Iraq's oil ministry warns oil companies against Kurdistan deals

An Iraqi oil employee checks pipelines at the Bai Hassan oil field, west of the multi-ethnic northern Iraqi city of Kirkuk, on October 19, 2017. (Photo by AFP)

Iraq's oil ministry has cautioned oil companies against signing contracts with authorities in the semi-autonomous Kurdish region without its approval.

"This department and the Iraqi federal government are the only two bodies with whom agreements should be reached for the development and investments in the energy sector," the ministry said in a statement.

Iraqi Oil Minister Jabbar al-Luaybi also denounced the "irresponsible announcements coming from certain officials in Iraq or abroad, or from foreign companies about their intention to conclude deals with parties in Iraq without the federal government being aware."

"The federal government and the oil ministry are the only bodies responsible for developing oil and gas strategy and authorized to sign agreements with foreign countries and companies," the minister stressed.  

This comes a day after Russian energy giant Rosneft signed a deal to put production sharing agreements into force with respect to five production blocks in the Iraqi Kurdistan.

On Wednesday, the Russian state-controlled giant said it would pay up to $400 million for 80 percent in the venture as part of the deal with the Kurdistan authorities.

A joint exploration program and pilot production is to start next year. If successful, Rosneft said it would start full-field development of the blocks in 2021.

Recoverable oil reserves at the five blocks are around 670 million barrels, the Russian company said, calling the estimate "conservative."

Rosneft and the Iraqi Kurdistan are already cooperating on crude purchases and sales, but the new deal "will allow us to talk about full-fledged entry of the company in one of the most promising regions" of the developing global energy market, Rosneft said.

On Thursday, Rosneft boss Igor Sechin told Russian news agencies that the company strictly followed the law and said that "if there are problems between the government of Iraq and Kurdistan then they need to solve the problems themselves."

"I am not a politician, my job is to produce oil," Sechin added

The agreement came as the Iraqi forces took control of the oil-rich city of Kirkuk on Monday, removed Kurdish flags from government buildings and replaced them with the Iraqi flag.

An Iraqi oil employee walks past oil barrels at the Bai Hassan oil field, west of the multi-ethnic northern Iraqi city of Kirkuk, on October 19, 2017. (Photo by AFP)

Kurdish leaders have coveted Kirkuk for long and described it as part of their territory even as roughly two-thirds of the city's population is non-Kurd. 

Kirkuk is not one of the three provinces that have made up the semi-autonomous Iraqi Kurdistan Region since 2003. However, Kurdish militants used a vacuum created when government troops were fighting against Daesh terrorists to overtake the city.

Tensions flared up between Iraq’s semi-autonomous Kurdish region and the central government in Baghdad after the KRG held a highly controversial plebiscite on secession.

The referendum was held on September 25 despite strong opposition from the central government in Baghdad, the international community, and Iraq's neighboring countries, especially Turkey and Iran.

Following the vote, Baghdad imposed a ban on direct international flights to the Kurdish region and called for a halt to its independent crude oil sales.