Source: Upstream, By Nassir Shirkhani in London
Companies operating in the Kurdistan region of northern Iraq have received a body blow amid a decision by the autonomous region to defer payments for outstanding oil sales for nine months while focusing on on-going sales, radically reduced by the collapse of the oil market.
The Kurdistan Regional Government (KRG) is grappling with an unprecedented financial squeeze brought on by low oil prices and a dispute with the central government in Baghdad over the running of the oil industry.
The payment deferral sent shares of London-listed Genel Energy and Gulf Keystone Petroleum down in early trading on Friday before both posted intra-day rises. Oslo-based DNO, meanwhile, did not record a price drop.
“Payment of invoices relating to oil sales from November 2019 to February 2020 will be deferred, interest free, for at least nine months,” Genel said.
“Should the oil price recover to $50 per barrel, a payment programme to recover the deferred invoices will be put in place.
“The KRG commits to settling monthly sales invoices by the fifteenth day of the following month,” it said.
Genel and partners were paid $4.6 million for sales from the Taq Taq field in March, while DNO and Genel received $34.6 million for exports from the leading Tawke field.
By comparison, DNO and Genel, which operate the Tawke and Taq Taq oilfields, respectively, received respective payments of $77.2 million and $10.3 million for October shipments.
Gulf Keystone and partners received $5.9 million for crude shipments from their flagship Shaikan field in March.
The payment represents a sharp reduction from past reimbursements to the company, which is pumping around 38,000 barrels of oil a day from the field. It reflects both the current low oil prices and a financial squeeze in the autonomous Iraqi region.
“The company confirms that it has received a proposal from the KRG relating to the payment timing of outstanding invoices for Shaikan crude oil sales during November 2019 to February 2020 inclusively,” Gulf Keystone said.
“Gulf Keystone understands that the KRG’s proposal is in line with those made to other international oil companies operating in Kurdistan,” a statement said.
Oil Ministry workers unpaid
A KRG official summed up the financial difficulties, telling Upstream: “Even the Oil Ministry employees are not getting paid. The reduced payments to the oil companies are to keep their soul and body together and encourage them to keep pumping.”
The KRG is currently pumping around 500,000 bpd from areas under its control, with the bulk of production coming from the DNO-operated Tawke field and fields operated by a local player.
The region is in discussions with Baghdad to handover its oil sales to Iraqi state oil marketing company Somo in return for a share of the national budget but progress has been stalled by political chaos in Opec’s second-largest producer.