London, 3 September (Argus) — Norwegian independent DNO said today that crude exports from its Tawke field in the semi-autonomous Kurdish region of northern Iraq will continue until mid-September.

The Kurdistan Regional Government (KRG) suspended exports from all fields in the Kurdish region at the start of April as part of a payment dispute with Baghdad. It ordered operators in the region to resume 100,000 b/d exports at the start of August as a goodwill gesture for one month, pending the receipt of funds from the federal Iraqi government to allow the KRG to reimburse the costs of producing companies. DNO said the deadline has been extended by two weeks.

“The KRG has requested that we continue to direct 40,000 b/d from Tawke to the Iraqi export pipeline until 14 September. We will comply with this,” said DNO. London-listed Genel Energy, which operates the 130,000 b/d Taq Taq field, refused to comment.

The extension of the deadline is intended to create a positive atmosphere in negotiations to resolve the KRG's dispute with Baghdad over exports, payments for them, and wider issues pertaining to some 50 production sharing contracts (PSCs) that the KRG has awarded to foreign companies without Baghdad's approval, and the enactment of a federal Iraqi oil and gas law. The KRG has announced its willingness to negotiate all those issues.

Baghdad considers the upstream PSCs awarded by the KRG without federal government approval as illegal, but the KRG says Iraq's constitution allows it to award such contracts without Baghdad's involvement.

Under an existing interim agreement between the KRG and Baghdad, the federal Iraqi government must pay the KRG 50pc of the value of exports from the KRG-run region through Iraq's state-controlled pipeline to the Turkish Mediterranean port of Ceyhan. The KRG then reimburses producing companies out of those payments.

The Iraqi government says it has already paid $250mn to the KRG, but the central government audit bureau has asked the KRG for details of crude produced in 2010, 2011 and 2012 but not exported through the government-owned pipeline. It estimates the value of the unaccounted for oil over those two-and-a-half years at around $8.5bn, whereas the cost money that the KRG is demanding from Baghdad amounts to some $1.5bn.

The standoff caused by the central audit bureau's request is an example of the bureaucratic red tape bedevilling the Iraqi government and is a “hangover from the previous regime,” says a KRG official.

The KRG says it is willing to keep exports flowing if the federal government simply makes the outstanding payments, pending a resolution of all outstanding issues. Various KRG officials have been publicly calling for a resolution of all disputes with Baghdad based on the Iraqi constitution. The constitution, promulgated in 2005 when Iraq was still under US-led occupation, favours a loose federal structure that devolves significant powers to local governments in Iraq.

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