In a potential breakthrough for companies active in Iraq’s north, regional Prime Minister Barham Salih said Baghdad has sent the first-ever payment for exports — $243 million — to local officials for transfer to contractors after years of dispute over terms.
“This positive development (adds) impetus to discussions over a long-delayed raft of federal oil- and gas-related legislation,” Salih said in a statement.
He failed to address contentious long-term profit-sharing terms for the companies but said the initial payment “augers well for the timely passage of a federal hydrocarbons law, a federal revenue-sharing law and other federal oil legislation.”
The money is half the net revenues from some 5 million barrels of exports in February and March, the first months of Kurdish exports after a 17-month shutdown as debate raged between Baghdad and the Kurdish capital of Arbil over how much to pay companies.
Salih said the payout stemmed from an “interim agreement” under which some export revenue collected by Baghdad would go to the region to pay “exploration and extraction costs” of contractors.
“The sum was transferred today from Baghdad to the KRG and for sure it will reach the companies in the next few days,” Fadhel Nabi, Iraq’s deputy finance minister in Baghdad, said.
Exports from two Kurdish oil fields — the Tawke field operated by DNO and Taq Taq by Turkey’s Genel Enerji and China’s Sinopec — flowed briefly in 2009.
That ended when the central government refused to honor export terms agreed by Arbil, saying they were too generous and that only Baghdad had contracting authority. The firms scaled back production and began selling locally at a painful discount.
Analysts said Thursday’s announcement leaves much of the dispute unresolved.
“There could still be a potential risk that Baghdad will say these contracts are far too good,” said Anders Holte, an analyst at ABG Sundal Collier.
After investing about $500 million in the region, DNO reported gross production at Tawke of more than two million barrels in February and March combined.
Much of the payment announced on Thursday will thus go to the Norwegian firm and its junior license partner, Genel. DNO entered Kurdistan in 2004, a year after the US-led invasion.
London-listed Gulf Keystone and Heritage Oil have also made large hydrocarbon discoveries on regional Kurdish licenses.
Trond Omdal of Arctic Securities said the $243 million seemed to be an “installment” toward further compensation.
DNO spokesman Tom Bratlie said: “We do not have any additional information at the moment. The issue of export payments has of course been the most important issue since we started exporting in the beginning of February.”
Analyst Marius Gaard at Oslo’s Carnegie Investment said the transfer from Baghdad was “the news we’ve been waiting for” but would not declare the firms’ wait over.
“When you read the announcement it is difficult to see what they (the two levels of government) have agreed on,” he said. “It’s a step in the right direction.”
“We will work to transfer the sums to the companies as soon as possible,” Ahmed Al-Mufti, an energy adviser to the prime minister of Iraq’s Kurdish region, said.
