Iraq oil payment talks 'hit impasse'

Roadblock: in payments dispute between Kurdistan and Iraq

Iraq talks aimed at resolving an oil payments dispute with Kurdistan are believed to have hit deadlock, while reported deals signed by Russia’s Gazprom Neft with the regional government are set to further strain relations with the Baghdad regime.

Reports at the end of last week that officials from the Kurdistan Regional Government (KRG) had finalised an agreement with federal counterparts for a workable mechanism for payments to foreign producers in the semi-autonomous region had raised hopes of a resolution to the long-running spat.

The payments row, part of a wider dispute over resource sovereignty and revenue sharing, stems from Baghdad’s objection to production sharing deals signed by Kurdistan with international oil companies (IOCs) such as DNO International, Genel Energy and ExxonMobil that it deems illegal.

Exports from the region through the official Kirkuk pipeline network have been halted since December due to the stand-off, which has been further inflamed by armed clashes in the disputed Kirkuk area.

Anglo-Turkish producer Genel Energy has been exporting crude by truck to Turkey to circumvent the stoppage, despite Baghdad threats to take legal action to halt the move.

Turkey has told Iraq it will reject any new oil and gas export pipelines built by Kurdistan without the approval of the Baghdad government, Iraq’s Oil Minister Abdul Kareem Luaibi was quoted as saying by the state media network on Monday.

Lawmakers from Iraq's ruling coalition were reported to have met with KRG representatives, along with government ministers and other officials, in the Baghdad parliament at the weekend to discuss the payments issue.

However, the political factions failed to agree on the amount of money that is still owed to IOCs working in Kurdistan, after earlier payments made by Baghdad, coalition legislator Ammar Tohme told Bloomberg.

“The groups met today but the issue has not been settled,” he said on Sunday.

The Kurds claim the companies are owed 4.2 trillion dinars ($3.6 billion), while the central government’s accounting bureau has said the amount is $1.5 billion, according to Tohme.

 Iraq’s government-sponsored Iraqiya earlier said that the political groups had reached an agreement.

The groups may call for a future meeting between Iraqi Oil Minister Abdul Kareem al-Luaibi and KRG Natural Resources Minister Ashti Hawrami, together with the parliamentary finance committee, to reach an agreement on the payments, Tohme said.

Meanwhile, Kurdistan is reported to have signed new agreements with Gazprom Neft, the oil-producing subsidiary of Russian gas monopoly Gazprom.

"We are satisfied with Gazprom Neft's work in the region. New agreements have been reached with this Russian company in recent days," KRG President Masoud Barzani was quoted as saying by news agency Interfax, which didn't report any details.

The Russian player acquired interests in two Kurdistan blocks last August, but also has a contract with Baghdad for the Badra oilfield in Iraq.

International companies consider production sharing deals on offer in Kurdistan to be more lucrative that technical service contracts available in Iraq.

However, the federal government has previously threatened to penalise foreign companies that sign such deals with the KRG by barring them from work in Iraq.

Gazprom Neft had failed to respond to Upstream’s request for comment by the time of publication.

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