x Abu Dhabi, UAESaturday 25 November 2017

Rosneft pays Kurdistan $1.3bn upfront in production deal

Russian energy juggernaut annoys Baghdad as it pumps in cash to restive region under crude oil purchase contract

The central processing facility of the Rosneft-owned Priobskoye oilfield outside the West Siberian city of Nefteyugansk. Sergei Karpukhin/Reuters
The central processing facility of the Rosneft-owned Priobskoye oilfield outside the West Siberian city of Nefteyugansk. Sergei Karpukhin/Reuters

The Russian oil major Rosneft said on Tuesday it had paid authorities in Iraqi Kurdistan an advance of US$1.3 billion as part of production-sharing deals that have irked Baghdad.

Rosneft announced last month it had signed agreements for five oil blocks in the region which is at loggerheads with Iraq's central government over independence.

"In the third quarter of 2017, the company made advance payments totaling $1.3bn under a Kurdistan government crude oil purchase contract," Rosneft said in its published results.

Following the agreement, the Iraqi oil ministry said that only it or the federal government had the right to negotiate investments in the country's energy sector.

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The oil minister Jabbar Al Luaybi criticised "irresponsible announcements coming from certain officials in Iraq or abroad", without mentioning the Russian state oil giant by name.

In September, Iraqi Kurds overwhelmingly voted to break off from Baghdad, a decision that led to a stand-off with Iraqi troops, and prompted fears for continued oil supplies from the region.

Recoverable oil reserves at the five blocks are around 670 million barrels, Rosneft said last month, calling the estimate "conservative".

Also in Tuesday's results, Rosneft announced it had almost doubled its net profit for the third quarter year-on-year on the back of higher oil prices.

Net profit from July to September was 47bn roubles (Dh2.9bn), compared with 26bn roubles for the same period in 2016.