DNO ASA (DNO), the oil producer focused on northern Iraq, said a U.S. court ruling has opened a market for Kurdish crude and it could make its first independent export sales by the end of the year at international prices.
A U.S. district judge in Houston yesterday ruled that the semi-autonomous Kurdistan Regional Government can take 1 million barrels of crude ashore in Texas even though Iraq’s central government claims ownership of it. That’s “good news” for DNO, which has been cleared by the KRG to export oil independently, Executive Chairman Bijan Mossavar-Rahmani said.
“That opens up a market, and we’ll walk into that market as well,” he said today in Stavanger, on Norway’s west coast. “It’s not just a legal matter or political matter, it’s also a matter of having refineries take this oil, run it through their refineries and see how it works.”
DNO, the first foreign explorer to drill in Iraq after the U.S.-led invasion in 2003, has been caught in a dispute between the KRG and Baghdad’s central government over the proceeds of oil exports. After pumping oil from its Tawke field in Kurdistan through a new pipeline to Turkey’s Ceyhan port since the start of the year, DNO has now been cleared by regional authorities to export its own oil as its share of production.
The Kurds, who are working to quadruple the capacity of their export pipeline, have defied the central government in recent weeks by shipping seven cargoes of oil overseas.
The U.S. court decision is probably not the last step of the legal struggle, DNO’s Mossavar-Rahmani said. Still, he’d be “disappointed” if the company didn’t make its first export sale by the end of the year, he said, adding that it’s too early to say whether that would be to a U.S. buyer.
While DNO’s heavy oil will be sold at a discount to Brent crude, a benchmark, the company expects it to be sold at international prices, which would represent a significant premium to the $50 to $60 a barrel it’s getting from sales to the local Kurdish market, Mossavar-Rahmani said.
Brent for October settlement traded 33 cents higher at $102.98 a barrel on the London-based ICE Futures Europe exchange as of 4:10 p.m. local time.
“It’ll be in line with what the Kurdish government is now getting,” he said. “I understand that those prices are in line with world prices.”
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