Kurdistan warns Baghdad it will halt oil exports again

Reuters News
Posted: Aug 28, 2012 10:47 AM
Kurdistan warns Baghdad it will halt oil exports again

By Ahmed Rasheed

BAGHDAD (Reuters) - Iraq's Kurdistan regional government threatened to stop oil shipments again at the start of September, claiming Baghdad's central government has continued to hold off on payments to oil companies, as the two sides continue a long-running dispute.

"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 August 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," Deputy Iraq's 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 totaling $514 million have been received, with the last payment made in May 2011.

(Reporting by Ahmed Rasheed; editing by Patrick Markey and Jane Baird)