The Kirkuk-based North Oil Company plans to nearly double the allocation of oil to refineries owned by the Erbil-based KAR Group, a sign of increasing cooperation between the Iraqi oil ministry and the Kurdistan Region, as reported by Iraqi Oil Report on Tuesday.
The Iraqi parliament banned Erbil-based oil and gas KAR Group from operating oil fields in Kirkuk in early January.
With a majority vote on January 8, parliament passed the motion banning KAR Group and assigned state-owned North Oil Company to take over oil production in the province and export it through the Iraqi marketing company (SOMO).
KAR Group had failed to reach an agreement with Iraqi authorities over the operation of the oil fields that were under Kurdish control following the rise of ISIS in 2014 until mid-October when the disputed areas came under Baghdad’s control.
The Kurdish company withdrew its staff and locked their facilities in the oilfields when Iraqi forces, supported by Iranian-backed Hashd al-Shaabi paramilitaries, drove the Peshmerga out of the area in response to Kurdistan’s independence vote.
The Kurdistan Regional Government’s (KRG) revenues have been slashed by about half since the loss of Kirkuk, further worsening the Region’s financial crisis caused by Iraqi budget cuts since early 2014, low oil prices, and the war against ISIS.
The parliament also mandated an investigation into exports from the formerly KRG-controlled oil fields and bank accounts that received revenues from oil sales. The legislature tasked various parliamentary committees, including energy and finances, with the inquiry.
Iraqi Prime Minister Haider al-Abadi criticized the Kurdish oil sales on several occasions, often releasing numbers different from those released by the KRG's Ministry of Natural Resources.
KRG Prime Minister Nechirvan Barzani urged Baghdad to check all the numbers concerning the oil and gas audit.
“If Baghdad is interested to learn about the numbers and what have we done, we are ready for the Iraqi government and parliament to come and any side to put all the data before them as we have wanted to have an extreme level of transparency,” Barzani said in early January.
The KRG signed an agreement with Deloitte, the largest professional and financial services company in the world, to conduct an audit of the Kurdistan Region’s oil production, exportation, and revenues at the end of 2016.
Bringing Deloitte in is part of the KRG’s economic reform plan and to increase transparency in the oil sector.
Deloitte stated in its financial report released on January 16 that they found no "misstatements" of the KRG's oil exports, consumption, or sales for the first half of 2017.
The data for the second half of 2017 will be published in the near future, the KRG said, adding it "considers the auditing process as an important step for strengthening transparency in the oil and gas sector of the Kurdistan Region."
"The KRG has approved Deloitte's recommendations to further enhance the processes and address any shortcomings," the statement added.
The firm will also be auditing oil production and sales for 2014, 2015, and 2016.
The KRG’s Ministry of Natural Resources stated on Tuesday that an audit by Ernst and Young of bonuses paid to the KRG by international oil companies will also be released soon.
Erbil and Baghdad have yet to decide on issues like oil exports and the KRG’s budget share that could help the Region to recover from its financial crisis.
