View Full Version : Iraq in dispute over 2013 draft budget as KRG oil sector demands higher allocation

02-14-2013, 12:56 AM
Ben Lando Platts 2/13/13
Iraqi politicians are in dispute over a $119 billion draft budget for 2013 that would set aside $11.3 billion for companies developing oil fields under contracts with Baghdad and $625 million for those under contracts with the semi-autonomous Kurdistan Regional Government, parliamentarians told Platts Wednesday.

The budget is based on an expected oil production of 2.9 million b/d at $90/barrel.

The Kurds say they need nearly $4 billion to pay companies with KRG contracts, for this year as well as for previous years' work in developing the sector, which is capable of exporting nearly 300,000 b/d of oil, KRG oil officials said.

A delegation sent by Prime Minister Nouri al-Maliki is in Erbil, the KRG capital, to negotiate on the budget allocation for 2013.
The KRG said that it will not be able to convince the companies under its contracts to resume oil exports from the region, unless the higher allocation is included in the 2013 budget. The Kurds at the end of December last year suspended crude oil exports via the Baghdad-controlled export pipeline, after the latest in a series of short-term political deals over the past two years fell through.

Maliki's allies, however, say it is the KRG that must act first and maintain exports. The KRG was supposed to export 175,000 b/d in 2012, which it did not. The 2013 budget calls for 250,000 b/d and contains language that will penalize the KRG's take of revenue redistribution relative to the revenue lost by exporting below that amount "as damage to the national budget for the lack of required supply," said Hanan Fatlawi, a member of parliament with Maliki's State of Law bloc.

The KRG, which essentially is made up of three northern provinces, typically receives 17% of the revenues redistributed to the provinces. Fatlawi has led a push to reduce that to 12%, another red line by the Kurds in this budget process.

Kurdish parlimentarians say that the budget puts all the burden on the KRG to perform and has no penalties for the central government if it does not deliver.

The KRG has signed 49 contracts with foreign oil companies including ExxonMobil, Total and GazpromNeft, which already have deals with Baghdad and have thus increased political tension. Baghdad views the KRG deals as illegal and says only the central government has the right to sign contracts.