Iraq’s self-ruling Kurds agreed to let the central government in Baghdad control the amount and quality of crude they export as well as manage revenue from its sale, Iraqi Oil Minister Abdul Kareem al-Luaibi said.
The Kurdistan Regional Government will export oil using a metering system operated by the Oil Ministry in Baghdad, Luaibi told a news conference yesterday in Vienna. The Kurds also agreed to put money earned from the sale of oil from Kurdish fields into a UN-administered account for Iraq’s earnings from crude, he said.
The agreement may herald an end to years of confrontation between Iraq’s Kurds and the central government. It may lead to a formal accord this month under which Kurdish authorities resume oil shipments via Iraq’s government-run export pipeline to neighboring Turkey, Luaibi said. The KRG halted the flow last December in a dispute with the central government over how to share oil revenue. Even so, Luaibi’s comments shed little light on how the agreement conforms with what may be a separate deal between the KRG and Turkey.
“It’s still very vague and unclear what’s been agreed to,” said Robin Mills, the head of consulting at Manaar Energy Consulting and Project Management in Dubai. “The most unclear issue in all of this is how payments will be handled.”
Mills, who spoke by phone from Iraq’s Kurdish city of Erbil, said KRG officials he met with there declined to divulge details of any agreements they have with Turkey. Iraq has rejected efforts by the KRG to reach a separate accord with Turkey to start exporting crude by the end of the year, using a new pipeline in the Kurdish region.
The Kurds have signed an energy agreement with Turkey, Nechirvan Barzani, the KRG’s prime minister, said Dec. 2 at a conference in Erbil. Luaibi declined yesterday to comment directly on reports about such a deal, saying only that Turkish Energy Minister Taner Yildiz confirmed to him that no accord exists yet between Turkey and the Kurds.
“Everyone’s got their own version” of whether the KRG and Turkey have formally agreed to anything, Mills said. “My take is that there are some agreements, but not everything is in place yet to resolve all issues.”
International companies including Exxon Mobil Corp. (XOM), Total SA, DNO International ASA and Genel Energy Plc have been caught up amid turmoil between Iraq’s central government and the semi-autonomous KRG.
Iraq’s understanding with the KRG will help the country boost crude shipments next year to 3.4 million barrels a day on average, a daily rate that would include 400,000 barrels from the Kurdish region, Luaibi said. Technical teams from Baghdad and the KRG will meet “very soon” to work out details, he said.
Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, exported 2.4 million barrels a day in November, according to the Oil Ministry. The Kurds have been sending as much as 50,000 barrels a day by truck into Turkey. They plan to start pumping about 300,000 barrels to Turkey using their new internal pipeline before the end of this year, KRG Natural Resources Minister Ashti Hawrami said Oct. 31. The Kurds are targeting exports of 1 million barrels a day.
“Without a payment plan in place, no one can commit to a full-scale development of the oil fields, which is what is really needed if the Kurdish government is to reach its target,” said Mills, the consultant.
Companies from Turkey, which has been trying to ease tensions between Iraq’s government and the Kurds, may help complete a pipeline from Iraq’s southern province of Basra, Luaibi said. This “strategic pipeline” may be ready within a few months, with a capacity for 850,000 barrels a day, including 500,000 barrels a day for export, he said.
Iraq will install two additional single-point tanker-mooring units by February to contribute to its oil exports southward from the Persian Gulf, Luaibi said. The country is operating two mooring units and will have a fifth as a spare, he said. Work on the new units won’t affect exports, Luaibi said.
Iraq has 150 billion barrels of proven crude reserves, excluding deposits in the Kurdish region, according to BP Plc’s Statistical Review of World Energy of June 2013. The KRG estimates its own reserves at 45 billion barrels, enough to meet U.S. needs for almost seven years.