x Abu Dhabi, UAESunday 23 July 2017

Iraq's Kurdish tensions over oil worsen

The tensions between Baghdad and Erbil over Kurdish control of its oil resources have been further stoked by comments from Iraq's top oil official.

The Baba Gurgur oil field near Kirkuk. The KRG halted oil exports following the central government's decision not to sign off on payments for regional oil. Kevin Frayer / AP Photo
The Baba Gurgur oil field near Kirkuk. The KRG halted oil exports following the central government's decision not to sign off on payments for regional oil. Kevin Frayer / AP Photo

The tensions between Baghdad and Erbil over Kurdish control of its oil resources have been further stoked by comments from Iraq's top oil official.

The Kurdish Regional Government (KRG) last week announced a halt to its exports, frustrated by the continued reluctance of the central government to sign off payments for oil flowing out of the autonomous region.

Hussein Al Shahristani, Iraq's deputy prime minister for energy affairs, responded by criticising the contracts awarded to international oil companies by the KRG as too generous, sayingthe companies were given "what they dreamt of in any place in the world".

The central government "had many remarks on the oil contracts signed in Kurdistan in the north, which do not achieve any profit for Iraq", he told Al Iraqiya TV.

Baghdad is irked by ExxonMobil's decision late last year to explore six blocks in the Kurdistan region, following the lead of Tony Hayward, the former BP chief executive who is heading the investment company Vallares, along with numerous smaller oil companies.

The central government has an informal policy of blacklisting oil companies active in the autonomous region from licensing rounds in the south of the country. But tough contracts and difficult conditions have made Kurdistan an attractive option for big operators over the rest of Iraq. The French oil major Total has hinted it may set up shop in the north.

The KRG stopped what it said were up to 100,000 barrels per day (bpd) of exports after becoming frustrated with the lack of further payments for its oil, which it receives from the finance ministry.

An initial two payments were made last May. Baghdad refuses to recognise the production-sharing agreements signed by the KRG, and the capital fears it will encourage secessionism if it allows Kurdistan too much influence over oil.

It also claims that Kurdish exports only amount to 65,000 bpd, sowing the seeds for further dispute.

Iraq's production last month reached the 3 million bpd mark, and new harbour facilities are boosting its export capacity. Nouri Al Maliki, Iraq's prime minister, has strengthened his position with adept political manoeuvering, increasing his ability to put pressure on Kurdistan. Experts say that will weaken the Kurdish position.

"With oil production from federal Iraq now starting to ratchet up on the back of recent investments, supported by the boost to southern infrastructure, it is arguably now a good time for the KRG to press its case and win the best deal it can," said Catherine Hunter, an energy analyst at IHS Global Insight.

UAE companies are also invested in Kurdistan's energy sector. Taqa, an Abu Dhabi company focusing on energy and utility assets, owns part of WesternZagros, a Canadian oil company that operates in two Kurdish blocks.

Taqa announced on Sunday it was buying 50 per cent of a 1,000 megawatt power plant in Kurdistan. DNO, a Danish oil company majority owned by RAK Petroleum, is also active in the region.

fneuhof@thenational.ae