Kurdistan Said Close to Resuming Monthly Payout to Oil Companies

Updated on
  • KRG hasn’t paid international producers for seven weeks
  • Companies, regional authorities agreed on new payment schedule

The government of Iraqi Kurdistan is close to resuming regular monthly payments to international oil companies as the rally in crude prices replenishes the region’s depleted treasury, according to people familiar with the matter.

It’s almost seven weeks since Genel Energy Plc, Gulf Keystone Petroleum Ltd and DNO ASA received their last payment from the Kurdistan Regional Government, which was for oil sold in September. The companies and the regional authorities have now agreed on a new monthly payment schedule, said two people familiar with the matter, who asked not to be identified because the information isn’t public. At least one company has been told to expect a payment on Monday, two other people said.

“We have an ongoing dialogue with the KRG, and they have recently reconfirmed their commitment to paying contractors,” Genel said in an e-mailed statement, without commenting on when it expected to receive the next payment. “We are confident that we will receive payments for oil exported from the Kurdistan Region of Iraq regularly, on a monthly basis, throughout 2017.”

The KRG has struggled to keep up regular payments to the international contractors as it contended with low crude prices, a dispute over revenue sharing with the federal government in Baghdad, hosting large numbers of internal refugees and battling for territory with Islamic State militants. Oil has risen about 20 percent since OPEC’s historic agreement with several other major producers to curb supply, easing the financial strain on the region.

Constructive Dialogue

Gulf Keystone maintains “a constructive dialogue” with the KRG’s Ministry of Natural Resources, the company’s Chief Financial Officer Sami Zouari said by e-mail. The company, which operates the Shaikan field, is owed money for oil sales from October, November and December. “We are confident these will be paid,” he said.

DNO didn’t immediately reply to an e-mail seeking comment. All three companies last received a payment on Dec. 5, according to their filings.

While recent payments have been erratic, the situation isn’t as bad as in 2015, when the companies didn’t get paid for the first nine months of the year, said Richard Mallinson, an analyst at Energy Aspects Ltd. “The KRG was expecting by this point to be producing and exporting more oil and probably was anticipating higher oil prices,” he said.

The region pumped 597,587 barrels a day in November from its own fields, according to the latest available estimates from the Kurdish Ministry of Natural Resources. That’s an increase of 38 percent from a year earlier, but little more than half the 1 million barrel-a-day target set by the KRG a year ago. The ministry has yet to publish production and export data for December.

The performance of Kurdish fields was mixed in 2016. Although DNO’s Tawke increased output for the full year, third-quarter production of 109,200 barrels a day was 25 percent below the level it reached in the third quarter of 2015. Genel’s Taq Taq endured the steepest natural declines, with daily output in the fourth quarter coming in at 45,000 barrels, down from 95,000 barrels a year earlier.

The oil companies have said they need regular payments in order to invest and boost their fields’ production. They’ve also asked to be paid back arrears for past oil sales. In the case of DNO, that amount stood at about $1 billion as of November, almost the size of the company’s market capitalization.

“Clearly the KRG’s finances are very stretched,” Mallinson said.