British newspaper The Daily Mail reported this week about 120 oil workers were held hostage. The report said workers with HKN Energy were held at a compound near the Turkish border since Friday.
The Kurdistan Regional Government issued a statement saying accounts of the incident in the international media were erroneous.
"The incident was not a serious security situation and at no time were any attempts made to take hostages," the KRG said. "The incident was caused by a labor dispute involving local workers who had not been paid since October last year."
The British newspaper quoted Schlumberger engineer Brock Fettes as saying "heavily armed" villagers shut down a rig at the Sarsang oil field, operated by HKN Energy, demanding money.
"The situation will obviously be resolved if they pay them but, until then, we are being held hostage," he was quoted as saying.
The KRG said HKN was asked to shutter the facility while the labor dispute was resolved.
"During the incident, an employee for the oil services company Schlumberger working at the site made a number of inaccurate comments to the media," the KRG said.
Lingering violence and disputes involving the KRG and the central government have presented challenges to Iraq's post-war oil sector.