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

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