Oil companies demand written guarantees before resuming Kurdish oil exports: Spox

ERBIL, Kurdistan Region - The spokesperson for the international oil companies operating in the Kurdistan Region said on Tuesday that Baghdad must provide written documentation of the international consultant’s audit of production and costs.

"We have been very clear. We have stated publicly. We have stated privately what our conditions are for resuming oil exports. And now is the time for the government of Iraq to share their view and produce written statements of work for the international consultant. And as soon as we have those agreements written, we will be ready to resume oil exports," Myles Caggins, spokesperson for the Association of the Petroleum Industry of Kurdistan (APIKUR), told Rudaw. 

"I want to make APIKUR’s position clear. Our companies are ready to resume oil exports when we have agreements, and we need agreements for sales and also an agreement for the international consultant that is required by Iraq's budget law," he added. 

Caggins also noted that Baghdad has been presented with with several options regarding the agreements. "But we have not had a final resolution. There have not been written agreements that have been presented to all parties for signatures."

Oil exports from the Kurdistan Region through the Iraq-Turkey pipeline have been suspended since March 2023 after a Paris-based arbitration court ruled in favor of Baghdad against Ankara, saying the latter had violated a 1973 pipeline agreement by allowing Erbil to begin exporting oil independently in 2014. 

In early February, the Iraqi parliament approved amendments to the federal budget law, authorizing a $16-per-barrel fee for production and transport costs in the Kurdistan Region - a move seen as a crucial step toward restarting exports.

The amendments also require both the federal government and the Kurdistan Regional Government (KRG) to establish an international technical consultancy within 60 days to assess production and transportation costs for oil fields in the Kurdistan Region. If an agreement cannot be reached, the federal council of ministers will appoint the consultancy.

The following is the full text of the interview with Caggins:


Rudaw: You said in a recent statement that you did not reach an agreement and expressed your disappointment. Why are you so disappointed? 

Caggins: I want to make APIKUR’s position clear. Our companies are ready to resume oil exports when we have agreements, and we need agreements for sales and also an agreement for the international consultant that is required by Iraq's budget law.

The current situation is the government of Iraq has been presented several options. We have presented several draft documents for sales agreements and also the scope of work for the international consultant. But we have not had a final resolution. There have not been written agreements that have been presented to all parties for signatures.

But the Iraqi oil ministry says that most of the issues have been resolved, except for a few technical ones. What does a technical issue mean here?

Well, since the last time I've spoken to you, there has been some progress on the arrangements for payments for future oil sales and also for past due arrears. So there have been some verbal agreements for those principles of the payment mechanism.
 
The outstanding issue, the issue that still needs work and agreement, is on this scope of work, the duties and responsibilities for the international consultant. Let me remind your viewers who are watching today. I know they're watching from Erbil, but also from Zakho. They're watching in Sulaimani. Article 12 of Iraq's budget law amendment requires an independent international consultant to determine the cost of oil production and the cost of oil transportation from each oil site in Kurdistan region.

And that consultant will report their findings. They will give a report to Baghdad and Erbil and the international oil companies. And that will determine the price that the companies will be paid for their production of oil.

The reason why this is important, that all sides agree, is because the international consultant must have a methodology. They must have a way of calculating these costs that is agreed by the companies. We must know the timeline. How long will it take for this international consultant to do their work? That is very important. And finally, we must know the type of report that they will produce and share.

All of these work that the international consultant does must be consistent. It must meet the Iraq's budget law, but also our current production sharing contracts. The contracts between the international oil companies and KRG are valid. They have been tested in Iraq's courts and they are proven to be valid. I have been on your program for almost two years, declaring that our contracts are valid, and the Iraqi courts have also agreed that the contracts are valid. So the international consultant must do its work that is consistent and conforms to the contract.

Have any company names been mentioned? Reports indicate that the Iraqi government has recommended certain companies to the KRG. Do you know which company has been selected to conduct the audit?

