Baghdad approves Kurdish exports; considers contracts 'illegal'

The Iraqi government, despite recently approving the export of oil from Kurdistan, still considers contracts signed between the Kurdistan Regional Government and international oil companies illegal.

May 12th, 2009

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 12 -- The Iraqi government, despite recently approving the export of oil from Kurdistan, still considers contracts signed between the Kurdistan Regional Government and international oil companies illegal.

"All we are saying is that these contracts are illegal and illegitimate," said Oil Minister Hussein Al-Shahristani. "The [Kurdistan] region does not have the right, nor does any province or anyone else, to sign contracts on behalf of Iraq without authorization," Shahristani told state television.

"Any contracts must be submitted to the ministry," he said following reports that his ministry had approved exports of oil to begin from the Kurdish region.

On May 9, the KRG announced exports of oil from fields in the Kurdish region would start officially June 1 with 60,000 b/d from DNO International ASA's Tawke field. DNO confirmed it received formal notice to commence exports on that date.

The KRG said the Kurdish oil would be marketed by Iraq's State Oil Marketing Organization, and the revenues would be deposited into the Iraqi state treasury "for the benefit of all Iraqi people."

In March, DNO was poised to begin exports of oil, having connected the Tawke oil field to Iraq's northern pipeline system.

Hardly had DNO announced its export plan this week than Addax Petroleum Corp. also said it received notification from the KRG of plans to export crude oil from the Taq Taq field in the Kurdish area of northern Iraq (OGJ Online, May 11, 2009).

Addax also will commence its exports June 1, but unlike DNO does not have a pipeline in place. It will have to truck its oil from the field to the Khurmala export station, where it will join the Kirkuk-Ceyhan line.

The decision of the Iraqi government was several months in the making and is due to the country's need for additional revenues amid the current economic downturn, according to industry sources.

Regardless of the reasons for its decision, however, Baghdad is likely to come under increasing pressure to step up exports as more discoveries come online in the Kurdish region.

Last week, Heritage Oil Corp. reported the discovery of a giant oil field in Iraqi Kurdistan with 2.3-4.2 billion bbl of oil in place, of which 50-70% appears recoverable.

The company said it could start trucking production from Miran West-1 by yearend, with individual flow rates likely to be 10,000-15,000 b/d (OGJ Online, May 6, 2009).

Contact Eric Watkins at hippalus@yahoo.com.

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