Iraq's semi-autonomous region of Kurdistan has recently negotiated deals with Rosneft and with trading houses to secure US$3 billion in loans that would be repaid with future oil sales, the region's natural sources minister Ashti Hawrami told Reuters in an interview published on Tuesday.
Kurdistan, which has been suffering from the oil price slump and fallout with the central government in Baghdad, needs a steady stream of money to pay to the international oil companies and to fight the Islamic State.
Kurdistan has been able to negotiate grace periods of between 3 and 5 years to repay the borrowings, Hawrami told Reuters, adding that such deals would help it to hedge against a decline in oil prices for a few years. In previous deals with trading houses - that have been pre-paying Kurdistan for exports for the past two years - the periods of the deals were typically between 6 and 12 months.
Last week, Russia's oil giant Rosneft said that it had signed a pre-financed crude oil purchase and sale contract for Kurdish oil over the period 2017-2019. The purchaser of crude will be Rosneft's trading arm, Rosneft Trading SA, the Russian company said, but did not reveal the sum of the deal.
Commenting on the $3-billion in deals with trading houses and Rosneft, Hawrami told Reuters:
"It strengthens our fiscal situation. It means we can pay more regularly to the international oil companies working in Kurdistan and we can invest some money in expanding our oil infrastructure."
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The Kurdistan Regional Government (KRG) has been struggling to make regular payments to companies as it has been locked in arguments with the central government in Baghdad over payments for oil exports, and allegedly over oil shipments made without approval from Baghdad. Political parties in Kurdistan are also quarreling over the share each of them gets from the oil trade. All these factors, coupled with Baghdad's contractual commitments to international oil companies, have further supported the idea that Iraq is the most likely OPEC member to produce more what was agreed upon under the November OPEC deal.
Hawrami now said to Reuters that the KRG-Baghdad relations were improving, and "In reality, Baghdad has given us some share of oil to export. So we have an arrangement that we both honor. We have real cooperation and we hope to build on that."
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More