KRG "Sets the Record Straight" on Oil Exports

By late spring this year, the inability or unwillingness of Baghdad to provide the KRG with its fair share of the agreed budget, had become clear to the KRG and the entire political leadership of Kurdistan Region, but despite the overwhelming evidence, no action was taken by the political leadership to deal with this new deteriorating reality.

Only in mid June did the political parties of Kurdistan reluctantly agreed to MNR’s long-suggested proposal to increase direct sales of KRG oil to international exporters in order to provide a direct and predictable economic lifeline to our Region.

That political decision took effect on 24 June, 2015.  The program involved the following:

• MNR to boost the export to 500,000 barrels per day of crude oil from KRG-operated fields, assuming no interruptions to the flows in the pipeline beyond MNR’s control, and no political interference or backtracking of the decisions taken.

• It was assumed and hoped that an average netback price of $55 per barrel will remain in place for the rest of the year.

• This was then expected to generate around $850 million per month, which was deemed to be sufficient to pay ongoing government costs and salaries and begin covering the backlog in the salaries.

• MNR was assigned responsibility for finding buyers for KRG crude oil and for agreeing with the previous buyers of KRG’s oil (who had made pre payments in 2014) to defer their outstanding pre-payments until 2016 to enable KRG to receive the full $850 million per month during 2015.

• It was assumed that this $850 million per month would also be enough for the KRG to set aside some money to pay the exporting International Oil Companies in order that they maintain and then increase export levels, thus to increase the revenues even further.

• It was also agreed that the Ministry of Finance would be in charge of receiving all oil revenues at the KIB and HalkBank.

• On July 7^th, a further government directive, signed by the KRG Prime Minister, authorized Minister of Finance with controlling the movement of money from KRG’s account in the HalkBank in Turkey.

• It was also agreed that all other revenue, if not directed to Halk Bank for any practical reason, should be directed to the Ministry of Finance account at the KIB.