Iraqi President Jalal Talabani and President of the Kurdistan Regional Government Masoud Barzani Monday pressed the button allowing the export of 100,000 barrels a day from two large oil fields in the Kurdistan region to start, marking a breakthrough two years in the making.
Talabani, himself a Kurd, said revenues from oil exported from Kurdish oil fields would go to the Federal Finance Ministry in Baghdad, which wasn't represented at Monday's ceremony in Erbil, the capital of Kurdistan region.
KRG Oil Minister Ashti Hawrami said earlier the region would start exporting 100,000 barrels a day from the Tawke and Taq Taq oil fields from Monday. He hoped to increase exports to 250,000 barrels a day in a year's time and to 1 million barrels a day in four years' time.
The export rate from Tawke, operated by Norway's DNO International ASA (DNO.OS), which is connected by pipeline to the Iraq-Turkey export pipeline, is 60,000 barrels a day.
Exports from Taq Taq oil field, operated by Switzerland's Addax Corp. and Turkey's Genel Enerji AS, are 40,000 barrels a day. They are being transported by truck from the field to a pumping station at the Kurmala oil field. Genel Enerji's chief executive, Mehmet Sepil, said during the ceremony that he expected output from the field to rise to 70,000 barrels a day within three months.
"We expect to achieve 180,000 barrels a day in the next one and half years," Sepil said.
Although the central government in Baghdad had given the go-ahead to the Kurds to start oil exports, none of its senior members attended the ceremony.
The federal government in Baghdad, which grants all oil-exports licenses, and the Kurds have been at odds since 2007 over Iraq's draft hydrocarbon law and oil contracts the Kurds signed with foreign companies.
The Kurdish government says drilling contracts with around 25 foreign companies are permitted under Iraq's constitution, which gives the Kurds a high degree of autonomy, including on oil policy.
"The contracts signed by the government of the Kurdistan region are legal and in line with the Iraqi constitution," Talabani said. "They are to the benefit of all the Iraqi people and they will bring prosperity to the whole people."
The government in Baghdad still refuses to recognize the production sharing agreements the Kurdish authorities have signed with the oil companies. That has raised doubt how DNO, Addax and Genel Enerji would get paid.
Federal Oil Minister Hussein al-Shahristani had said that the central government wouldn't pay a dollar or a barrel of oil to these companies.
KRG spokesman Khaled Salih , however, said payment to these firms would start after the start of exports though a "mechanism" that would be agreed on. "We will share with you the new mechanism when it is agreed."
Salih said that 17% of the revenue generated from Kurdish oil sales will be returned to the region.
The KRG receives 17% of Iraq's total state oil revenues from the national budget.