Shahristani Retains Hard Line on KRG Oil Contracts

Iraq’s deputy prime minister has said that oil contracts signed by the Kurdistan Regional Government (KRG) must be rewritten, and that recent government payments to international producers in the region in no way validate the contracts, according to a report from Reuters.

“The contracts as they stand will have to be presented to the government and brought into line with our other contracts in the country,” Hussein al-Shahristani, deputy prime minister for energy, told the news agency at an energy conference in Oslo, Norway.

Shahristani’s remarks suggest the central government is sticking to a hard line in talks on a national oil law; asked if Kurdistan’s contracts were illegal, Shahristani replied as he has before: “Yes, as far as the Iraqi government is concerned those contracts are not binding with Iraq.”

Since August a parliamentary committee has been debating a draft national hydrocarbon law, or ‘oil law’, approved by the Iraqi cabinet, that would centralise control of oilfields in Baghdad.

DNO spokesman Tom Bratlie commented:

Our contracts are legal — they are entered into with the Kurdish regional government — but we do not want to participate in the political debate in Iraq. We have of course seen that there are different views on this question between Baghdad and Erbil.

While the KRG contracts grant the companies a share of oil profits, Shahristani has said he favours leaner “service contracts” like those imposed in southern Iraq.

He said he could not predict when a final draft of the national oil law would be sent to the full parliament.

“What the KRG had asked the Iraq government is to pay them (companies) for the actual capital that was invested in drilling wells and making service facilities that are the property of Iraq,” Shahristani said.

“These are only the capital expenses that the KRG has spent on developing these fields. As far as we are concerned they have nothing to do with the contracts, or with the companies.”

DNO, which has exported as much as 70,000 barrels a day from Kurdistan since February, received $60 million from the Kurdish government last month and $104 million in June without, according to the Reuters report, receiving an explicit explanation of what the money was for.

The payments were presented as “cash advances” in an interim arrangement, Bratlie said.

“There has been some challenge with regards to how to book this,” he said, “but the important thing for DNO is that we are getting paid, period.”

According to Azzaman news agency, Iraq only agreed to carry Kurdish crude on its national pipelines on condition the proceeds were funneled to the Central Bank.

Shahristani said he had no plan to meet with DNO executives while in Norway for the conference.

(Source: Reuters, Azzaman)

3 Responses to Shahristani Retains Hard Line on KRG Oil Contracts

  1. Re da Caste October 13, 2011 at 11:10 pm #

    Shahristani is only creating split in Iraq and trying to oppress the Kurds the same way Saddam did. Maliki must sake him otherwise the Kurds will withdraw their support to him and the forces in Kurdistan for independence will grow stronger.

  2. Julian October 14, 2011 at 4:57 am #

    Why would any country want to waste time and money rewriting valid contracts already profitable and in effect; particularly when the national economy is in tatters. The GOI needs to get its house in order in Baghdad before it asks any other region of the country to do anything; otherwise it just looks like another corrupt government with its hand out for cash.

  3. Sam October 15, 2011 at 12:31 pm #

    If Iraq wants inward investment and to inspire foreign confidence in their emerging economy they have to stop this senseless bickering and move on. As a result of the Kurdistan Regional Government being dynamic massive new oil fields have been discovered and many companies are happy to move ahead with vital infrastructure (such as new pipelines). These oppertunities will cost Iraq nothing but the endless debates and uncertainty are doing nothing to inspire investors; surely it’s not that difficult to reach a compromise.