KRG "Sets the Record Straight" on Oil Exports

As a result MNR duly performed the following:

• Immediately signed contracts with experienced international oil traders and buyers for its available export volumes, a process approved by the Regional Oil & Gas Council around the 3^rd week of June 2015.

• MNR obliged the buyers guarantee $850m monthly assuming the average export levels are achieved.

• MNR persuaded by agreement all the traders involved to defer receiving oil against their outstanding pre-payments until 2016.

• However, in practice MNR faced significant interruptions to the oil flow through the pipeline in Turkey due to sabotage and theft, leading to reduced export levels and the loss of revenue to the KRG of $501m (detailed of which was published by MNR recently).

• Failure to meet contractual export delivery targets below the agreed average levels released the buyers from their full payment obligations of $850m per month, however even then the traders were once again persuaded not to cut back on the payments on those occasions.

Adding to all these challenges, the price of crude oil has dropped since mid June 2014 by approximately 20%.

Despite all the above difficulties, the following payments have been achieved or expected in the last two months (from June 24 to Aug 24):

1. As of the 20^th of August, the KRG received $1,241.6 million into the KIB account in favor of Ministry of Finance - it was then up to the Ministry of Finance to follow up with KIB on the management and movement of the funds received.

1. A further deposit of $187.5m will be made into the same KIB account on 21^st of August (i.e. by tomorrow).

1. A further $125.0 m is also expected on or before August 24.

1. Thus a TOTAL of $1,554.1 m, which is more than promised under the agreements reached with the traders despite the reduced oil exports caused by interruptions.

1. In addition, there were KRG’s refined product purchases, which amounted to $134.0 m using export oil swaps for diesel for KRG’s power stations.