Iraq’s central government has approved payment of close to $560 million to oil producers in the autonomous Kurdish region, its finance minister said, after Kurdish authorities threatened to halt exports due to a lack of payments from Baghdad.
The central government has a long-standing dispute with the Kurdish Regional Government (KRG) in the north over the control of oil in the region, which has throttled payments. Baghdad maintains it alone has the right to export oil.
On Monday, the KRG said it had reduced exports to 50,000 barrels per day and warned it would stop them altogether if Baghdad was not forthcoming with payments, which it said amounted to around $1.5 billion, Reuters reported.
“We’ve allocated 650 billion Iraqi dinars ($559.4 million) in the 2012 budget to pay the companies, which we will release after we receive the audit from the board of supreme audit,” finance minister Rafie al-Esawi told reporters on the sideline of the Arab League summit on Tuesday.
Iraq’s ministries and government offices are all audited by the board of supreme audit, an independent body.
Iraq is hosting the meeting for the first time in 20 years, and the three day event opened on Tuesday, with talks focused on economic and financial cooperation between Arab states.
Iraq approved a $100 billion budget for 2012 in February, based on an average oil price of $85 per barrel and 2.6 million bpd in crude exports.
Its Deputy Finance Minister Fadhil Nabi told Reuters a total of about $2.53 billion had been set aside as payment for oil companies working in Iraq, which included the $560 million for oil producers in the northern Kurdish zone.
Iraq, which has the fourth-biggest oil reserves in the world, aims to boost its oil production capacity to 8million to 8.5 million bpd by 2017, which could vault it into the top echelon of world producers.
As much as a third of the oil extracted in northern Iraq is refined locally for domestic use, partly due to late payments from Baghdad for crude pumped into the major pipeline to Turkey and in part because it reduces the costs of producers.
Tensions between Baghdad and the KRG over oil have been high since October, when ExxonMobil announced a Kurdish exploration deal that the central government deemed illegal.
Source: Upstream Online