Iraq Central Government Threatens to Cut Revenue to Kurds Over Pipeline to Turkey

Bloomberg Business Week

Iraq central government threatened to cut oil revenue to the Kurdish north in a deepening standoff over a new export pipeline that companies from DNO International ASA (DNO) to Genel Energy Plc (GENL) plan to use to ship crude from the region.

The government in Baghdad may refuse to give the 17 percent of annual earnings from oil sales allocated to the semi-autonomous Kurdish provinces if they bypass central authorities and start operating a link through Turkey by year-end, Hussain al-Shahristani, deputy prime minister for energy affairs, said in an interview in Dubai yesterday.

“We have our options, and you will hear them when we adopt measures, as this is a big loss for Iraq,” he said. “No Iraqi would accept that they take 17 percent of Iraq’s revenue from crude produced outside of Kurdistan and at the same time all of the revenue of the crude produced in Kurdistan.”

 

The Kurdistan Regional Government halted crude exports through the government-run pipeline in December amid a dispute with the Oil Ministry in Baghdad over the sharing of crude sales revenue and payments owed to companies such as DNO and Genel Energy. The Kurds, who are building export pipelines as a step toward self-sufficiency, estimate their oil reserves at 45 billion barrels.

The Iraqi government insists that the Kurds link their new crude export pipeline to the main government pipe at a metering station near the Turkish border, Shahristani said.

“They refused and said they want to link it after the metering station to prevent the Iraqi government from knowing the quantity of crude they are exporting,” he said. “The real problem is that they don’t want anyone to know how much they are producing and selling.” 

Iraqi Kurdistan offers improving business environment; tensions with Baghdad remain – country risk report

Maplecroft    Country Risk Report for Iraq

Maplecroft’s Country Risk Report for Iraq focuses on the primary risks to oil and gas companies operating in Iraqi Kurdistan. The report includes in-depth analysis of current political dynamics, including tensions between Erbil and Baghdad, security concerns, legal and regulatory challenges, the human rights and labour rights situation and environmental issues.

Iraq is facing a year of political uncertainty and potential instability. In Iraqi Kurdistan, the relationship between the Patriotic Union of Kurdistan (PUK) and the Kurdistan Democratic Party (KDP) is souring. Meanwhile, an increasingly hostile and intractable confrontation between Erbil and Baghdad over contested territory and Kurdish issuance of oil contracts remains a source of concern for investors. Tensions peaked in November 2012 when both the KRG and federal authorities sent thousands of troops to a disputed border in the Diyala governorate. A de-escalation of the military stand-off has yielded progress but political statements regarding the incident remain vitriolic.

Oil and gas companies have good reason to be interested in Iraqi Kurdistan. Long-term indications suggest that crude production from the north of the country will constitute a rapidly growing share of overall national output, rising from 6.6% in 2012 to 33% by 2020. However, considerable challenges remain, not least the inability of Erbil and Baghdad to agree on the terms of exploration contracts.

Iraqi Kurds woo more oil majors in contest with Baghdad

Julia Payne & Simon Falush       Reuters

Iraqi Kurdistan said it is negotiating with two or three major international companies to operate oilfields and expects to announce the outcome in about a month, in a move likely to further heighten tensions with Baghdad.

The remarks by Natural Resources Minister Ashti Hawrami on Tuesday highlight the autonomous region's resolve to push ahead with development of its oil resources independently of the Baghdad-based central government.

Kurdistan has upset the central government by signing deals directly with oil majors such as Chevron Corp and Exxon Mobil, providing lucrative production-sharing contracts and better operating conditions than in the south of the country.

Last week Hawrami said Kurdistan, which is in the north of Iraq and has run its own administration and armed forces since 1991, had awarded Chevron a stake in the Qara Dagh oil block.

"We are negotiating with two to three other significant companies. They will hopefully be announced in a month or so," Hawrami told reporters on the sidelines of a conference in London.

He also said Exxon Mobil's contentious deal to operate in the autonomous region was on track.

Turkey Beating Norway as Biggest Regional Oil Driller: Energy

Offshore Oil drilling on Turkey's Black sea cost

Selcan Hacaloğlu & Brian Swint       Bloomberg


Turkey is drilling for oil and natural gas with more rigs than any European country and plans new rules in 2013 to speed exploration of energy supplies for the fastest-growing major economy after China.

The country fielded 26 rigs at Dec. 31, according to data compiled by Bloomberg, and the number has since risen to 34, Energy Ministry officials said yesterday. Turkey has leapfrogged Norway as offshore drilling increased in the Black and Mediterranean seas. Spending on exploration jumped to $610 million last year from $42 million a decade earlier.

With economic growth forecast at 3.5 percent this year and about twice the pace of the most advanced economies to 2017, Turkey is drilling for its own energy to ease reliance on imports from Iran, Iraq and Russia. State-owned Turkish Petroleum Corp. has taken Royal Dutch Shell Plc (RDSA) and Exxon Mobil Corp. (XOM) as partners, after neighboring Israel and Cyprus made some of the decade’s biggest gas finds in the past three years.

“If there’s one country that needs energy, it’s Turkey,” said Darren Engels, an analyst at FirstEnergy Capital in Calgary. “Their domestic business doesn’t scratch the surface.”

Turkish Petroleum, which is known as TPAO and has operations in Libya, Iraq, Azerbaijan, Colombia and Kazakhstan, needs to boost domestic output as it pursues a target of supplying all of Turkey’s energy needs by 2023.