Baghdad (AFP) Feb 5, 2011
Iraq will respect profit-sharing contracts that its Kurdistan region has signed with foreign oil firms, ending a longstanding dispute between the two sides, Prime Minister Nuri al-Maliki said on Saturday.
He said Baghdad finally agreed because extracting crude in Kurdistan was more difficult and costly than south Iraq, and added that output from the autonomous region would double to 200,000 barrels per day (bpd) by end 2011.
His remarks signal an end to a standoff between Baghdad and Kurdish authorities in their northern capital of Arbil that broke out after the latter stopped exporting oil in October 2009 in a row over payments.
"The oil ministry accepted these contracts because the nature of the extraction in Kurdistan is different from Basra," Maliki told AFP in an interview, referring to Iraq's oil-rich southern province.
"There is a need for bigger efforts there, while in Basra it (oil) is closer to the surface. It's difficult to have service contracts in Kurdistan but it's normal to have them in southern Iraq," he added.
While Kurdistan has signed contracts with international energy companies based on profit-sharing, Baghdad prefers the use of a service fee, whereby firms are paid a fixed sum for each additional barrel of oil they extract.
Kurdistan stopped exporting oil in October 2009 in a dispute with Baghdad over payments to foreign energy companies, and the two sides have been locked in a row ever since.
The central government had repeatedly said it was opposed to the Kurds signing their own contracts, a stand which Kurdish officials ignoring by clinching agreements with foreign firms after the US-led invasion of 2003.
The two fields currently being exploited in the northern region are Tawke, run by Norwegian energy firm DNO which has current present production of 60,000 bpd, and Tuk Tuk field, run by Turkey's Genel Enerji with output of 40,000 bpd.
Deals with both firms were signed in 2004.
Baghdad and Iraqi Kurdistan appear in recent months to have agreed to resume exports, with Baghdad paying the expenses of energy firms working in the region, although the payment of profits has not been publicly addressed.
DNO said on Thursday that it had begun pumping oil to an export pipeline, with exports from the Tawke field due to resume within days.
"The companies continue producing according to the contract signed between them and the KRG (Kurdistan regional government), and will take their share, and what is left will come to the state budget," Maliki said.
"The Kurds will not take anything other than the companies' share."
His remarks were welcomed by Kurdish regional prime minister Barham Saleh.
Iraq has the world's fourth-largest proven reserves of oil, with 143.1 billion barrels of crude, behind Saudi Arabia, Venezuela and Iran.
The country currently produces around 2.5 million bpd and output is expected to rise to 3 million bpd by the end of the year.
Overall exports, which account for the lion's share of Iraq's government revenue, averaged around 1.95 million bpd in December.
Iraq's 2011 budget, which is still being considered in parliament, factors in targeted exports of 225,000 bpd from Kurdistan.
Production, however, is expected to rise dramatically in the coming years, after the government awarded 11 contracts in 2009 to foreign firms to ramp up output manifold.
Parliament in Baghdad has yet to pass a key hydrocarbons law, however, discussion of which has been repeatedly delayed.
The law, which would regulate the sector and divide responsibility between Baghdad and Iraq's provinces, has been held up for more than three years due to disagreements between MPs from the country's various communities.
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