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Weekly UpdatesAlthough Kurdistan is exporting 35,000 b/d of crude oil through Turkey, Baghdad still regards KRG's exploration and production sharing agreements (EPSAs) with international oil companies (IOCs) as illegal and wants to see them annulled. But Kurdistan's exports are set to reach 100,000 b/d before end-2009, being produced from DNO's Tawke field and Taq Taq which is developed by a JV of Genel Enerji of Turkey and Swiss-based Addax Petroleum of Canada. Exports began on June 1 in a ceremony attended by Kurdistan President Mas'oud Barzani and top-ranking officials from Baghdad. Yet the dispute over KRG's EPSAs is serious as the Kurdish leaders keep insisting on them, while Baghdad is adamant that they must be changed in line with the latter's service contracts (see below).
Exports later this year will be around 40,000 b/d Taq Taq in the province of Erbil and another 50,000 b/d from Tawke in Dohuk. Genel/Addax hope Taq Taq's exports would reach 60,000 b/d by end-2009. Exports from Tawke will link with the Iraq-Turkey main export pipeline at the border town of Fiskhabur, while crude from Taq Taq will be trucked from Erbil before connecting with the main export pipeline. Regional president Massoud Barzani presided over an official ceremony on June 1. Exports from the two fields will reach 250,000 b/d by 2011/12 and the KRG hopes total oil output in Kurdistan will exceed 1m b/d by 2012/13.
Terms of the Taq Taq agreement are for Baghdad's Finance Ministry to receive 88% of the revenues, of which the KRG will get back 17%. Genel Enerji and Addax will share 12%, Okotan told reporters. DNO executives say the terms for the Tawke are quite similar. The crudes are being exported through the State Oil Marketing Organisation (SOMO) of the Iraqi Oil Ministry.
In Baghdad Oil Minister Hussein al-Shahristani keep calling the IPSAs illegal, although he has come under heavy criticism for failing to lift Iraq's anemic oil and gas output as crude prices have plunged. This dispute and other hot issues between Erbil and Baghdad have been the main obstacle to passage of an Iraqi petroleum law by parliament.
Iraq is in dire need of revenue to rebuild its shattered economy, especially after oil prices tumbled from a peak of $147.27/b for paper WTI on July 11, 2008, to a range of $65-75/b, putting heavy pressure on Baghdad's budget. Iraq derives over 90% of its income from the energy sector. Baghdad wants Iraq's crude oil output to reach 6m b/d by 2015, from about 2.4m b/d.
DNO Int'l on June 11 linked its future investments in Iraq to swift payment from Baghdad for oil exports. DNO Chief Executive Helge Eide then told reporters: "We have not received any money yet, but we wouldn't normally get that. It is normal to get that after a month The KRG are very clear on that it will come With the focus there is now, it is important that this gets solved swiftly. It is important with respect to investments ahead".
Genel Enerji last week announced a $5.5 bn merger with Heritage Oil of the UK and said it expected consolidation among the 35 or so oil firms active in Kurdistan. Genel is part of the powerful Cukurova Holding Group, Turkey's largest industrial and commercial conglomerate with numerous investments ranging from automotive, telecommunications, media, textiles, energy, transportation and information technology services. The group has strong government connections in Ankara and Genel would not have made such a big investment as taking in Heritage Oil had it not been assured about the future of Kurdistan despite its dispute with Baghdad.
Yet Shahristani, a resource nationalist, remains stongly opposed to the EPSAs. He had travelled to Erbil for meetings with the KRG premier and minister of natural resources. But both sides are still firing warning. UPI quoted Shahristani as saying: "We are in serious discussion with the KRG about several issues but the position vis-a-vis the contracts the Kurds sign without going through the central government remains unchanged. Those contracts have no standing with the Iraq government".
One day earlier, Kurdistan PM Nechirvan Barzani had stated: "Let Shahristani say what he wants to do, since all the oil contracts of the Regional Government are legal and signed according to the [KRG] law and [Iraqi] Constitution". KRG Natural Resources Minister Dr Ashti Hawrami said: "We have a contractual right, a constitutional right, a legal right. Anybody [who] has a complaint about that they can take us to court. Kurdistan oil is Iraqi oil".
The KRG claims provisions in the Iraqi Constitution referring to de-centralised power allow it to pass its own petroleum law and sign deals on its own. A federal petroleum law was initially agreed upon in February 2007, but it has been slow in moving through the Council of Ministers in Baghdad and has just recently been taken up by the federal Council of Representatives. Shahristani said the EPSAs signed before February 2007 would be honoured if they were brought in line with the federal law, with the others considered illegal (see omt19IraqFieldsMay11-09).
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