A worker is seen at an oil refinery in the autonomous Iraqi region of Kurdistan, in 2009
A worker is seen at the Tawke oil refinery near the village of Zacho, in the autonomous Iraqi region of Kurdistan, in 2009. Iraq's Kurdistan region threatened on Monday to stop oil exports, and argued the central government did not have the right to sign a deal with British firm BP to develop a giant oilfield in disputed land. © Ali al-Saadi - AFP/File
A worker is seen at an oil refinery in the autonomous Iraqi region of Kurdistan, in 2009
Prashant Rao, AFP
Last updated: March 26, 2012

Iraqi Kurdistan threatens to end oil exports if Baghdad keeps funds

Iraq's Kurdistan region threatened on Monday to stop oil exports, and argued the central government did not have the right to sign a deal with British firm BP to develop a giant oilfield in disputed land.

The moves were the latest in a long-running dispute over energy contracts and revenues between Baghdad and the autonomous region, with the two sides squabbling over payments, revenue-sharing and Baghdad's refusal to recognise dozens of contracts Kurdish officials have signed with foreign energy firms.

The latest round in the Kurdistan-Baghdad dispute comes with Iraq in the spotlight as it hosts an Arab summit for the first time in over 20 years.

In statements issued within an hour of each other on Monday, Kurdish officials said they were reducing oil exports and would stop them entirely in a month if the central government did not hand over $1.5 billion in promised funds, and then said Baghdad needed to seek their approval before reaching a deal with BP.

"The MNR (Ministry of Natural Resources) has reluctantly decided to reduce exports to 50,000 bpd (barrels per day) with a view to possible cessation in one month unless payments are forthcoming" for companies working on oilfields, the Kurdish government said in a statement in English on its website.

It added that the Kurdistan region was "committed to the export target of 175,000" bpd agreed in Iraq's 2012 federal budget, and said it could even export more "if the federal government honours its commitments to pay."

The statement said payments had been withheld for 10 months, and now amounted to nearly $1.5 billion.

Kurdistan said in May 2011 that Iraq had paid oil contractors in the autonomous region as part of an "interim agreement on revenue allocation."

In a separate statement, Kurdish officials said Iraq's oil ministry and state-owned energy companies did not have the right to award contracts for fields in the disputed province of Kirkuk or adjacent territories embroiled in a land row between Baghdad and the Kurdish government in Arbil.

"Management of oil and gas in Iraq does not fall under the exclusive powers of the federal government," it said.

"The Kurdistan regional government requires the federal oil ministry and the North Oil Company to respect the country’s constitution and sit down soon with all the relevant parties to determine how best to enhance and revitalise the present Kirkuk fields," it added.

BP agreed an initial deal with the state-owned North Oil Company (NOC) last week to up output at the Kirkuk oilfield, one of Iraq's biggest, from 280,000 bpd to 580,000 bpd by the beginning of 2014, senior NOC official Hussein Ghulam said.

The autonomous region has signed around 40 contracts with international companies on a production-sharing basis without seeking the express approval of the central government's oil ministry, which regards Kurdistan's deals as illegal.

The federal oil ministry, meanwhile, has awarded energy contracts to international companies on the basis of a per-barrel service fee. It has also refused to sign deals with any firm that has agreed a contract with Kurdistan.

Baghdad has yet to approve an oil and gas law that would regulate the sector, with proposals languishing for several years.

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