Wednesday, May 12, 2010

Kurdish Oil Exports To Start Again

On May 6, 2010 the Iraqi Oil Ministry said that it had come to an agreement with the Kurdistan Regional Government (KRG) to allow it to export its oil. In May 2009, the central government originally authorized the Kurds to sell their petroleum abroad as long as the revenue was deposited with Baghdad. The next month the KRG began exporting from its Tawke and Taq Taq fields that were run by Norway’s DNO,  and a Swiss, Canadian, Turkish joint venture of Addax Petroleum and Genel Enerji. In mid-September 2009 the KRG stopped all work at the two fields when its Natural Resources Minister was caught in a stock scandal involving DNO and the Oslo Stock Exchange. By the beginning of October Tawke and Taq Taq were officially shut down because the KRG had not worked out a deal with the central government to pay the Norwegian, Swiss, and Turkish companies. For the time that they were operating, Baghdad was getting all the profits, but the corporations were not being compensated for their work. Afterward, Kurdish officials stepped up their attacks upon Baghdad claiming that their oil policy had failed, that the KRG didn’t have to follow the Oil Ministry’s rules, that the Kurds could export oil, and keep any profits that came from it. 

There was no breakthrough on the matter until the beginning of 2010. That’s when Prime Minister Nouri al-Maliki began reaching out to the Kurds, hoping to woo them before the parliamentary elections. In January the Prime Minister said that the two sides should discuss renewing exports. By March, Oil Minister Hussain al-Shahristani was saying that Kurdish sales would begin within a month. In April, the Oil Ministry sent a delegation to Irbil to hold talks with the Kurds about their oil contracts. After that meeting, the KRG said that they had reached an agreement with Baghdad to export again. The Tawke and Taq Taw fields would go back to work, the Oil Ministry would pay the companies working there the costs of extracting petroleum, the profits would be deposited in Baghdad, and then distributed to Kurdistan. The KRG claimed they could produced around 200,000 barrels a day by the end of the year. That led to the May 6 announcement by Oil Minister Shahristani.

This year the Iraqi government is trying to boost oil production and exports. In 2009 it signed ten deals with international companies to develop several of its oil fields. The Oil Ministry’s agreement with the KRG could be part of this plan, but there is also a large political element to it as well. Prime Minister Maliki wants to keep his position in a new Iraqi government, and knows that he needs the support of the Kurds to accomplish that. It was no surprise then that he began making concessionary remarks to them right before the March 2010 parliamentary elections about their exports. Iraq currently produces on average 2.4 million barrels a day, so 200,000 extra from Kurdistan is not that much of an increase, and not much for Maliki to give the Kurds to achieve his political goals. Either way it appears that the KRG will soon re-start its foreign sales, which will be a step towards accomplishing their goal of legitimizing their ability to develop their oil resources autonomously from the central government.

SOURCES

Agence France Presse, “Iraqi govt resolves oil row with Kurds,” 5/6/10

AK News, “Kurdistan oil exportation to resume soon,” 4/12/10
- “Oil delegation to visit Erbil to talk over Kurdish oil exports,” 4/7/10

Bloomberg, “Iraqi Kurds plan to double oil export capacity,” Hurriyet Daily News, 3/25/10

Shattab, Ali, “Iraqi Kurds willing to export oil via national pipelines,” Azzaman, 4/12/10

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