No sign of Kurdish oil exports scheduled for February 1 start

Baghdad (Platts)--1Feb2011/628 am EST/1128 GMT

The semi-autonomous Kurdistan Province in Iraq has not yet started exporting crude oil despite a reported agreement that exports would resume from February 1, Iraqi oil ministry sources said Tuesday.

Two top oil ministry officials, speaking on condition of anonymity, said there had been no additional oil supplied from two producing fields in the Kurdish province despite a reported deal between the Kurdish Regional Government and Baghdad that would have allowed the resumption of exports.

The officials said they did not know when exports would begin.

Kurdish Prime Minister Barham Salih said earlier this month that he had reached an agreement with the Iraqi federal government that would allow oil exports to resume, with Baghdad agreeing to pay foreign contractors operating in Iraqi Kurdistan.

Deputy Iraqi Oil Minister Ahmed al-Shamma subsequently confirmed to Platts that exports would resume on February 1 at a rate of 100,000 b/d from the Tawke and Taq Taq oil-producing fields.

Under an existing agreement with Baghdad, which allowed for brief oil exports from Kurdistan in 2009, the Kurdish crude is exported through the federal pipeline system with the State Oil Marketing Organization selling the crude on the KRG's behalf and the proceeds deposited into the central treasury. The KRG would, in turn, receive 17% of total revenues, in line with its percentage of the Iraqi population.

The Tawke field, operated by Norway's DNO, has current production capacity of 50,000 b/d and is connected directly by pipeline to the Iraqi northern export pipeline at Feysh Khabur, just before it enters Turkey.

The Taq Taq field, being developed by a joint venture between Turkey's Genel Enerji and China's Sinopec, which has been producing 35,000 b/d, is transported by tanker trucks to a central depot and then fed into the export pipeline to the Turkish port of Ceyhan.

The Iraqi 2011 budget assumes oil exports for the year of 2.25 million b/d, including 150,000 b/d to be exported from the Kurdish province. Baghdad made the resumption of Kurdish exports a condition for the KRG receiving its 17% share of revenues, a provision that angered Erbil and prompted Salih's visit to Baghdad to try to resolve the issue and reach agreement on oil exports.

The KRG began exporting oil from Tawke and Taq Taq on June 1, 2009, but oil flow was halted four months later at the request of the foreign contractors, who insisted on being paid before they would agree to resume exports.

The Kurdish government had argued that since the central government was collecting the revenues from the oil sales, it should be responsible for paying the contractors. Baghdad wanted the KRG to pay out of its 17% share.

It was not immediately clear, in view of the reported agreement over payment to contractors, why exports had not yet resumed. The Iraqi government, in a bid to ease tensions with Erbil, had agreed to pay contractors' costs but not profits.

The exact amount and payment mechanism has not been disclosed.

It was not possible to contact a KRG representative for clarification with Kurdish natural resources minister Ashti Hawrami in London for an energy event.

The KRG has signed 40 production-sharing contracts with foreign oil companies which Baghdad says are illegal and refuses to honor.

--Ben Lando, newsdesk@platts.com

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