Kurdistan warns Baghdad it will halt oil exports again

Kurdistan warns Baghdad it will halt oil exports again
Iraq's Kurdistan regional government threatened to stop its share of national oil exports again at the start of September, claiming Baghdad has continued to hold off on payments to oil companies, as the two sides continue a long-running dispute Today`s Zaman reported

"We are moving ahead to stop oil exports at the start of September, because until this moment we didn't receive any sign Baghdad will approve payments for oil companies working in the region," a senior Kurdistan government official said on Tuesday.

Iraq's uneasy federal union is being tested as the central government has a long-standing disagreement with autonomous Kurdistan in the north over control of oil and territory along their internal border.

Baghdad maintains it alone has the right to export Iraqi crude. But Kurdistan has moved ahead with signing exploration deals with oil majors such as Exxon and Chevron, which the central government rejects as illegal.

In April Kurdistan halted exports, saying Baghdad had not made payments to companies working there, but it restarted shipments on Aug. 7 with a warning they could be halted again in a month if there were no payments.

Iraq says Kurdistan's oil shipments have fluctuated around 100,000 to 120,000 barrels per day since they restarted, below the 175,000 bpd that Baghdad says was agreed with Kurdistan.

A senior Iraqi government adviser said Kurdish authorities still needed to present receipts showing company expenses and that more auditing was needed before any payments are approved.

Iraq approved a payment of close to $560 million to oil producers operating in the north in return for their investment costs to develop oilfields in the Kurdish region. But officials are still waiting for the go-ahead.

"We've allocated 650 billion Iraqi dinars ($559.4 million) in the 2012 budget to pay the companies, which we will release after we receive the order from the government. Until now no order was received," Iraq's Deputy Finance Minister Fadhil Nabi said.

Crude produced in Kurdistan is fed into Iraq's Kirkuk export stream and sold onto world markets via the Turkish Mediterranean port of Ceyhan. The earlier KRG export halt cut Kirkuk shipments by a quarter to below 300,000 bpd.

In an interim agreement in January 2011, Baghdad approved payments to companies in Kurdistan for exploration and extraction costs.

That agreement called for Kurdish authorities to supply 175,000 barrels per day of oil exports and Baghdad to route 50 percent of the KRG's export earnings to Kurdistan to cover producing companies' costs.

Kurdistan says only two payments totalling $514 million have been received, with the last payment made in May 2011.

Kurdistan's resumption of exports was seen as a goodwill gesture to ease tension after Baghdad threatened to cancel a contract with France's Total for signing deals with the autonomous region.

Total and a unit of Russia's Gazprom followed US majors Exxon and Chevron into signing deals with Kurdistan, which is already at odds with Baghdad in a long-running dispute over territory and oil rights.

"We were hoping to convince Baghdad that exports from Kurdistan could boost Iraq's oil revenues but it seems we failed," the Kurdish official said. "Companies here are starting to get nervous."

Iraq is moving forward with ambitious plans to double its oil production over the next three years. It has now passed the 3 million bpd level for the first time in three decades and has overtaken Iran to become OPEC's second biggest oil producer after Saudi Arabia.

But some firms report only modest gains and say they are frustrated by infrastructure bottlenecks, payment disputes and logistical constraints.

That has made Kurdistan an attractive alternative for oil explorers due to more investor-friendly contracts.

"Using oil exports as a weapon will only make things worse," a senior Iraqi oil ministry official said. "The Kurdish government should understand that if it seeks a real compromise."

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