This month’s signing of a pre-financed contract with Russia’s state oil company Rosneft for the Kurdish export of crude oil through the Ceyhan pipeline will strengthen Kurdistan’s fiscal situation and economic independence, the head of Kurdistan Regional Government’s (KRG) Ministry of Natural Resources was reported as saying.
“It strengthens our fiscal situation. It means we can pay more regularly to the international oil companies working in Kurdistan and we can invest some money in expanding our oil infrastructure,” Reuters news reported MNR Minister Dr. Ashti Hawrami said during an interview in London.
Reuters reported the new deals have increased total borrowing to around $3 billion since 2014, although Rudaw English could not independently confirm current debt or the value of loans sought in the new contract.
“We have learnt a lot from the oil price shock, the costs of fighting ISIS, and the burden of some 1.8 million refugees coming to our territory… Reform is a must — we have a lot of debts to deal with,” Hawrami reportedly said.
“This helps our economic independence although it is important to understand that this cannot be achieved just by oil revenues and higher oil prices,” he reportedly added. “We also need to press on with our economic reforms.”
The deal with Rosneft is for a two-year period, from 2017 to 2019, and according to a Rosneft statement, the purchaser of crude will be Rosneft’s trading arm — Rosneft Trading SA.
“It is also positive for the traders as they don’t have to renegotiate their contracts every six months,” Reuters reported Hawrami said.
According to the November oil production and export report from the KRG, the Region exported an average of 587,646 barrels of oil per day through a pipeline terminating at Turkey’s Ceyhan port.
Crude oil price had dipped under $30 in January 2016 down from more than $105 two years prior. Brent crude traded at around $55.36 per barrel in London on Tuesday.
“We have to be mindful about supply and demand. You tell me what the oil price is going to be and I will tell you when we could reach 1 million bpd of output. Investments have dried up in the last two years because of the oil price crash and attacks by ISIS,” Hawrami reportedly said.
Baghdad and Erbil have been in dispute over the Kurdistan Region’s share of oil revenues since early 2014 when the Iraqi government under former Prime Minister Nouri al-Maliki cut the Region’s budget over the prospect of independent exports of Kurdish oil to international markets.
Relations have improved under the current Iraqi Prime Minister Haider al-Abadi, but the budget payments, a key dispute between both sides, has not resumed, causing an ongoing financial crisis in the Kurdistan Region.
“In reality, Baghdad has given us some share of oil to export,” Hawrami reportedly said. “So we have an arrangement that we both honor. We have real cooperation and we hope to build on that.”
On the topic of Exxon Mobil relinquishing three oil blocks in the past year, Hawrami reportedly tried to view it as an opportunity for other firms.
“Exxon has concluded that they will continue working on 3 blocks while on another three the potential reserves were simply not big enough for them,” Hawrami reportedly told Reuters. “Those blocks could suit other firms. We are now looking to farm them out.”