The Kurdistan Regional Government exported a record amount of oil last month, emphasising that most of it was delivered to the central government’s oil marketing arm as it tries to resolve a long-standing dispute over control and revenue sharing.
The KRG issues only sporadic reports on its oil output and exports, but the ministry of oil and minerals put out a statement earlier this week saying nearly 18 million barrels, or about 578,000 barrels per day, were exported in May through the pipeline that runs north to the Turkish port of Ceyhan.
The ministry said that about 407,000 bpd came from fields in the Kurdish region, with a further 171,000 bpd coming from fields operated by Iraq’s Northern Oil Company. Most of the latter came from the Kirkuk oilfield that lies on the Iraq border with the Kurdistan region.
“The KRG remains on track to meet its oil export commitments under the 2015 federal budget and is pleased that KRG export volumes, already at record levels, continue to increase,” the ministry said.
The KRG had a long-running bitter dispute with the Iraqi central government for years that, while ostensibly about control over oil exports and revenue sharing, was mainly about political control. The result was a complete breakdown in the relationship early last year when the KRG sought to export its oil independently and Baghdad cut off revenue to pay for government employees, including security personnel.
However, relations have improved since the election of Haider Al Abadi last year, and especially the instalment of Adil Abdul Mahdi as the oil minister. The two sides reached an agreement in December under which the KRG would deliver 550,000 bpd for export to the State Oil Marketing Organisation (SOMO) and the central government would share with the Erbil government 17 per cent of Iraq’s oil revenue, or about US$1 billion a month.
This deal soon broke down, however, because of disputes about the amount of oil delivered, the methods for accounting for oil and expenses, and shortfalls in Baghdad’s payments. According to the KRG, only $409m was paid in April.
According to local news reports in Kurdistan, the central government warned on Tuesday – before the ministry issued its oil exports report – that it planned to lower regional government employees’ salaries this month.
“If they can get to that 550,000 bpd number [of agreed exports through SOMO] and show that they are making good on their end of the deal, then they can get closer to a full agreement,” said an Iraq analyst at an international organisation who did not want to be quoted by name.
“It is important to realise that if an agreement is to be reached, now is the time to reach it.”
Mr Mahdi has a very good relationship with the Kurdish leadership, including the deputy prime minister Rowsch Shaways.
A deal will have to wait at least several weeks now, though, with parliament in recess and Ramadan starting in a few weeks.
UAE companies have extensive interest in the Kurdistan region and are hopeful that a deal will resolve issues that have contributed to large arrears in payment.
Pearl Petroleum, for example, which is 40 per cent owned and operated by Dana Gas, with another 40 per cent owned by Crescent Petroleum – both of Sharjah – produced 76,000 bpd of oil equivalent from the Khor Mor and Chechemal fields, including 20,000 bpd of condensate.
It has been earning revenue from the sale of the condensate through the state marketing system and domestic sales of liquefied petroleum gas and natural gas. But the disputes have contributed to it falling short of world export prices and prevented it from reaching agreement with the KRG about future development of the project, according to Robinder Singh, the head of investor relations at Dana Gas.
“Since there is no pricing agreed for the surplus gas to the extent it effects the KRG’s liquidity, it prevents us from reaching an agreement,” Mr Singh said.
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