KRG to Start Oil Payments to IOCs

The Kurdistan Regional Government has announced plans to start paying oil companies a proportion of the revenues from crude oil sales.

Starting from September 2015, the Kurdistan Regional Government, KRG, will, on a monthly basis, allocate a portion of the revenue from its direct crude oil sales to the producing international oil companies, IOCs, KRG Ministry of Natural Resources said in a statement.

It added, as Kurdistan Region’s oil export is expected to “rise in early 2016, the KRG envisages making additional revenue available to IOCs to enable them to begin to catch up on the past receivables due under their production sharing contracts.

An agreement was reached last December with the Federal Government of Iraq, to export crude oil in exchange of regular payments of the Region’s 17 percent revenue entitlement. The arrangement was enshrined in the Iraqi Federal Budget Law for 2015.

However, “due to a number of factors, the federal government has to date been unable to provide the Kurdistan Region with its monthly budgetary dues. As a result, the KRG has been obliged to introduce direct crude oil sales from Ceyhan to help pay Kurdistan Region’s governmental salaries, maintain vital government services, and of course, pay the Peshmerga and other security forces who are fighting Islamic State terrorists.

The statement stressed that the KRG remains determined to reach a lasting agreement with Baghdad on all outstanding issues relating to oil and gas and revenue sharing, through dialogue and discussion.

The KRG has been pleased with the level of technical cooperation on the ground from federal government entities such as the North Oil Company, NOC, and SOMO. The KRG will continue to facilitate oil export from NOC-operated fields in Kirkuk via the KRG’s pipeline network to Turkey”, said the Ministry of Natural Resources statement.

Although the revenue gained from direct sales is still below Kurdistan’s 17 percent share of the federal budget, it is significantly higher than the amount the federal government was able to allocate to the KRG on a monthly basis.

Praising the role of international oil companies, the Ministry of Natural Resources statement said:

“The KRG acknowledges and appreciates the economic contribution to the Kurdistan Region made by the producing IOCs and their success in raising oil export from Kurdistan to record levels …

“The KRG also recognizes the patience of the producing IOCs, which, despite receiving hardly any payments for their crude oil production since May 2014, have maintained operations and have continued to invest to support Kurdistan’s crude oil export.”

(Source: KRG)

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