KRG Ministry of Natural Resources

Erbil, Kurdistan – Iraq (mnr.krg.org) - The Kurdistan Regional Government (KRG) welcomes the recent positive statements by the federal Minister of Oil Jabbar Ali al-Luaibi about improved relations between the KRG and Baghdad, and looks forward to hosting the minister soon for constructive discussions on resolving outstanding issues on oil and gas.

The KRG further welcomes the recent constructive discussions with the federal Minister of Electricity, Qassim Mohammed Al-Fahadawi, regarding cooperation in the electricity sector and the need to provide fuel for power and refined products to help reconstruct Mosul and other liberated areas following the defeat of IS.

The KRG notes and appreciates the support of Prime Minister Abadi for this confidence-building approach. The KRG affirms its commitment to constructive dialogue with its partners in the federal government and enters discussions over energy cooperation in good faith.

However, it is also noted that a few officials and political figures in Baghdad oppose this new atmosphere of pragmatism between the federal government and the KRG. Therefore, it is important for both sides to remain vigilant to ensure these opposing voices do not undermine the chances of progress.

For example, in a recent interview with Iraq Oil Report, Dr Falah Alamri, the Director General of the State Oil Marketing Organization (SOMO), made several contentious and misleading comments regarding the KRG’s oil export and sales process. Despite insisting he wanted to avoid interference in politics, his comments were clearly at odds with the new atmosphere of cooperation. 

The SOMO director made misleading statements about the selling price of Kurdistan Oil on the international oil market. In fact, the KRG oil sells at a similar price to the SOMO Official Selling Price (OSP). There are the usual discounts for quality from the crude blend benchmark, as used by SOMO. The only extra reduction offered by the KRG is for the cost of the money for prepayment purchases for its crude. Amid the crash in the oil price, compounded by the illegal budget cuts of 2014 imposed on the KRG by the Maliki Government, and the influx of over one million refugees and internally displaced persons, the KRG was forced to sell oil on a prepayment basis in order to pay salaries and fund its security forces. As with any loan-type arrangement, there is a cost to the money.

Any other deductions from the KRG oil export revenues are due to increases in shipping and insurance costs caused by SOMO’s aggressive and counterproductive campaign of harassment against the legal buyers and shippers of KRG oil. Such actions also increase the costs for SOMO’s own oil.

Since the KRG crude export started in May 2014, the KRG blend has successfully established itself on the international market, and now, through contracts with the world’s leading buyers and refiners, it is in demand, reaching a wide range of refineries and locations.

At a time of economic crisis, the revenue from those sales has paid salaries in the KRG and surrounding areas, provided humanitarian support to the victims of war in Iraq and Syria, and sustained the Kurdish security forces who are fighting bravely against terrorism.

The KRG’s energy policies and its positive approach to on-the-ground cooperation with the federal oil authorities in Kirkuk and the federal electricity minister in Baghdad have not only enabled it to provide power to Kirkuk, but also to come up with planned win-win arrangements whereby power and refined products can help to rebuild the liberated areas that border the Kurdistan Region.

The KRG is confident that both sides will approach the coming talks with a positive, can-do attitude, and will not let politics stand in the way of progress.