KRG Export Disputes

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As a result of the deep-rooted political disputes between the Kurdistan Regional Government (KRG) and Baghdad, exports of Kurdish crude since 2009 have been governed by a series of temporary political deals. The KRG has on several occasions decided to shut in its growing production, as Baghdad controls the pipeline network and claims exclusive rights to sell Iraqi crude. [1]

With the KRG lacking pipelines to export its own oil, in January 2011 Iraqi Prime Minister Nouri al-Maliki and then-KRG Prime Minister Barham Salih struck a deal that enabled the KRG to export crude through pipelines controlled by the Iraqi central government in Baghdad. The deal mandated that the KRG would get half the revenues from its exported oil.[2] The deal covered 14 months of exports and US $514 millions in payments by Baghdad.[3] It called for Kurdistan to raise exports to 200,000 barrels per day (bpd) that year, and for Baghdad to make two immediate payments totaling 1 trillion dinars ($833 million).[4]

However in April 2012 the KRG responded to the payment dispute with the central government by halting oil shipments. The KRG claimed that it was owed US $1.5 billion in backlogged payments from Baghdad[5] and Turkish oil company Genel complained that it had not been paid for most of the oil exported in 2009 and 2011, with other operators such as DNO voicing similar grievances.[6] In turn Baghdad claimed complete audits were not conducted and accused the KRG of selling crude and fuel products unilaterally rather than sending the revenues back to the central government as agreed.[7]

The Kurds later resumed exports through the Baghdad-controlled pipeline from Kirkuk to Ceyhan in Turkey, and in September 2012 the central government and the autonomous region finally reached a settlement over the dispute, with the KRG promising to continue exports and Baghdad pledging to pay foreign companies working there.[8] On the 13 September 2012 Baghdad and Erbil announced that they had come to a new agreement over exports of Kurdish oil. The new export agreement was signed in Baghdad by Oil Minister Abdul Karim Luaibi, KRG Minister of Natural Resources Ashti Hawrami and four other officials.[9]However by the end of 2012 this agreement itself looked to be in doubt, according to Iraq Oil Report.[10]

In the first two weeks of 2013, the Turkish Hurriyet newspaper reported that the KRG in a symbolic move had begun to export crude oil directly to world markets, in small quantities from the Taq Taq field and via the Turkish port of Mersin.[11]

The central government in Baghdad responded by threatening to seize what it views as illegal exports, claiming that the State Oil Marketing Organisation (SOMO) is the sole legally authorized entity that has the exclusive right to export and import oil and gas.[12]

Kurdish Export Infrastructure

In July 2012 the Kar Group announced it had completed 23 percent of the first section of a pipeline to carry oil from Iraqi Kurdistan north across the border to Turkey, bypassing Iraqi Arab regions. The pipeline project is to transport oil from the Taq Taq field to Khurmala, a route currently managed by tanker, and also includes the construction of a gas pipeline from Erbil-Dohuk. . The project was described by fund manager Ivor Pether as "quite provocative" and Prime Minister Al-Maliki has said that the central government is worried that the planned pipeline may make the Kurds economically self-sufficient and embolden them to seek independence.[13]

If this pipeline was to connect to Turkey, as some press reports have suggested, Iraqi Kurdistan would be opened up to external markets. However the future of this export route depends very much on energy cooperation between Turkey and northern Iraq into the future.[14] Meanwhile Sami Alaskary, a member of parliament and close advisor to the Prime Minister, commented to Iraq Oil Report that "the Kurds can't rely on pipelines to Turkey to survive", warning that they could risk losing the 17 percent of the national budget currently allocated to the region.[15]

References

  1. "Budget battle over Kurdistan exports", Iraq Oil Report 25 October 2012.
  2. "Kurdistan begins independent crude exports", Iraq Oil Report 11 July 2012.
  3. "Budget battle over Kurdistan exports", Iraq Oil Report 25 October 2012.
  4. "Budget battle over Kurdistan exports", Iraq Oil Report 25 October 2012.
  5. "Budget battle over Kurdistan exports", Iraq Oil Report 25 October 2012.
  6. "Budget battle over Kurdistan exports", Reuters, 8 October 2012.
  7. "exports start and Turkey line operational", Iraq Oil Report 8 August 2012.
  8. "Budget battle over Kurdistan exports", Reuters 8 October 2012.
  9. "Budget battle over Kurdistan exports", Iraq Oil Report 25 October 2012.
  10. "Baghdad targets KRG budget priorities", Iraq Oil Report, 17 December 2012.
  11. "KRG starts independent crude oil exports", Hurriyet Daily News, 8 January 2013.
  12. "Iraq threatens to seize oil shipments, sue dealers", Huffington Post, 11 January 2013.
  13. "Tony Hayward Loads Trucks With Kurdish Oil Awaiting Pipe: Energy", Bloomberg, 30 July 2012.
  14. "Kurdistan Oil Pipeline Would Test Turkish Policies on Iraq and Syria", Al Monitor, 24 November 2010.
  15. "Baghdad targets KRG budget priorities", Iraq Oil Report, 17 December 2012.