The APIKUR member companies have seen the recommended names of the international consultant and our companies have no objection… to the group of potential independent consultants who will come and do this important work.

What is important is what work will the consultant do? But our companies are not standing in the way. We just want to make sure that our contracts are protected, the contracts that our companies have with the Kurdistan Regional Government.

According to information obtained by Rudaw, the Iraqi government has granted significant authority to the potential consulting company tasked with auditing oil production and expenditures. What is your opinion on the extent of the powers given to this company? Can you specify what those powers include?

Companies in APIKUR want to continue to operate within the laws of Iraq and the KRG. And we do not have any disagreements with the government of Iraq. What we are looking for the government of Iraq to do is follow through with their statements. We have seen all of the leaders in Iraq, including the prime minister and the minister of oil, talk about how important it is to resolve the issue of oil exports. The Minister of oil held a large meeting on April 20th… And our companies participate in those meetings. We are active participants in those meetings. 

Iraqi Oil Minister Abdul Ghani attended the recent Sulaimani Forum and spoke during a panel. He said that a meeting would be held soon and the Kurdish oil exports would resume soon. Why is the Iraqi government expressing optimism, while you remain pessimistic and believe that no progress has been made and that discussions are effectively starting from scratch?

Well, we have heard so many times that the oil exports will start as soon as possible. And probably nobody wants the oil exports to resume as soon as possible more than the international oil companies that produce the oil for export.

We have been very clear. We have stated publicly. We have stated privately what our conditions are for resuming oil exports. And now is the time for the government of Iraq to share their view and produce written statements of work for the international consultant. And as soon as we have those agreements written, we will be ready to resume oil exports. 

In your latest statement, you say that good meetings have been held, but no agreement has been reached regarding your financial entitlements - whether related to past debts or future payments. Are you still insisting that the past debts must be settled before resuming oil exports?

The dollars that our companies are owed are very important to our companies and our shareholders and our employees. And also as a simple principle in business, if you produce something, you should be paid for what you produce.

As I mentioned earlier, there has been progress on the discussion and agreements for how and when our companies would be paid for past due payments. Currently, the biggest issue is an agreement on the consultant's scope of work, because if the scope of work for the international independent consultant, if that scope of work does not conform to our contracts, then future payments could be in jeopardy. So yes, this is about money, it is about the export of oil, it is about growing the economy of Iraq for all people.

Let's ask some frequently asked questions. What are the latest updates on the oil production in Kurdistan? How much oil do the APIKUR companies produce? How much do you sell it for? To whom do you sell it?

Our companies are currently selling oil for around $28 to $32 per barrel. And this is less than half of the sale price for oil that is exported onto the global markets. And that's why we are so adamant, we are advocating to have oil sold on the global markets at Ceyhan Port because that oil on the global market is sold for between $65 and $75 per barrel.

We are continuing to produce oil for local sales. It is refined by high-quality, highly capable oil and gas refiners in Kurdistan Region. And it is our goal to get oil back into the pipeline for global export. 

How much do you sell it for?

Yes, like I mentioned, local sale oil is between $28 and $32 per barrel. It goes up and down a little bit, but we're more focused on the big prize of getting oil exported through the pipeline.

How much does the KRG owe you?

These dollars that we are owed for past due payments come from the time period of October 2022 until March of 2023, and it is about $1 billion.  As a reminder, every month that the pipeline is closed is costing a billion dollars to all parties. Once we get oil back into the pipeline, everybody will have more money to share and distribute, including
payments for past due money owed to the companies. 

This is the first time I've seen such a disappointment in the APIKUR statement. Will your pessimism continue, or do you have some hope?

Our companies are committed to our investments in Kurdistan Region. Our companies have invested about $10 billion to build Kurdistan Region's oil and gas industry since 2005. The changes are so visible throughout Kurdistan Region, the tall buildings, the bright lights. Most of this comes from the growth of the oil and gas sector. And we are committed to seeing more investment and more growth in oil and gas in the Kurdistan Region and for the benefit of all Iraqi people.

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