Iraq Kurd oil sales, signing bonus waiting for Baghdad

Ashti Hawrami, Kurdistan Regional Government minister of natural resources, in his office in Erbil, Iraq. (Ben Lando/UPI)



By BEN LANDO, UPI Energy Editor
Published: June 10, 2008

ERBIL, Iraq, June 10 (UPI) -- Iraq's Kurdish region has been collecting millions of dollars in signing bonuses for 19 oil deals inked with international oil companies but is waiting for a federal revenue-sharing law before turning it over to Baghdad.

The signing bonuses vary from between $1 million and $5 million "to sometimes more than that," said Kurdistan Regional Government Minister of Natural Resources Ashti Hawrami, though he wouldn't give details "until we publish the information."

"It will be published probably within a month or two. We're currently working on compiling all of our agreements, and then we will just put all the information on the KRG Web site," he told United Press International at his office in the KRG capital. He said the funds are being held in an account "in Erbil."

"The signing bonuses are part of the oil revenue, and they should be accounted for as such. That money hasn't been touched by the regional government. It's basically accounted for to be deposited when we have an agreed revenue sharing law."

Also to be published are details of what is required of the contractors, aside from searching for and producing oil and gas.

"We have placed quite a lot of burden on the contractors on the local content, i.e., through employment, training, capacity building, expats (foreigners) coming in to help us, technology transfers, just to make sure that we can benefit from the contract in a variety of ways, also this includes environmental fund and so on," he said. "We want the contract area to benefit from the contractor's good will and corporate responsibilities. You're going there and you're disturbing everybody's life in terms of seismic activities, drilling, housing, expats coming and going.
"We're basically putting the burden on the contractor to really make an impact locally at the contract area, the villages, the area affected, to contribute to them. Maybe building a couple schools, a hospital, or maybe contributing to a government program. We call that local capacity support.

"We're also doing some sales of crude oil internally now," he said. "A few million dollars of revenue is accumulated, again this revenue is accounted for in the same way."

The 19 oil and gas deals with foreign companies are part of a dispute with Baghdad over control of the hydrocarbons development. The federal Oil Ministry has called most of them illegal. This contention has stalled talks on a package of oil-related legislation including a new oil law, a revenue-sharing law and laws reconstituting the national oil company and reforming the Oil Ministry.

And although only two of the 19 oil deals have resulted in oil production, none is being exported, he said.

"The government share of the revenue belongs to all Iraqi people. We will deal with that and account for it, but in practice we haven't reached there yet."

Small local refineries are taking what is produced by Norwegian firm DNO and the Taq Taq Operating Co., the joint venture of Turkey's Genel Enerji and Canada's Addax Petroleum. But as these and the other contracts start increasing flow, the KRG plans to have the capacity to keep some crude at home.

"Cumulatively probably we're going to build about 100,000 barrels per day refinery capacity, which basically should solve most of our domestic problems," Hawrami said. One is to be built by Heritage Oil of Canada and the other by Genel, both at the site of their respective exploration blocks.

"It is difficult to forecast these things because they are not entirely under our control," he said. "Typically I think two years from the date of the award is about right for these refineries, which under the current environment is considered to be a fast track, because the refinery builders have full orders, much bigger orders, and so on."