Iraq’s federal government aims to establish a new oil company in the Kurdistan region, the oil ministry said in a statement on Saturday.
The aim of the new company will be to enter into new service contracts with oil firms currently operating there under the Kurdistan Regional Government (KRG), according to the statement.
Oil minister Ihsan Ismael said on May 7 that the ministry would start implementing a February federal court ruling that declared the legal foundations of the Kurdistan region’s oil and gas sector unconstitutional.
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Iraq then wrote to international oil firms operating in the semi-autonomous region requesting they sign new contracts with state-owned marketer SOMO rather than the Kurdistan Regional Government (KRG).
The letters marked the first direct contact between the ministry and oil firms operating in the Kurdistan region. The move follows years of attempts by the federal government to bring KRG revenues under its control, including local court rulings and threats of international arbitration.
The oil ministry will pursue legal action against companies that continue to operate under “unlawful production sharing contract schemes” and that “do not engage in good faith negotiations to restructure their contracts,” according to the statement.