KRG statement
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KRG statement on Kurdistan Region oil contracts and revenues
Statement by Dr Ashti Hawrami
Minister for Natural Resources
Kurdistan Regional Government
17 January 2010
After talks with the Kurdistan Region’s Prime Minister Dr Barham Salih,Iraq’s Prime Minister Nouri al-Maliki on 3rd January said in astatement to the press, “It is time to look at this file and settle itwith flexibility and realism, in order to preserve the rights andinterests in these contracts.” He added, “The revenue will be part ofthe national revenue that is distributed equally to all Iraqis”.
In response to this statement, we believe it is necessary to explain the following:
1. We reiterate our already publicly announced position: We believethat the oil revenue of the Kurdistan Region is for all of the Iraqipeople, in the same way as all of Iraq’s other oil revenues, whichshould be distributed throughout Iraq fairly and in accordance with arevenue sharing law to be enacted as required by the Constitution.Therefore we agree with the Federal Prime Minister’s statement.
2. We note that the Federal PrimeMinister assured us all that he wishes to look again at the oilcontracts with the Kurdistan Region in order to solve the issue. TheKurdistan Regional Government (KRG) is ready to start a seriousdialogue regarding this matter, and we are also ready to immediatelyrestart the process of oil exports from the Kurdistan Region’s fieldsat a rate of no less than 100,000 barrels per day, and in the interestsof all the Iraqi people. We will also work to rapidly increaseproduction to more than 200,000 barrels per day this year.
3. Although there are different views onthe level of the profit share to be allocated to the contractors, thereality obliges us all to agree on the resumption of the oil export andto allocate a certain percentage of the revenue from the exported oilto the concerned contracted companies, to cover their actual costs.This will create a suitable and a positive atmosphere to enable us tostart, as soon as possible, a dialogue about all other suspended issues– particularly to open the door for everyone to understand theframework of the contracts that the KRG has signed. In particular wecan then address the amount profit that is granted to the contractedcompanies. This should be viewed in comparison with what is anacceptable standard in the international oil industry regarding oilexploration and production. To demonstrate the extent of our resolveand readiness, we are publishing here the contracts of the companies
DNO and
Genel,to facilitate discussions and to show the transparent nature of thesecontracts and their economic benefits for everyone in Iraq.
4. We do not object to offering the oilproduced in the Kurdistan Region by the contracted companies to SOMO(State Oil Marketing Organisation of Iraq), assuming that SOMO thenallocates part of the Region’s oil revenue either to the KRG tocompensate the companies involved, or for SOMO to directly compensatethe agreed amounts to the companies involved, provided that suchpayments do not exceed the amounts that these companies have spent, andas outlined in the table below. The balance of the derived oil revenueshould then be deposited in the Federal Government’s bank account.
5. The current relevant producingcompanies include DNO and Genel. We are ready to form a financialcommittee composed of representatives from the Federal Government’s andthe Kurdistan Region’s ministries of finance, along withrepresentatives from the aforementioned companies, to verify andconfirm the exact amounts of money that these companies have investedso far.
6. For the sake of expediting thisprocess, we believe it is also necessary to create another committeecomposed of representatives of the KRG Ministry of Natural Resources,SOMO, DNO, and Genel, to confirm the amount of oil produced andexported by these companies, and to confirm the revenue that SOMOreceives from the sale of the oil produced and exported by them, toensure that an accurate and a fair compensation is made to them.
7. The
table and
figures explain the following:
a. Although the initial oil production will begin with 100,000 barrelsper day, it will increase gradually and continuously to 1,000,000barrels per day within five years from now.
b. The anticipated revenue that theFederal Government will receive from the oil production of theKurdistan Region during the coming five years from 2010 to 2014 willbe: $2.75 billion (2010), $8.23 billion (2011), $12.45 billion (2012),$18.27 billion (2013), and $25.62 billion (2014). The total costcompensation of the companies contracted in the Region for the sameperiod will be: $1.4 billion (2010),
.9 billion (2011), $1.05 (2012),$1.2 (2013), and $1.4 (2014). This illustrates that the FederalGovernment (Ministry of Finance) will receive in total more than $67billion as net revenue from the oil produced by companies contracted inthe Region in the coming five years. In return, less than $6 billion incosts will be paid to these companies.
c. By 2015 the total revenue will be morethan $27 billion per year, with a cost compensation of $1.5 billion peryear to the companies involved.
Finally, oil revenue coming from theKurdistan Region will lead to the expanded economic development of Iraqin general, and it will increase the prosperity of all the Iraqipeople. This is due to the rightful participation of the Region in thisvital oil sector, and for the benefit of all constituencies of thepeople of Iraq. Therefore we call upon the Federal Government to engagein a serious dialogue with the KRG to reach a comprehensive agreementon this matter in the interests of Iraq as a whole.