Iraq’s semi-autonomous Kurdistan Regional Government plans to start regular payments to oil producers including DNO ASA, Genel Energy Plc and Gulf Keystone Petroleum Ltd. within seven days. The companies’ shares rallied.
Kurdistan allocated $75 million of revenue from the sale of crude oil for payments, the KRG’s Ministry of Natural Resources said Monday in an e-mailed statement. Operators of the Taq Taq oil field, including Genel Energy, will receive $30 million, while the same amount will go to Tawke field operator DNO, it said. Gulf Keystone said it will receive $12 million of the $15 million allocated for the Shaikan field, with the remainder going to its partners, Mol Group and Texas Keystone Inc.
“Regular payments will be needed to allow the exporting companies to cover their ongoing expenses and plan for further investment in the oil fields, which will in turn boost production and thus help the people of the Kurdistan region,” according to the ministry statement. Further payments will be made as shipments rise in 2016, it said.
The payments would be the first scheduled compensation to companies that have been caught for years in a dispute over revenue sharing between authorities in the northern Kurdish enclave and Iraq’s federal government. Genel’s shares rallied as much as 6.8 percent in London, while Gulf Keystone climbed 5.3 percent. DNO rose as much as 8 percent in Oslo trading.
“At this critical time for our company and for the entire oil industry in the Kurdistan region, we welcome the announcement of this payment,” Gulf Keystone Chief Executive Officer Jon Ferrier said in a statement.
Gulf Keystone last received a KRG payment, also of $15 million, in December, the company said on Aug. 27. Genel and DNO were paid a combined $60 million from the authorities, according to statements in December.
Even after Iraq’s central government agreed with the Kurds in December to allow increased oil shipments, payments continued to elude producers after the collapse in prices squeezed KRG budgets. Crude exports are the main source of revenue for the KRG to pay for government salaries and services and finance the war against Islamic State militants, according to the statement.
“The steep fall in the price of oil means the KRG continues to struggle to cover its minimum financial needs,” the ministry said. “But it is also recognized that it is unrealistic to expect the international oil companies to be able to sustain oil exports at current levels without receiving some of their financial dues on a predictable basis.”
Benchmark Brent crude has slumped more than 50 percent over the past year and was trading at $48.96 a barrel at 1:32 p.m. in London.
Iraq’s minority Kurds, who historically have resisted control by the central government in Baghdad, are independently developing oil reserves they say may total 45 billion barrels. That’s equivalent to almost a third of Iraq’s deposits, according to BP Plc data. The KRG exported 472,832 barrels a day in August, down from 516,745 barrels a day in July, because of sabotage and theft inside Turkey, according to a Sept. 3 ministry statement.