View Full Version : Iraq impasse costing $20 million a day

12-25-2012, 07:21 PM
Dec 25, 2012 Updated Dec 25, 2012 7.52pm

Iraq (http://www.thenational.ae/topic/location/middle-east/iraq) is losing US$20 million (Dh73.5m) a day, cutting into the country's budget, after oil (http://www.thenational.ae/topic/subjects/industry/oil) exports from the Kurdish autonomous region halted because a deepening political crisis is delaying payments.

http://www.thenational.ae/deployedfiles/Assets/Richmedia/Image/SaxoPress/AD20121212969153-A_worker_at_Taw_225x150.jpg (http://www.thenational.ae/thenationalconversation/industry-insights/energy/kurdistan-oil-wrapped-in-red-tape)

At the heart of the dispute are fundamentally different approaches in giving foreign companies access to the fields.
Kurdistan grants companies production-sharing agreements in which companies can take a share of the output. In contrast, Baghdad uses a service-contract model that pays foreign partners a per-barrel fee, which many executives say is not high enough to compensate for the risk involved.
"The Kurdish authorities have committed to 200,000 barrels a day [bpd]. If we take an average of $100 for the price of oil, that's taking $20 million from the budget," said Abdel Ilah Qassem, the adviser to Baghdad's deputy prime minister for energy affairs Hussain Al Shahristani.
"It's a political crisis, one that even the politicians don't know how long it will take to resolve."
Crude exports halted on Saturday, the latest show of hostility between Iraq's central government and the Kurdish Regional Government since the withdrawal of US forces last year.
Ali Hussein Balo, the adviser to the Kurdish ministry of natural resources, said the regional government had no choice but to halt exports after Baghdad failed to fulfil a commitment to pay 1 trillion Iraqi dinars (Dh3.16 billion) owed to companies working in the region for their output. Mr Balo said it paid only 650bn dinars.
The US majors ExxonMobil and Chevron, along with the French major Total, have angered Baghdad by signing oil deals with KRG this year without the central government's permission.
The political row has had major repercussions for Sharjah-based Dana Gas, an explorer and producer, which was forced to restructure its $1bn sukuk after disruptions in payments from Iraq and Egypt.
In April, the Kurds stopped the exports of around 100,000 bpd due to delays in payments. Four months later, exports resumed. That allowed the Kurdish and central governments to reach a new agreement on payment. Baghdad says the subsequent suspension of payments was because the Kurds were pumping less than the 200,000 bpd they had pledged.
Iraq exports 2.6 million bpd of crude and will increase this to 2.9 million next year, Mr Qassem said. The nation's average crude output is 3.2 million bpd. Capacity is 3.4 million bpd and will increase to more than 3.5 million in 2013, he said.
Political tensions peaked after central and Kurdish forces, called the Peshmerga, clashed for the first time last month. The president, Jalal Talabani, of Kurdish origin and seen as a unifying force among rival factions, asked forces on both sides to exercise restraint and patience.
Mr Talabani suffered a stroke and was hospitalised last week, before being sent to Germany for care leaving political matters on hold.
Iraqi Kurdistan has aligned its economic foreign policy with Turkey. The autonomous region plans to build an independent oil pipeline in the next two years, Ashti Khawrami, the Kurdish natural resources minister, told Bloomberg last month.

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