UPDATE 2: Rosneft’s contracts with Iraqi Kurdistan exceed $3 bln

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CAIRO, Nov 7 (PRIME) – The price of contracts between Russian oil major Rosneft and the Iraqi Kurdistan has exceeded U.S. $3 billion, Izzat Saber, a member of the region’s parliament, told PRIME on Tuesday.

“The package of contracts between the government of the Iraqi Kurdistan and Rosneft has exceeded $3 billion,” he said.

Rosneft has transferred $1 billion to the government as prepayment, and Kurdistan used the money to redeem its debt to the United Arab Emirates’ oil and gas company Dana Gas, he said.

The government plans to invest $1 billion out of the sum of contracts with Rosneft in construction of a natural gas pipeline running from the city of Erbil to Ceyhan in Turkey. “This has not been paid yet, and works on the pipeline have not been launched yet,” he said.

The region also plans to use the remaining $1 billion from the contracts to develop five oil blocks in the region – Avana, Bey Hasan, Miran, Ain Zalah, and Bagwan. Three of the blocks are currently under control of the government of Iraq, not under the rule of Kurdistan, he said.

The contracts stipulate that Rosneft will buy 60–70% of all exported oil of the Iraqi Kurdistan at a price below international quotes. But it will be difficult to implement without negotiations with Iraq whose army regained control over the three blocks, he said.

“It means that Rosneft and the Iraqi government will have to negotiate the way to fulfill the contract signed with Kurdistan,” he said.

Rosneft and the regional government signed an agreement on cooperation in February, and signed an agreement to sell and buy oil in 2017–2019. In September, the company and the government discussed Rosneft’s participation in financing construction of a natural gas pipeline in the region, and a contract may be signed in 2017.

In October, Rosneft and the government of the Iraqi Kurdistan signed documents necessary for coming into force of production sharing agreements for five oil blocks located in the region. On October 20, the company and the government announced a project for operation of an oil pipeline in the region, and said that the share of Rosneft in the project may reach 60%.

Representative for the Iraqi Oil Ministry Asem Jihad told PRIME that the Iraqi authorities see Rosneft’s contracts with Kurdistan as illegal and can punish people responsible for their conclusion.

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