Iraq Gives Go-Ahead to Kurdish Oil Exports

(Dow Jones Newswires), May 18, 2010

The Iraqi federal government Tuesday approved a deal that would allow oil exports from oil fields in the semi-autonomous region of Kurdistan in northern Iraq, which have been on hold for the last seven months over a payment row with Baghdad, a cabinet spokesman said.

"The cabinet has approved a request submitted by the oil ministry to execute an agreement reached with Kurdistan Regional Government that stipulates the resumption of crude oil exports produced by the region," Ali al-Dabbagh said in a statement emailed to Dow Jones Newswires after the cabinet's weekly meeting.

Oil ministry spokesman Assem Jihad said that according to the new deal the federal government in Baghdad would pay foreign oil firms operating in Iraq's Kurdistan their expenses, but not profit.

The Kurds, who maintain a semi-autonomous rule in Iraq, suspended exports of 40,000-60,000 barrels a day in October last year from Tawke and Taq Taq oil fields after a brief trial because the federal government refused to compensate oil companies for costs incurred during exploration and production.

Analysts in Baghdad said the move could be a signal from the Shiite-led outgoing government to try to forge a coalition government with the minority Kurds after the country's March parliamentary elections.

However, the new deal doesn't mean that the country's federal Oil Minister Hussein al-Shahristani has accepted scores of production-sharing contracts that the Kurds signed with international oil companies, Jihad said.

The Baghdad-based federal government, which grants all oil-exports licenses, has been at odds with the Kurds since 2007 over several oil and gas contracts the Kurds signed with foreign companies. Baghdad argues it has neither seen them or been consulted on these deals.

Shahristani had said a solution to these contracts would take a longer time, but said resumption of exports had no connection to the dispute.

The Kurdish government said it had already sent two contracts to Baghdad signed independently with Norway's DNO International ASA (DNO.OS) and Genel Enerji of Turkey to develop Tawke and Taq Taq oil fields respectively.

Dabbagh said the exports would be handled by the State Oil Marketing Organization, an affiliate of the federal oil ministry, and that revenues from oil sales would go the federal fund.

The cabinet spokesman also said that the cabinet has instructed the federal finance ministry to issue a letter addressed to the KRG "guaranteeing payment of costs incurred by [international oil] companies" which developed the region's fields.

He gave no further details.

Copyright (c) 2010 Dow Jones & Company, Inc.


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