Thursday 30 May 2024

Kurds ready for new oil deal with Baghdad

ERBIL (Iraq), June 15, 2016

Iraq's Kurds said they are ready to strike an agreement with the central government in Baghdad on a deal to increase oil exports if it guarantees them monthly revenue of $1 billion, more than double what they make currently from selling oil.

The Iraqi central government in March stopped oil exports through a Kurdish pipeline to pressure the local authorities to resume talks about an oil revenue-sharing agreement.

Iraq's state-run North Oil Company normally exported 150,000 barrels a day through the pipeline that comes out at the Mediterranean port of Ceyhan, in Turkey.

The pipeline also carries oil produced in the Kurdish region in northern Iraq and sold independently from the central government.

Kurdistan Regional Government (KRG) spokesman Safeen Dizayee said in an interview in the Iraqi Kurdish capital Erbil on Tuesday that the Kurdish authorities would be willing to sell the oil through Baghdad if they received a share from the federal budget amounting to $1 billion a month.

"If Baghdad comes and says OK, give me all the oil that you have and I'll give you the 17 percent as per the budget, which equals to 1 billion, I think, logically it should be the thing to accept," he told Reuters, specifying later that the amount referred to a monthly payment in dollars.

"Whether this oil goes to the international market or first to Baghdad and then to the market, it doesn't make any difference," he said. "We are ready to enter dialogue with Baghdad."

A government spokesman in Baghdad did not return telephone calls seeking comment.

The KRG stopped delivering crude oil to the central government a year ago, a decision taken when Baghdad's payment fell under $400 million a month, Dizayee said.

"The Kurds are offering a win-lose deal for Baghdad: a win for them and a loss for Baghdad," said Baghdad-based oil analyst Hamza al-Jawahiri. "What's the point of asking the central government to pay double the value of the region's oil?"

The Kurdish region exported an average of 513,041 barrels in May through the pipeline to Turkey, generating about $391 million, of which about $75 million was paid to oil companies that produce the crude, according to KRG official estimates.

"The companies have been assured that certain amounts will be made on a monthly basis," said Dizayee, referring to the three foreign oil producers in the KRG region - DNO, Gulf Keystone and Genel.

"We have started to pay some of it, at least it has rebuilt that confidence between the government and the IPCs (oil companies)," he said, referring to arrears owed to the companies.

The KRG in February said it would pay international oil companies in 2016 according to the terms of their contracts, after making ad-hoc payments last year.

The foreign operators have been reluctant to invest without the promise of regular payment, while the cash-strapped KRG needs production to increase to avert an economic collapse caused by a sharp decline in oil prices since 2014.

The KRG is also in a dispute with the central government over Kirkuk, where the North Oil Company produces its crude and which the Kurds claim as part of their territory.-Reuters

Tags: Baghdad | kurds | oil deal |

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