Iraq Kurds to Hold Talks With Baghdad to Resolve Oil Issue

The Kurdistan Regional Government, or KRG, in northern Iraq is sending a delegation to the federal government in Baghdad to resolve issues relating to payments made to foreign contracting companies producing crude oil in the region, the KRG's prime minister said in a statement Thursday.

"A delegation from the Kurdistan region will travel to Baghdad shortly to discuss payment by the federal government to foreign contracting companies working in the oil sector in Kurdistan ," Nichervan Barzani said.

The KRG suspended crude oil exports of nearly 100,000 barrels a day in April, protesting that Baghdad was delaying payment of $1.5 billion it gathered in revenues from those exports. It restarted them, however, on Aug. 7, in what it said was a "goodwill gesture," but said flows would halt if no payments were forthcoming by Aug. 31. It later extended its deadline to Sept.15.

"The central government needs to pay the due money to contracting companies," Mr. Barzani said.

The KRG last year received payments totaling $514 million to cover producing firms' past cost, but stopped supplying oil for exports in April this year citing a $1.5 billion backlog owed by Baghdad .

The central government said earlier this year that it was preparing to pay another $560 million this year to foreign oil companies in Kurdistan but it was waiting for the KRG to send documents to support the costs.

A federal oil ministry-led government committee has since raised the stakes by warning that in excess of $3 billion could be cut from the KRG's budget share over its failure to supply 175,000 barrels a day of oil for exports as agreed under Iraq 's 2012 budget.

"The region rejects Baghdad 's threats to cut part of KRG's share of the budget and use that as a pressure card against Kurdistan ," Mr. Barzani said.

The central government and the KRG are at loggerheads over issues including Kurdistan 's refusal to seek approval from Baghdad for oil contracts it has awarded to foreign firms, and over a swathe of disputed territory in northern Iraq .

Tensions between Baghdad and the KRG have risen since last year when U.S. energy giant Exxon Mobil Corp. (XOM) announced a deal with the KRG to explore for oil in Kurdistan. Recently companies such as Total SA (TOT), Chevron Corp. (CCX) and Gazprom Neft (GZPFY) have followed Exxon in defying Baghdad , and signed deals with the Kurds.