Kurdish oil minister expects deficit in Iraqi budget
Iraq’s federal budget will have a “significant deficit” next year as oil prices continue to fall, Ashti Hawrami, the Kurdish oil minister, said at a conference in London on Wednesday.
The budget was originally based on US$70 per barrel of oil, but Brent prices have fallen below $60 after Opec agreed to maintain its current levels of output at a meeting on November 27.
“If it is $60 [per barrel] then there will be an additional 10 per cent deficit. It is guesswork, hopefully either volumes will increase or prices will stabilise at a higher level,” said Mr Hawrami.
His comments were echoed by Iraq’s deputy prime minister Rowsch Nuri Shaways, who said at the Kurdistan Oil and Gas conference that “the heavy burden of war and drop in oil prices may be necessary to revisit ambitious plans of the next five years”.
But the Iraqi federal government remains “committed to progress in this vital economic field with regard to production and export capacities, renovating decaying infrastructure and developing current [oil] fields as well as adding new ones,” added Mr Shaways.
Despite the impact of the fall in prices on the budget, it is unlikely to affect the negotiations recently struck with Baghdad allowing the KRG to export its oil.
“Oil prices is external…[it] affects all the budget of Iraq. The arguments have not been about price, but about fair distribution of revenues whether oil price is high or low,” said Mr Hawrami.
“What has not been agreed is all the remaining issues that drift us – the right to export, right to receive 17 per cent of the budget and revenue-sharing,” he added. “Those issues have been left in good faith.”
The KRG’s current policy is to become self-sufficient as soon as possible and the ministry of natural resources is looking to increase its production for export to 500,000 barrels per day by the first quarter of 2015. By 2016 the region is expecting to produce 1 million bpd.
Substantial increase in oil output from the Tawke and Taq Taq fields as well as new pipelines to reach stranded oilfields will help the KRG achieve this aim.
Proceeds from all the additional oil that the region produces will be used to clear the backlog of payments to international oil companies, which includes the UAE’s Dana Gas and Taqa and $7 billion borrowed from neighbours and international institutions.
According to ministry of natural resources figures, a total of 34.5 million barrels of oil have been exported since the beginning of the year, with about 21.5 million barrels sold through Turkey’s Ceyhan pipeline. The ministry has received only about $3bn from these revenues.
“Our export is our right,” said Mr Hawrami. “If that is the reason for the dispute, that dispute will continue,” adding that federalism, transparency and rule of law was the only realistic approach to better relations.
By 2020 Iraq is expected to produce 8 million bpd, with reserves in the Kurdish region to play a significant role.
Meanwhile, Genel Energy is interested in acquisition opportunities in Kurdish Iraq as differences with Baghdad are resolved.
“We expect to see a lot of consolidation both in Kurdistan and globally,” the Genel president Mehmet Sepil said at the same conference. “Most of the big companies were created through mergers at the time of political or economic crisis.”
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Published: December 17, 2014 04:00 AM