Iraq’s Finance Ministry has made its first payment to the semi-autonomous Kurdistan regional government (KRG) for oil exports into the northern pipeline to the Mediterranean, marking a breakthrough in their ongoing dispute over oil resources.

Baghdad transferred $243m to the KRG, which will be used to pay the international oil companies (IOCs) responsible for production in the region, compensating them for production, exploration and development costs, according to an analyst note from London-based consultancy IHS Global Insight.

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 (MEED 11:2:11).

It remains unclear if the $243m paid by Baghdad matches what the IOCs would have received under their contracts. Analysts speculate that the firms may have been forced to accept tighter terms of face continued non-payment.

The sum is equal to half the net revenue from the sale of the 5 million barrels of crude produced in the Kurdish region in February and March, which was exported through the Kirkuk-Ceyhan pipeline to Turkish, according to Samuel Ciszuk, Middle East energy analyst at IHS Global Insight.

“A more permanent solution is hoped to be part of the national oil law and revenue-sharing law, when they are passed by the Iraqi parliament, although the latter has been deadlocked amid political disunity over it since early 2007,” says Ciszuk.