(MENAFN- ProactiveInvestors) the operator of Genel’s () 25% owned Tawke field has reaffirmed its commitment to Kurdistan and has said the full monetisation of oil exports remains a priority.
It comes as Tawke reached a significant production milestone with the oil field yielding a total of 100 million barrels to date.
The Oslo listed oil company now expects Tawke’s output to pick up this spring with capacity growing to 200000 barrels per day.
"Our priority now is to work with the Kurdistan Regional Government to monetize all oil produced at Tawke according to contractual entitlements" Bijan Mossavar-Rahmani DNO’s executive chairman said in a statement.
Due to continued uncertainties over export payment schedules DNO began selling oil into the local market in Kurdistan in early 2015. The company has said this will step-up though it is seen only as an interim measure to support revenue generation.
Kurdistan’s regional government (KRG) agreed a co-operative oil sales deal with Baghdad late last year however payments from Iraq have been sporadic and have fallen short of the agreed terms.
Iraq and Kurdistan are both suffering a liquidity crisis; for a number of reasons including falling oil prices and the ongoing conflict against ISIS.
But the KRG has now received its first federal budget payment from Baghdad for 2015 with just over US$200mln received at the end of last week.
Press reports in Iraq highlight that the size of the January budget payment roughly correlates with the value of oil delivered by the KRG to Iraq’s crude marketing agency SOMO.
And whilst this ‘pay as you go’ for crude sales is not official policy reports suggest it is financially and politically difficult for Baghdad to authorise the transfer of revenues to Kurdistan other than those the semi-autonomous region helped generate.
As more crude was exported via SOMO in February - about 300000 barrels per day - it is speculated that the subsequent payment to the KRG may be higher.
Experts say the latest payment indicates continued co-operation between the KRG and Baghdad even though both sides fell short.
December’s agreement envisaged the delivery of 550000 barrels of oil per day to SOMO by the KRG (250000 bopd from Kurdistan controlled fields and 300000 bopd from fields in the Kirkuk region).
In return the KRG would be due US$1bn per month from Baghdad.
The KRG transferred some 145000 bopd in January and the payment last week was for just over US$200mln.
The flow through of payments to oil contractors such as DNO and Genel is unclear but the KRG is said to need around $700mln a month to pay the public sector and support government spending.
Genel unlike London listed Kurdistan peer Gulf Keystone () has ample cash reserves (at the end of 2014 it had about US$1bn) and City brokers believe the group is strongly positioned should oil prices and regional politics stabilise.
GKP last week revealed it was in talks with potential buyers of the company.
Analysts claim the group – which has fallen from 2012 highs of 440p to recent lows of about 35p – is vulnerable to a takeover due to its high level of debt as well as concerns over oil payments and its ability to fund the full development of its Shaikan field.
GKP cancelled trucked export operation last month and began selling crude locally.
As oil companies in Kurdistan continue to pump crude and expand operationally the visibility and reliability of export payments remains a key focal point for investors.
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