KRG criticises Iraq oil law

The semi-autonomous Kurdish government in northern Iraq has criticised a draft of oil law approved by the country's cabinet. The law proposes to centralise control of Iraq's vast oil reserves, which the Kurds think prejudicial.

According to Reuters, the Kurdistan Regional Government (KRG) called on Iraq's parliament to reject the long-awaited law, saying it contradicted the "essence of the constitution".

The new law is key to the OPEC producer's efforts to rebuild after years of war by giving investors more solid legal assurances. It has been in the making for years but has faced opposition over who controls the world's fourth largest oil reserves.

Most of the opposition has come from the KRG, where the government has signed its own contracts with foreign oil companies that the central government in Baghdad deems illegal. The KRG issued a statement accusing Iraq's cabinet of "fooling its members" by reviewing the draft in haste.

The statement said: "In the absence of a federal oil policy for more than six years and unjustified delays in passing the federal oil law...we were caught by surprise by the Cabinet action in approving a draft, in absence of most members, which is totally contradictory to the draft law agreed before."

The cabinet approved the draft in August and sent it to the parliament for ratification. The KRG rejection could hamper efforts to reach a final deal any time soon. The KRG accused Baghdad of breaching political agreements and trying to centralise decision-making.

The statement, added: "The presidency of the Kurdish region denounces this manoeuvre and calls upon the cabinet to withdraw the draft law proposed by the oil ministry immediately, as it contradicts the essence of the constitution…We demand that the parliamentary presidency reject the draft law."

Sources: Upstream Online, Reuters

For more news and expert analysis about Iraq, please see Iraq Focus.

Iraq to pay expenses to foreign oil companies in the Kurdish region

Iraq's Oil Ministry and its Kurdish counterpart have agreed to pay exploration expenses to foreign oil companies operating in the Kurdish region. Under the new agreement, the central government in Baghdad will not, however, pay foreign companies their profits.

In the past, the central government has maintained that the Kurdistan Regional Government (KRG) should pay the companies' profits from its annual national budget. But, it has now been agreed that the State Oil Marketing Organisation (SOMO) will be responsible for payments, due to be made through the Kurdish Natural Resources Ministry.

The central government also confirmed that it has reached an agreement with the Kurdish government to resume oil exports from the north starting 1st February, with a rate of around 100,000 b/d. Speaking about the agreement, oil ministry spokesman Asim Jihad said, "The resumption of oil exports from the region at the start of next month will strengthen Iraqi crude exports and boost its oil revenue.”

Kurdish oil exports from two of the region's fields, Taq Taq and Tawke, halted in 2009 when the central government refused to compensate oil companies working the fields. According to Kurdish natural resources minister, Ashti Hawrami, under the new agreement export rates from the region could reach around 250,000 b/d by the end of the year.

Oil exports were expected to resume from the region in May last year, but remained blocked due to the delay in forming a new government following inconclusive election results in the March. It seems now, however, that the differences between Iraq's central government and its Kurdish counterpart are some way toward being ironed out.

Sources: Reuters, Ahram, Kurdish Globe, Proactive Investors, Bloomberg

For more news and expert analysis about Iraq, please see Iraq Focus.

Kurdish region expected to resume oil flow by next year

A dispute between Iraqi Kurdistan and the central government has resulted in suspension of Kurdish oil exports. Speaking about the issue, Iraq's Oil Minister Hussain Al-Shahristani has said that the region will mostly likely resume oil flow next year.

The semi-autonomous northern area - populated primarily by Iraqi Kurds - has been locked in a dispute with Baghdad for a while. The central government deems field development contracts signed between Kurdistan Regional Government (KRG) and foreign companies to be illegal.

It is estimated that the region could produce up to 150,000 b/d. Commenting on the ongoing dispute, during a conference in Baghdad, Shahristani said, "It is supposed to be resolved and the region will start handing over the oil at the beginning of next year."

Iraq has signed contracts with a number of foreign oil companies; with the intention of increasing output capacity from 2.5million b/d up to 12million b/d. Oil flow from the north could be instrumental in boosting exports, which play a 95 per cent role in the country's federal budget.

The central government of Iraq has insisted on controlling the country's energy resources, including those in northern Iraq. However, Kurdish region's Oil Minister has expressed hope that the contracts signed between the region and foreign investors will be recognised by the new government.

The ongoing dispute between Baghdad and the Kurds extends over land sovereignty, energy resources, foreign investment and revenue dispensation. On the subject of foreign contracts Shahristani said that Baghdad was not interested in the existing contracts, and urged firms working in the north to submit receipts for equipment and other expenses to the central government. He added that the contracts would also be reviewed and that if “they are acceptable and reasonable like the rest of the contracts that have been concluded in the rest of Iraq, the costs will be paid to the companies.”

Source: Reuters

For more news and expert analysis about Iraq, please see Iraq Focus.