KRG says Baghdad payments continue to lag: Update

Update adds KRG, Iraq quotes on payments

The Kurdistan Regional Government (KRG) has only received around one third of the oil payments due from Baghdad in the first five months of this year, said KRG oil minister Ashti Hawrami. And, in turn the KRG now owes some $3bn to foreign oil companies operating on territory it controls.

But Falah al-Amri, head of Iraq's state-owned marketer Somo, disputed Hawrami's calculation of what is due to the regional government

Hawarami said that the KRG remains committed to the deal with Baghdad, under which it hands over crude produced in its territory to Iraq's state oil marketer Somo at the Turkish port of Ceyhan.

The KRG agreed to transfer 375,000 b/d to Somo in the first quarter of this year, and to increase crude deliveries to 600,000 b/d afterwards to maintain an agreed 550,000 b/d average for the year, in return for around $1bn in monthly payments.

Speaking at a CWC conference in London, Hawrami said: "The export [of the agreed 550,000 b/d] was gradual, and it was not expected technically that we would reach that from day one, but now I am pleased that we have reached that target for export, and hopefully that will increase as the capacity of the fields as well as the capacity of the pipeline increases". The minister said there is good cooperation between Somo and the KRG oil authorities on the ground but acknowledged that technical problems occur. The flow of crude to Ceyhan was disrupted for 80 hours in May, the KRG said last week.

He continued: "The KRG has its commitment to the oil deal and remains committed with the federal government and we need, of course, the other side of the equation to be committed, which is the payment of our budget from the federal government.

On payment levels, Hawrami said the KRG has received 2,300bn Iraqi dinars ($1.93bn) for January-May of ID6,600bn due. Later, he said: "The value of the 500,000 b/d or whatever that we contributed in May was valued at around $800mn and we got less than half of that. Simple formula. How can this be fair how can that be realistic? In March we supplied about 250,000 b/d and we received around $380mn-400mn. We doubled the export at a slightly higher oil price [in May] but we are still getting less money. It seems that the more we supply the less we get."

Last week, Iraq's oil minister Adel Abdul Mahdi acknowledged the same monthly allocation level of ID1,300/m cited by Hawrami. But al-Amri today challenged Hawrami's reasoning. He said that the KRG argues that payments should be based on assumptions in the national budget while Baghdad holds they should be based on actual prices and volumes.

Al-Amri said that the budget is based on an export level of 3.3mn b/d, some 2.75mn b/d from the south of the country. But the actual level from the south has been around 2.5mn b/d. Exports from the north through Ceyhan are supposed to run at 550,000 b/d but the average has been 300,000 b/d. "Therefore we are short 500,000 b/d. The budget price is $56/bl but Iraqi oil is selling below $50/bl. This month because the KRG increased it exports from Ceyhan we received more than 500,000 b/d [into Somo tanks in Ceyhan], generating from this export more than $800mn but in the beginning of the year, in January, we generated $200mn-250mn."

ag/ts

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