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Abdel Mehdi .... sees confidence and goodwill between the two sides.

Iraq says to start work on final Kurdish oil deal

BAGHDAD, December 27, 2014

Iraq's Kurdish region will continue to export its own crude oil under an initial deal with Baghdad until a comprehensive deal is reached, with work on a final agreement expected to start within weeks, Iraqi oil minister Adel Abdel Mehdi said on Monday.

Early this month, the Iraqi central government reached a temporary agreement with Kurdish regional authorities ending a bitter dispute over oil exports by and budget payments to the semi-autonomous Kurdish region.

Under the deal, Kurdish fields would export 250,000 barrels per day through Iraq's state oil marketing organisation (Somo), while an additional 300,000 bpd from the Iraqi area of Kirkuk would be exported via a pipeline running through Kurdish territory.

In an interview with Reuters on Monday, Abdel Mehdi said the initial deal was put together mainly so Baghdad could form a budget for 2015, and that a final settlement "should be worked out in the coming weeks".

In the meantime, the Kurdish region can continue exporting above the 250,000 bpd limit on its own, but legal action taken by Baghdad against Kurdish authorities in Arbil over oil exports will remain in place, he said.

"We agreed for the time being things would stay as they are. It means, they were producing, they were exporting and we are putting some claims on that. This is not legal, so things will continue as they are now."

There is now "confidence and goodwill" between the two sides, Abdel Mehdi said. "We think we can sit together and settle all those pending issues like the payments and claims from either side."

The minister said Iraq now produced around 3.2 million bpd in the south of the country and expected this to rise about 100,000 or 200,000 bpd next year.

That would bring total crude oil production by Iraq, after its export agreement with the Kurdish region, to 4 million bpd in 2015.

But Abdel Mehdi said he didn't think that would trigger any pressure from Opec next year to cap Iraq's production, which has been exempted from quotas because of wars and sanctions.

"Last year, almost a million barrels (per day) have been cut from the market because of Kirkuk and the KRG (Kurdish regional government), so we have already done a lot of cutting in favour of Opec and I think Opec understands that."

Abdel Mehdi also said he expected oil prices to stabilise over $70 a barrel by the middle of next year. Brent crude is now trading around $62, down from about $115 in June.-Reuters




Tags: Oil | Iraq | Kurdish |

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