Kurds threaten to cut oil exports in September

07 August 2012

Kurdish oil exports resume but Erbil still awaits payments from Baghdad for contractors

The semi-autonomous Kurdistan Regional Government (KRG) could halt oil exports again at the end of August if Baghdad does not release payments to contractors working in the region’s oil sector.

The KRG published its correspondence at the end of July with three oil firms working in the region; Norway’s DNO, London-listed Genel Energy and Erbil-based KAR Group.

All three agreed to resume exports totalling 100,000 barrels a day (b/d) from 1 August, through the Iraq-Turkey pipeline. DNO will export 40,000 b/d from the Tawke field, Genel Energy will add another 40,000 from the Taq Taq field and KAR Group will contribute 20,000 b/d from its development of the Khurmala Dome formation.

If outstanding payments are made by Baghdad, the overall volume will increase to the 175,000 b/d agreed by the KRG as part of the 2012 budget. However, if payments are not released, the KRG and the oil firms agree to halt exports as of midnight on 31 August.

DNO, in particular, expressed its concerns in its reply to the KRG, saying it “remains reluctant to export oil given we have received no payment for the Tawke oil exported in 2009 and received only partial payment for the Tawke oil exported in 2011 and 2012”.

A payment of $560m has been approved by Baghdad since the end of March, but has not been disbursed. The dispute has become increasingly bitter over the past few months.

According to the US’ Special Inspector General for Iraq Reconstruction (Sigir), the Kurdish authorities began blocking the import of oil-field equipment entering Iraq from the north of the country.

International oil companies working in the south of Iraq had been importing goods through the Kurdistan region to get around the long delays at Iraq’s main port of Umm Qasr in the south.

The response has been for Baghdad to block shipments of refined oil products into the Kurdistan region of oil products refined in the south.

“Collectively, these and other developments appeared to make CoR [the Council of Representatives] passage of hydrocarbon legislation acceptable to both sides increasingly unlikely in the short term,” said Sigir in its 31 July quarterly report.

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