KRG, Tehran in Oil Talks

KRG, Tehran in Oil Talks KRG, Tehran in Oil Talks

Iraqi Kurdistan officials and the National Iranian Oil Products Distribution Company (NIOPDC) are in talks to start trade in oil products to the autonomous neighboring region.

Iran and the Kurdistan Regional Government (KRG) have reached a preliminary agreement to trade diesel and kerosene for one year, director of international affairs at the NIOPDC was quoted by Shana news agency as saying.

Seven companies have participated in a tender to set a pricing formula for the oil products, Esmael Hasham Pirouz said, adding that his company is conducting assessments on how to move forward. It is expected that a contractor for the project will be decided in two weeks, and the contract will be signed by the end of July.

The agreement provides for exchange of crude with other oil products. To meet its domestic demand, the KRG is also negotiating the purchase of Iranian gas and have Kurdish oil refined across the border. The gas will be supplied to households and Iraqi Kurdistan’s power stations. The news agency said that the KRG has reportedly asked Iran to refine its oil and send it back for domestic use. Follow-up negotiations are planned to determine the route of a pipeline that would carry Iranian gas to the Iraqi Kurdistan and finalize details of the oil refining agreement.

Oil lies at the heart of the dispute between the Iraqi central government and the Kurdish-run northern enclave. At issue are control of oilfields, territory and crude revenues shared between the two administrations.

Baghdad claims sole authority over oil exploration and export. It has already accused the Kurds in the past of smuggling crude via Iran and keeping the revenue for itself. The KRG claims its right to exploit and export the reserves under its soil is enshrined in Iraq's federal constitution.

Fuel oil and naphtha have moved by truck from Kurdistan through Iran for years, because Kurdish domestic sales contracts allow the sale of these products outside Iraq.

According to a deal, signed last December, the Kurds committed to handing over 550,000 barrels of oil per day from areas under their control to Iraq's national oil marketing entity known as SOMO.

In return, the federal government in Baghdad agreed to pay Kurds 17 percent of Iraq's national budget. That meant, after deducting certain expenses for common national purposes, the KRG would get around $1 billion per month from Iraq's budget, estimated at about $105 billion.