Iraq, Kurdistan Closer to Solution on Paying Oil Firms

Erbil, 14 April 2010 - Reuters

Kurdish and federal Iraqi officials have agreed on potential mechanisms for paying oil firms operating in the Kurdish north but the proposals must be approved by the Iraqi cabinet, a Kurdish official said.

A delegation led by Iraq's deputy oil minister, Abdul Karim Louaibi, travelled to Kurdistan regional capital Erbil on Sunday and held talks with natural resources minister Ashti Hawrami over how to restart crude exports from the region.

"The Finance Ministry will have the final say on repaying contractors working in the region and after receiving its okay we will resume exports within two to three days," Hawrami told Reuters late on Monday.                          
Dr Ashti Hawrami, Kurdistan Regional Government minister of natural resources
He did not give any details about the proposed mechanisms worked out by the Iraqi and Kurdish officials. Iraqi officials said the cabinet had to approve the proposals and it would be up to the Finance Ministry to implement them.

Paying international oil firms such as Norway's DNO and Turkey's Genel Enerji is a main hurdle to relaunching exports from Kurdish oilfields.

The incumbent Shi'ite Muslim-led government in Baghdad deems independent contracts signed with around two dozen companies by the Kurdistan Regional Government (KRG) to be illegal.

Exports from two fields, Taq Taq and Tawke, briefly occurred last summer only to be suspended after Baghdad refused to pay the firms and the KRG declined to cover their costs from its 17 percent share of national oil revenues.

SIGNS OF BREAKTHROUGH

Iraq's minority Kurds, who have enjoyed virtual autonomy in their northern enclave since the first Gulf War, are embroiled in various disputes over oil,www.ekurd.netland and power with Iraq's majority Arabs.

Kurdish oil clout suffered a blow when Iraq concluded multibillion-dollar deals with oil majors to quadruple national output of 2.5 million barrels per day by developing oilfields south of Iraqi Kurdistan.

That made the region's potential exports less crucial for a government that depends almost entirely on oil for revenue.

Signs of a breakthrough have increased amid negotiations to form the next Iraqi government after a March 7 general election produced no clear winner. The Kurdish bloc is likely to be a partner of whoever ends up picking the next prime minister.

Oil Minister Hussain al-Shahristani said in February the Iraqi government could end up paying exploration and extraction costs of oil firms working in Iraqi Kurdistan but not their profits.

"We will submit results of the meetings to the council of ministers to issue a final decision," the KRG website quoted Louaibi as saying after the talks in Erbil.

Deputy Finance Minister Fadhil Nabi said any suggestions to repay oil firms must be approved by the cabinet.

"I don't think the issue depends on the Finance Ministry. Cabinet should approve them first and then refer them to the Finance Ministry for implementation", Nabi told Reuters.

Louaibi could not be reached for additional comment and an Oil Ministry spokesman did not provide further details.