Middle East > Iraq > Kurds to support oil companies in Iraq with regular payments

Iraq: Kurds to support oil companies in Iraq with regular payments

2015/08/30

A move to issue regular payments to oil companies operating in the Kurdish north of Iraq should help them endure the market downturn, the government said.

The Ministry of Natural Resources of the semiautonomous Kurdish government said it would issue the initial batch of regular payments to oil companies by the middle of next month. The decision came next a Kurdish oil council approved the allocation of between $75 million and $100 million of the revenue generated from direct oil sales.

The Kurdish government said it recognized that international oil companies are struggling to maintain normal operations because of the lack of payments during a depressed oil economy.

"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," the ministry said in a statement.

The Kurdish government in early 2015 reached a transaction with the federal government in Baghdad to export some of its crude oil in exchange for a portion of in general oil revenue. The KRG under the terms of the agreement funnels 250,000 barrels of oil per day to Baghdad and agrees to use the federal National Oil Marketing Organization for marketing.

British energy company Gulf Keystone Petroleum, one of the key players in the Kurdish oil sector, in early 2015 suspended crude oil exports through Turkey and directed sales to the local market briefly because of a lack of payment from the Kurdish government.

The company in a statement on initial-half results said revenues of $30.1 million represented a 61 % increase from the same period last year. Security risks stemming from the Islamic National insurgency and payment cycle uncertainty present challenges to the company nevertheless.

Gulf Keystone Petroleum operates primarily in the Shaikan oil field in the Kurdish north of Iraq, where production is expected to evolution from 40,000 barrels of oil per day to 100,000 bpd.

"This [payment agreement] will provide us with the necessary means to recommence investment into the field and evolution toward further increasing production, and subsequently price, for all stakeholders," Gulf Keystone Chief Executive Officer Jon Ferrier said in a statement.

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