infrastructure is there but we will not start pumping until the disputes are settled.”

In June 2009 Iraq’s Oil Ministry approved a request from the KRG to send 60,000 barrels-a-day (b/d) of crude oil to the Iraq export pipeline running from Kirkuk to Ceyhan in Turkey. However, to date no exports have been made (MEED 10:2:10).

The region has the capacity to export some 100,000 b/d of crude oil from the two producing fields, Tawke and Taq. The KRG expects production to reach 250,000 b/d in the first half of 2010.

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