ERBIL, Kurdistan Region – The Kurdistan Regional Government (KRG)’s Ministry of Natural Resources denied an allegation from the Iraqi finance minister who recently speculated the Region’s oil sector may be smuggling crude or over-producing, contrary to an OPEC agreement to cut production.
“There are indications that the KRG is not cutting back to the limits required by the OPEC+ agreement for which federal Iraq has to make up this difference,” Iraqi Finance Minister and Deputy Prime Minister Ali Allawi said on Tuesday at the Powering Iraq virtual conference, according to S&P Global Platts.
He also suggested smuggling is occurring in the Region. “There might be leakages from some other oil fields, or there might be leakages that go into trucking to various points, but we are not aware of the amounts,” he said.
On Thursday the KRG hit back. “These allegations are baseless, are completely speculative and are made without any evidence,” read a statement from the Ministry of Natural Resources.
The Iraqi Ministry of Finance responded to the KRG statement, saying that the minister's comments had been distorted.
Oil producers of OPEC and allies have been cutting production since May by 10 percent of global supply after the COVID-19 virus slashed demand. OPEC+ agreed to ease the measure from August as the global economy shows signs of recovery. Iraq was slow to comply with the production cuts. Oil Minister Ihsan Abdul Jabbar Ismail said it would be in full compliance by August and would compensate for its overproduction in May and June.
Iraq cut oil exports in July and August, but revenues were up thanks to higher prices.
Baghdad and Erbil agreed to share the production cuts, but in July the KRG denied it had reduced its output. In its statement on Thursday, the Ministry of Natural Resources said it has reduced production in line with the OPEC agreement “and its recent gross production figures have been well below the fair pro rata levels compared with the rest of Iraq.”
The KRG's monthly oil production and export figures are audited and published by Deloitte. In its statement, the Ministry of Natural Resources advised Baghdad to do the same. “What is needed is for the federal authorities to follow KRG’s example by independently auditing and publishing their own production, local consumption and export volumes to create greater transparency and accountability in oil sector throughout all of Iraq,” it stated.
In 2019, the KRG exported 160,306,283 barrels of oil, another 564,476 barrels were sold to local refineries for domestic use, and 1,369,581 barrels were sold locally, according to Deloitte. The KRG earned a net more than $4.5 billion in oil sales.
Updated at 11:08 pm
