The autonomous Kurdistan Regional Government (KRG) has pushed ahead with its threat to halt its oil exports, marking a new low in an increasingly bitter dispute over oil.

Norway’s DNO was instructed to halt oil exports from the Tawke field in the north of Iraq until further notice, because the federal government in Baghdad has not honoured its payment commitments,according to a 1 April statement from the KRG’s Ministry of Natural Resources.

The KRG says it is owed close to $1.5bn. Only $514m has been paid so far, with the last payment in May 2011.

“After consultation with the producing companies, the ministry has reluctantly decided to halt exports until further notice. There have been no payments for ten months, nor any indication from federal authorities that payments are forthcoming,” says the statement.

Crude oil exports to the Iraq national oil export system have stopped, but all other crude oil and refined product deliveries remain unaffected, according to DNO.

Exports had already been reduced in March to 50,000 barrels a day (b/d) from an estimated 90,000 b/d. Oil production will be diverted to the local market for processing and refining to generate an alternative source of cash flow for the producing companies.

All exploration and development operations on wells Peshkabir-1, Tawke-14, Tawke-15 and Tawke-1A, continue as before and as per plan, according to the company.

“Once this unfortunate non-payment situation has been satisfactorily resolved we will do our utmost to increase exports above the target of 175,000 b/d included in the 2012 Iraq budget,” says the KRG.

Iraq’s Finance Minister Rafi al-Essawi told reporters on the sidelines of the Arab League summit in Baghdad that the government had approved the payment of $560m for the KRG to pay its oil contractors as part of the 2012 budget.

However, the budget is yet to be signed off by the independent Board of Supreme Audit. There is no indication when this will happen.

With the commissioning of its new offshore export terminal, Iraq’s southern exports could compensate for the loss of Kurdish oil. According to State Oil Marketing Organisation (Somo) Iraq shipped approximately 1.92 million b/d of Basra crude in March, the highest level since 1990, up more than 17 per cent from February exports.

The first of four new single point mooring stations (SPMs) was launched in mid-February and the construction of a second is due to be completed in April.