Authorities in Iraq’s cash-strapped Kurdish region will withhold delivery of oil to the central government and export crude independently in 2016 to ensure revenue amid a global price slump, according to a senior lawmaker in the territory’s parliament.
The central government in Baghdad was not committed last year to paying the self-ruled Kurdistan Regional Government its 17% share of the federal budget and this lack of commitment persists in 2016, said Izzat Sabir Ismael, chairman of the Kurdish Parliament’s Finance and Economic Affairs Committee, Bloomberg reported.
“Oil prices are low and government revenues in 2015 were about $50 billion at best, which means half of what has been forecast,” he said in a phone interview.
“If the KRG delivers to Baghdad the agreed quantity of 550,000 barrels a day, Baghdad will not be able to pay the KRG its share of the budget—which is about $1 billion a month. So, the KRG studied the situation and decided to export oil on its own.”
The KRG has fallen months behind in paying fees to international oil companies, including DNO ASA and Genel Energy Plc as well as wages to its public-sector employees.
The Kurds have been holding back crude produced in their enclave in northern Iraq and exporting it independently since June via a pipeline through Turkey, as they exercise greater control of their own affairs.
KRG's finances have been eroded by the budget impasse, collapse in crude prices and the cost of a war against Islamic State militants in Iraq, the second-biggest producer in the Organization of Petroleum Exporting Countries.
The Kurds, who have historically resisted control by Arab-dominated governments in Baghdad, are independently developing oil reserves they say may total 45 billion barrels —equivalent to almost a third of the deposits in the rest of Iraq, according to BP Plc data. The Kurdish region exported 600,769 barrels a day of crude in November, up 0.9% from the previous month, according to a KRG statement on Dec. 9.
Iraq holds the world’s fifth-biggest oil reserves and is shipping the most crude in at least 25 years, even after the self-styled Islamic State militants seized much of the country’s northwest.
