KRG appoints Kamal Atroshi, ex-Total and Petronas
KRG, federal government in talks over budget revenue sharing
Differences over oil portfolio stymying OPEC+ compliance
Dubai — The appointment of a new natural resources minister by Iraq's semi-autonomous Kurdistan Regional Government is unlikely to end a spat with Baghdad over oil sales and sharing of federal budget revenue that has impacted its compliance with it OPEC+ oil quota.
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Register NowThe KRG has appointed Kamal Atroshi, an oil and gas adviser to Prime Minister Masrour Barzani since he rose to power in July 2019, as its new natural resources minister, a post that had been vacant for around a year and a half.
Atroshi, who has 35 years of oil geophysics experience, started his career working in now-defunct Iraq National Oil Co.and then moved into various positions including stints at Total and Malaysia's Petronas.
The key issue facing Atroshi will be negotiating with the federal government Kurdistan's share of the 2021 fiscal budget and the transfer some of their oil to Baghdad in return for revenue sharing.
Kurdistan's share of the budget is a point of contention with the federal government, which wants Erbil to stick to a previous agreement to receive revenue in exchange for Kurdish oil.
Kurdistan has its own agreements with international oil companies and markets and sells its own oil, while Baghdad's State Oil Marketing Organization handles federal crude and has its own different model of contracts with IOCs.
OPEC+ compliance
Atroshi's appointment "will make little difference to ongoing negotiations over the KRG's rights and obligations under the draft 2021 federal budget that largely remain mired in the same underlying dynamics that have played out over the last 13 years: these issues will remain in the hands of the KRG's senior political leadership," said Patrick Osgood, senior Iraq analyst at Control Risks.
Disagreements between the federal government and the KRG have hindered OPEC's second-largest producer from complying with its OPEC+ quota.
Federal government officials, including deputy prime minister Ali Allawi and oil minister Ihsan Ismaael, have said previously that the KRG was not complying with the OPEC+ production cap, forcing Baghdad to compensate for Kurdish overproduction, a charge that has often been denied by the KRG.
Iraq's lax compliance, among the worst in OPEC+ in 2020, has complicated the coalition's efforts to balance an oil market suffering from anemic demand outlook.
December overproduction
However, both the KRG and Baghdad contributed to the country's breach of its OPEC+ quota in December, according to SOMO figures released Jan. 7.
Iraq's oil production, including output from the semi-autonomous Kurdistan region, rose 4.7% month-on-month in December to 3.857 million b/d, above the country's OPEC+ quota of 3.804 million b/d, SOMO data showed.
Production from the federal government rose 4.2% to 3.366 million b/d in December, while output from Kurdistan increased 7.7% to 491,000 b/d, according to SOMO data.
Atroshi's appointment is also unlikely to change oil policy in the KRG, according to analysts.
"He is going to be a steward rather than a policy leader," said Osgood. "Major issues surrounding oil and revenue deal-making with the federal government, significant decisions over IOC payments and contracts, and oil-related matters with Turkey will continue to be handled by the prime minister and president."
Delayed payments
The KRG last year delayed payments to IOCs amid a liquidity crunch, which along with the pandemic, impacted oil projects in the semi-autonomous region.
His appointment was more about consolidation of power for Barzani and the end of disagreements with other Kurdish parties over filling this key post, analysts said.
"The [Kurdish] PM wants to make a clear break with the past and the new minister will end the long standing dispute between the Kurdish parties over the new direction," said Shwan Zulal, head of Carduchi Consulting.
"This is a win for the current PM but there is no expectation the new minister will change course rapidly."
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New KRG oil minister unlikely to end spat with Baghdad over oil, revenue - S&P Global
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