BAGHDAD, Jan 10 (Reuters) - Iraq’s Oil Ministry expressed “deep regret and astonishment” on Friday over plans announced by the autonomous Kurdish region to begin piping oil to Turkey without central government approval.
The first crude has begun to flow and exports are expected to start at the end of this month before rising in February and March, the Kurdistan Regional Government (KRG) said on Wednesday.
The ministry in Baghdad expressed astonishment at the move and described it as a “flagrant violation of the Iraqi constitution”.
It also rebuked the Turkish government for allowing the Iraqi-Turkish pipeline system to be used to pump and store crude oil produced in Kurdistan without Baghdad’s approval.
The ministry in a statement said the planned oil exports breached a Dec. 25 agreement between the Iraqi government and the KRG. That called for experts from both sides to discuss how crude from Kurdistan could be exported under the auspices of Iraq’s State Organisation for the Marketing of Oil (SOMO).
Kurdistan’s bid to sell oil and gas independently has infuriated officials in the Iraqi capital as Baghdad has long insisted that the central government retains sole authority over managing Iraq’s energy resources.
Iraq’s constitution mandates that all Iraqi oil revenues go through the central government in Baghdad, and the Kurds then receive 17 percent, although they frequently complain that they have received less than that.
The ministry on Friday threatened legal action against any companies that trade in “smuggled” oil or gas from Kurdistan without going through SOMO.
Companies that have taken the risk of exploring for oil in Iraqi Kurdistan welcomed the KRG announcement as a signal they might begin to generate export income from their investments, despite Baghdad’s objections.
“We’ve been waiting to read these words and hear these words since 2007,” said Todd Kozel, chief executive of Gulf Keystone which has Kurdish government approval to exploit what it says is one of the world’s largest onshore exploration fields.
“It’s music to any operator’s ears in Kurdistan. It’s the monetisation of our assets,” he told Reuters on Thursday.
Shares in several oil companies involved in Iraqi Kurdistan rose on Thursday, including London-listed Genel Energy, Norway’s DNO, Hungary’s MOL and Britain’s Petroceltic and Afren.
Iraqi Kurdistan has blossomed economically under self-rule as the only part of Iraq to escape the violence unleashed after the U.S. invasion that toppled Saddam Hussein in 2003.
Although the early flows are predicted to be modest, its oil exports have the potential to redraw export routes across the region.