By Mirna Sleiman and Julia Payne
The largest oil and gas investor in Iraqi Kurdistan has filed the first major legal case against its government over $1 billion in owed payments and production rights, just as the autonomous region looks to become a major energy exporter.
Dana Gas, leading a consortium of investors, has filed an arbitration case in London to clarify the amount of money the investors are owed for work already carried out and their rights to develop and market gas fields, the Abu Dhabi-listed company said on Tuesday.
The Kurdish autonomous region's massive untapped oil reserves, lucrative production-sharing contracts and safe environment compared with the rest of Iraq have prompted international oil companies over the last few years to commit to investing billions of dollars in blocks there.
ExxonMobil Corp, Chevron Corp and Total SA have entered Kurdistan even at the risk of losing contracts in the south.
The Kurdistan government fired back at the lawsuit, saying Dana Petroleum had made "misleading" statements about being owned money, and ordering it to withdraw the allegations.
"It is Dana and its affiliates that owe the KRG significant sums," the Kurdish regional government's Ministry of Natural Resources said in a statement. It said the KRG has "incurred very large losses" as a result of misrepresentations and a "failure to meet commitments and promises" that the company had made.
Baghdad has long called the upstream contracts by the KRG illegal. The two sides have been locked in a longstanding payment disagreement, with the KRG consistently claiming billions on behalf of its upstream investors.
In continued defiance of the central government, the KRG is expected to export significant volumes of crude oil for the first time via a new pipeline, following initial shipments by truck through Turkey to the international market.
The first pipeline shipments will start by the end of the year, bolstering the KRG's long search for independence as it will soon earn more from its exports than it receives from the central government in Baghdad.
"It's only natural at this stage for the relationship to get more complicated as the financial burden weighs more heavily on smaller entities, while the bigger IOCs can bear some more of the payment issues," said Ayham Kamel, Middle East and North Africa analyst at the Eurasia Group consultancy.
Dana Gas is also owed significant sums by the Egyptian government, which has still not decided on how or when exactly it will pay back over $6 billion it owes to upstream companies.
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