Problems persist for oil companies in Kurdish Iraq

DNO held up at Tawke field because of continued fighting.

The KRG has been exporting oil north via Turkey’s port of Ceyhan at a rate of about 350,000 barrels a month for much of this year. Sebastian Meyer / Corbis

DNO, the Norwegian oil exploration company, said on Wednesday that it faces continued delays to plans to ramp up production at its Tawke oilfield in Kurdish Iraq because of fighting in the region.

In an update on its operations, DNO, which is 42.8 per cent owned by RAK Petroleum wrote: “The company has taken steps to mitigate delays to its Tawke 200,000 barrel per day deliverability target resulting from the withdrawal of third party contractors from Kurdistan during the past few months.”

The company said that exports of Tawke oil to Turkey by the Kurdistan Regional Government for its own account currently average about 90,000 barrels per day. Local sales decreased to 29,960 bpd during the third quarter and currently average about 20,000 bpd, according to DNO.

Separately, Gulf Keystone Resources, a London-listed company whose main asset is the Shaikan oilfield in Kurdish Iraq, said a settlement with the KRG over oil arrears might lead to consolidation among companies operating in the region. The KRG currently owes Gulf Keystone about $250 million for oil and work carried out, John Gerstenlauer, Gulf Keystone’s chief executive, told Bloomberg News. Payment of arrears could help Gulf Keystone boost production at Shaikan fourfold from its current working interest level of 40,000 bpd.

The KRG owes a number of oil companies operating in the region billions of dollars in arrears because of its larger dispute with Iraq’s central government over the national budget and control of oil resources in the Kurdish region. The Kurds maintain that Baghdad has been racking up unpaid payments to it at the rate of $1 billion a month since the start of the year as civil servants in the region go unpaid.

Meanwhile, the central government has been in dispute with the KRG over how Kurdish oil is marketed and accounted for. The KRG has been exporting oil north via Turkey’s port of Ceyhan, estimated to total between 15 million and 17 million barrels from the end of May through September, but the central government has challenged the legality of those sales in courts in the US and Greece.

“We are pretty close to a solution for the exports going forward and we are continuing to have discussions on the schedule for paying us the amount in arrears,” Mr Gerstenlauer was quoted saying. “Once the payment issue is solved we should see a consolidation in the region.”

Apart from DNO and Gulf Keystone, other companies with interest in the region include Oil Search, Genel and Abu Dhabi Government-owned Taqa.

A number of companies pulled out workers because of the threat from the insurgency of Da’esh, which is also known as Islamic State. Although the threat has subsided somewhat since the intervention of the US and its allies, including the UAE, via air strikes in support of Kurdish and Iraq central government forces, the threat to some oil installations continues.

Nevertheless, DNO said it is continuing to make progress on Tawke, with one well (28) expected to go into production at the end of November and another (27) “spudding” shortly thereafter.

The company said results on other fields in the region – Benenan and Dohuk – were mixed.

DNO also said that production at its main field in Yemen remains stable at 7,000 bpd, “notwithstanding the current security and political environment”. It cannot, however, drill on other prospects in Yemen and has declared force majeure on all of its interests there because of the violence and political upheaval.

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