(MENAFN- Arab Times) Iraq made a $430 million budget payment to the Kurdistan region for May, the finance minister said on Tuesday, potentially putting further strain on a deal over oil exports. The December deal was hailed as a breakthrough in a long-running dispute over exports between the federal government in Baghdad and Kurdish regional authorities, but both sides accuse each other of violating it. Finance Minister Hoshiyar Zebari said Baghdad had paid 508 billion dinars ($430 million) to the region in May as expenditure had been lowered across the board, and sought to play down any impact on the oil deal. "All the amounts for all ministries and state departments have been lowered," Zebari said. "There are no negative effects on the deal: it is standing and still ongoing." Under the deal, the Kurds committed to export 550,000 barrels per day (bpd) of oil in return for the reinstatement of budget payments to the region, which Baghdad slashed in early 2014.
Kurdistan's minister of natural resources Ashti Hawrami said in a conference in London on Tuesday that the region had met its target and remained committed to the deal despite receiving only 35 percent of the funds it should have to date. Meanwhile, Iraq on Tuesday again reduced its ambitious oil output growth targets, saying it would raise production by almost 60 percent by 2020 at best in an indication OPEC's second-largest producer was bringing its aspirations in line with lower oil prices. Baghdad has previously promised to more than triple output to become the world's top producer with 12 million barrels per day (bpd) of production capacity after signing contracts with global oil majors at the turn of the decade. It has since managed to boost its production and exports to record high levels, overtaking Iran as OPEC's traditionally second-largest producer behind Saudi Arabia. But Iraq has also repeatedly revised the target due to delayed investments, red tape, infrastructure bottlenecks and a fight against Islamist militants.
On Tuesday, Falah Alamri, head of Iraq's State Oil Marketing Organisation (SOMO), told an industry conference in London the country was now aspiring to produce 5.5-6.0 million bpd by 2020, up from the current 3.8 million bpd and down from the previously target of 8.4- 9.0 million bpd. The lower production target follows a slump in crude oil prices that has slashed government revenues and forced Baghdad to renegotiate contracts with oil majors. Oil executives from foreign companies working in Iraq and attending the conference welcomed the move. "I was pleasantly surprised " We believe it is a more realistic target," said Gati al-Jebouri, senior vice president from Lukoil Overseas. "In any case, to maintain the current level of production a minimum of $10 billion needs to be invested over the next four and a half years. To achieve a target of 9 million bpd would need more than $100 billion of investment over the next four to five years."
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