Baghdad demands compensation from Kurdistan Regional Government

27 June 2011

Federal government threatens to cut Kurdish budget allocation

Iraq’s federal government has threatened to cut the budget allocation for the semi-autonomous Kurdistan Regional Government (KRG) due to ongoing disputes over the Khurmala dome oil formation.

The KRG claims sovereignty over the Khurmala dome, a section of the disputed Kirkuk field, which Baghdad plans to develop.  

The Oil Ministry says it has lost more than $193m in lost production at the site due to KRG obstruction at the site, according to AK news agency. The KRG receives 17 per cent of Iraq’s total budget.

According to Baghdad, the Dome could produce 70,000 barrels a day (b/d) more than when the dispute began in 2008.

In 2004, Iraq’s State Company for Oil Projects (SCOP) awarded a $136m deal to the local KAR Group to provide engineering and equipment to increase production at the Khurmala Dome to 100,000 b/d.

Baghdad and Irbil have been in a tense dispute since 2007 over who controls the region’s oil resources, with the Oil Ministry refusing to recognise the KRG’s numerous production-sharing agreements, declaring them illegal.

Tensions appeared to be easing this year after Iraq’s Finance Ministry has made its first payment to KRG for oil exports into the northern pipeline to the Mediterranean, marking a breakthrough in their ongoing dispute over oil resources (MEED 8:5:11).

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