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Crude oil production in the autonomous region of Kurdistan in Iraq will not be affected much by OPEC’s agreement last week to prop up international oil prices by cutting production across the group.
According to Kurdistan’s Minister of Natural Resources, Ashti Hawrami, the Kurdistan Regional Government has not yet heard from the central government in Baghdad with regard to the actual cuts that will need to be made.
Iraq agreed to slash its production by almost 200,000 bpd to support market rebalancing efforts initiated by Saudi Arabia in September. Still, Hawrami said, the KRG was ready to cooperate with Baghdad on the cut.
While Minister Hawrami said that communication between Erbil, where the KRG is based, and Baghdad had improved substantially, the budget transfers from the central government to Kurdistan for 2017 have not yet been agreed upon.
Kurdistan is home to some of the biggest producing fields in the country, and has been locked in a dispute about revenue distribution with the central government for months. Baghdad cannot force Erbil to curb output at its fields, and Erbil has plans to tender 20 oil and gas blocks next year.
This, coupled with Iraq’s vital need for oil revenues amid the final push against Islamic State and massive public spending, has raised questions about the country’s actual plans after the output cut agreement. Some observers note that the country simply cannot afford to cut production with public spending exceeding 50 percent of GDP and the fight against IS still ongoing.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.