Kurds Vow Steady Payments to Oil Companies as Exports RiseNayla Razzouk
Iraq’s northern Kurdish region chose the first half of September to start making regular payments for crude exports to oil producers including DNO ASA and Genel Energy Plc. The companies’ shares rallied.
Oil exporters will receive $75 million to $100 million in total next month, according to a statement from the Kurdistan Regional Government’s Ministry of Natural Resources Thursday. Additional export revenue will be paid to the companies as Kurdish shipments rise in 2016, it said.
The payment would be the first stable compensation for the companies that have been caught for years in a dispute over revenue sharing between Iraq’s federal government and the semi-autonomous Kurdish region. Genel gained 18 percent, the most since it began trading in 2011, while DNO and Gulf Keystone Petroleum Ltd. also rallied.
“With the steep fall in the price of oil, it is difficult for the international oil companies to sustain oil export at current levels without receiving some of their financial dues on a predictable basis,” according to the statement. They will “be distributed in broad proportion to the companies’ past and present contributions to export.”
Gulf Keystone received $15 million as part of the last payment from the Kurdistan Regional Government in December, Tony Peart, the company’s legal and commercial director, said today in a presentation following their first-half results. Genel and DNO received a total of $60 million from the authorities, according to statements from December.
Even after Iraq’s central government struck a deal with the Kurds in December to allow increased shipments, payments continued to elude producers after the collapse in oil prices squeezed government budgets.
“Crude oil export is the principal revenue earner for the Kurdistan region and helps to pay civil service salaries, maintain vital government services and defend the region against Islamic State terrorism,” according to the KRG statement.
Kurdish daily crude exports will rise by 100,000 barrels to 650,000 barrels by the end of the year, KRG spokesman Safeen Dizayee said in an Aug. 25 interview. Output is due to rise 100,000 barrels a day to 800,000 barrels by the end of year.
“Regular payments will allow the exporting companies to cover their ongoing expenses and plan for further investment in the oil fields, which will in turn boost production,” according to the KRG statement.
Overseas shipments may rise to 1 million barrels a day if the KRG can resolve debts owed to the oil companies, Dizayee said.
Iraq’s minority Kurds, who historically have resisted control by the central government in Baghdad, are independently developing oil reserves they say may total 45 billion barrels. That’s equivalent to almost a third of Iraq’s deposits, according to BP Plc data.
Genel gained 9 percent to 321 pence at 1:04 p.m. in London while Gulf Keystone advanced 9.3 percent to 29.5 pence. DNO climbed 11 percent to 8.38 kroner in Oslo. The FTSE 350 Oil and Gas Producers Index rose 2.6 percent as Brent crude prices rallied 3.7 percent to $44.72 a barrel. Oil prices declined 56 percent in the past year on a global surplus.
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