William MacNamara Kurdistan says will export oil from June 1; Baghdad denies

The Kurdistan Regional Government (KRG) of Iraq claimed this morning that oil would soon be commercially exported from its large fields, in an apparent resolution of a long-running dispute between the KRG and Iraq’s central government about who grants Kurdistan’s oil licenses and how Kurdish oil revenues will be shared.

But the Iraqi oil ministry denied any deal had been completed, according to Reuters reports from Baghdad, and the oil companies that stand to gain most from a resolution backed away from the statement, saying they had not yet received word of anything concrete.

The northern region holds reserves of oil and gas whose indicated scale only grows by the year. This has attracted many oil explorers like DNO, Addax, and OMV who continue to invest in field development even as the viability of exporting the oil is uncertain. Baghdad declared “invalid” all oil licenses granted by the KRG after 2007, and it has blocked Kurdistan oil operators from flowing oil through the Iraq-Turkey pipeline that is key to any commercial-scale exportation. It has, however, allowed oil operators to build spur pipelines connecting their fields to the main pipeline.

While no expected the power struggle between Iraq’s central and regional governments to end any time soon, many many players involved in the Kurdistan oil industry said in recent weeks that the two sides were closer than ever to an agreement over Kurdish oil exports and were hammering out the final details of revenue-sharing.

Thus, share prices jumped for many Kurdistan oil companies when Ashti Hawrami, the KRG oil minister, issued a release saying “exports shall commence officially on 1 June 2009″ from the Tawke Field, operated by Norwegian oil explorer DNO, followed later in June by exports from the Taq Taq field, a joint venture between Addax Petroleum of Switzerland and Genel Enerji of Turkey. The two fields would export a total 100,000 barrels per day through the pipeline by the end of June.

The statement implied a deal had been struck that favoured the central government: “The exported crude oil from both fields will be marketed by SOMO [Iraq's state oil-marketing company] and the revenue will be deposited to the federal Iraq account for the benefit of al lraqi people”. Dr Hawrami’s statement also emphasised, once again, that Kurdish oil exports would aid national goals, as Iraq seeks to boost total production and restore oil revenues decimated by the low oil price.

“We are surprised to read the statement this morning,” said a spokesman for DNO, the immediate beneficiary of the scheme. “We have to focus on the formal process, and we have not received formal confirmation yet. But neither have we received any signals indicating things are not moving in the right direction.” DNO’s Tawke field, which along with Addax/Genel’s Taq Taq is the only field ready to export oil today, had already forecast official exportation would start no later than the second quarter of 2009.

Heritage Oil this week announced it had discovered up to 4.2bn barrels of oil in one half of its Miran field in Kurdistan, drawing new attention both to the oil region’s high potential and to political stalement preventing exportation.

Official text below from www.krg.org.

Ministry of Natural Resources announces start of crude oil exports from Kurdistan Region, Iraq
Announcement Dr Ashti Hawrami
Minister for Natural Resources
Kurdistan Regional Government

8 May 2009

On behalf of the Kurdistan Regional Government (KRG), the KRG Ministry of Natural Resources announces that crude oil exports shall commence officially on 1 June 2009 from the Tawke Field, at an initial rate of around 60,000 barrels per day. This follows the completion of all the metering instrumentation and the tie-in of the field pipeline with the Iraq-Turkey main export pipeline at the border town of Fishkhabur.

In addition, during the coming month of June, some 40,000 barrels per day of light crude oil shall commence (by trucking) from the Taq-Taq field to the newly installed temporary loading and unloading facilities at the Khurmala Station located East of Erbil, and from there onwards it will be transported through the existing pipeline networks to the Iraq-Turkey export pipeline. This will be a temporary measure and will continue until a field pipeline is laid between the Taq-Taq field and the Khurmala Station.

The exported crude oil from both fields will be marketed by SOMO and the revenue will be deposited to the federal Iraq account for the benefit of all Iraqi people. The average API gravity of the crude oil mix at a combined rate of 100,000 barrels per day will be around 35 degrees. Once the Taq-Taq pipeline is laid and further upgrades are made to the Tawke pipeline, the combined exports from these two fields will reach 250,000 barrels per day, with the average API gravity of around 39 degrees. These higher API gravity oil mixes will improve on the overall quality of the present Kirkuk oil mix which is only around 31 degrees API.

To mark this occasion the Ministry of Natural Resources shall hold an opening ceremony at Fishkhabur. A number of dignitaries will be invited from the Kurdistan Parliament, the KRG, the Kurdistan oil sector, SOMO officials, the head and members of the Federal Parliament Energy Committee, the Federal Finance and Oil Ministers, the Governor of Duhok and other officials. Local and international media will also be invited.

This great historic achievement, which was accomplished in record time, is one of the KRG’s contributions to raising oil production and revenue for the benefit of all Iraq. We wish to acknowledge and thank officials of the North Oil Company in Kirkuk for their technical support during the last year to facilitate the tie-in with the export pipeline. They, and other high level federal Ministry of Oil officials who have supported us in the process, will be invited to attend the ceremony to celebrate this important occasion with us.