KRG halting oil exports for Baghdad's nonpayment

By OGJ editors

The Kurdistan Regional Government ordered a halt Apr. 1 to crude oil produced in Kurdistan that was destined for export through Turkey because the KRG said Iraq’s federal government in Baghdad has ceased payments.

The KRG Ministry of Natural Resources in Erbil said, “After consultation with the producing companies, the ministry has reluctantly decided to halt exports until further notice. There have been no payments for 10 months, nor any indication from federal authorities that payments are forthcoming,” the MNR said.

The KRG said it has received no payment since May 2011. Iraq has reported production of 2.3 million b/d in March, of which about 75% is exported.

Iraq’s national government considers illegal the 40 or so contracts that the KRG has signed with international oil companies and has dissuaded several companies from signing with the KRG. The national government, which exports crude via the Persian Gulf, indicated that the KRG is allocated more revenue in the federal budget than the region accounts for in oil sales.

The MNR added, “We hope that this is a temporary measure and that those in the federal government responsible for nonpayment will quickly realize that their failure to adhere to their agreements is not in the interests of the Iraqi people.”

The MNR said it will make every effort increase exports above the 175,000 b/d target included in the 2012 Iraq budget “once this unfortunate nonpayment situation has been satisfactorily resolved.” In the meantime, it plans to divert production “to the local market for processing and refining to generate an alternative source of cash flow for the producing companies.”

DNO International ASA, Oslo, confirmed MNR’s request that it halt delivery of that portion of crude oil produced from Tawke field that was destined for the Iraqi national pipeline system.

DNO said all other Tawke crude oil and refined product deliveries and field operations remain unaffected. The company’s exploration and development operations on the Peshkabir-1, Tawke-14, Tawke-15, and Tawke-1A wells continue as before and as per plan.

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