Iraqi Kurdistan government may cut fuel, power subsidies 12/2/2015
Iraqi Kurdistan government may cut fuel, power subsidies
12/2/2015 0 Comments
LONDON,— Iraq’s Kurdish Regional Government (KRG) said on Tuesday it is exploring ways to cut spending, particularly on subsidies to the power sector, as low oil prices strain its finances and bills to a number of international oil companies remain unpaid. “Reform options are under consideration, and some are underway to reduce the subsidies of petroleum products and electricity,” Qubad Talabani, KRG deputy prime minister, told a conference. “Our people have become accustomed to generous government salaries and other payments funded by oil revenues. But what was feasible at $100 (a barrel) is not sustainable at $40,” he said. Talabani said major reforms were needed to balance the region’s finances, which have been eroded by its fight against Islamic State insurgents. He said the region provided diesel and natural gas free to independent power producers, bringing total subsidies to the electricity sector by the KRG to $3 billion a year. Iraqi Kurdistan has an ongoing dispute with central government in Baghdad, which slashed funds to the region last year, rendering it unable to pay its own employees’ salaries, let alone oil company dues. International oil producers such as London-listed Genel Energy are owed millions in unpaid bills, but there are signs the cash is starting to flow. The KRG authorised the release of payments to oil exporting companies for November in line with payments made in the past two months, an official close to the minister of natural resources said on Monday. Still, foreign operators warned they may have to curtail their investment in the region, if payment is not forthcoming. Bijan Mossavar-Rahmani, executive chairman of Norway’s DNO ASA, which operates in Kurdistan reiterated the Iraqi Kurdish government owes his company more than $1 billion. “Without payments we cannot invest more than what is required to maintain safety and integrity of our ongoing operations. Our production so far this year has dropped by about 50,000 bpd from its peak last spring, as a lack of investment and from natural field decline,” Mossavar-Rahmani told the conference.