The international partners in Iraqi Kurdistan's Taq Taq and Shaikan oil field have received $75 million in payments from the Kurdistan Regional Government for oil exported by pipeline through Turkey, three of those companies reported Wednesday, as KRG looks to rebuild trust with international oil companies.
The payments represent the the fourth round of KRG disbursements to international contractors for Kurdish crude supplied for export by pipeline via Turkey since the government re-started such payments in September 2015.
The new payment program followed intensive rounds of meetings between government and company officials last year as Kurdistan sank into an economic, financial and humanitarian crisis as a result of the Islamic State militant group's insurgency in northern Iraq and rocky relations between Erbil and Baghdad, compounded by lower oil prices.
It is key to KRG efforts to rebuild trust with international oil contractors that are still developing the region's large oil resources despite mounting arrears in government payments of their contractual dues.
The crux of the discussions was that the KRG was nearly broke as it was not receiving financial transfers from Iraq's federal government, yet desperately needed development of Kurdish oil production and exports to continue to raise cash.
The international oil companies for their part could not justify continued investment in the region to shareholders unless they were paid.
In the face of an apparent impasse in which even KRG staff went unpaid for months, regular government payments for crude supplied for export were still essential if the contractors were to continue their work, the companies argued.
Finally in September, after its disbursements to international oil contractors had been suspended for months, the KRG pledged to establish regular monthly payments for exported crude and to ramp them up during 2016 to cover arrears.
FOURTH CONSECUTIVE PAYMENT
With its latest installment, the KRG has continued to honor the first part of its pledge but has not yet moved on to the second, as the monthly totals allocated for crude exports from each Kurdistan producing field connected to the regional government's pipeline to Turkey have not changed.
That is both good news and bad news for the contractors.
"We are pleased to start 2016 with confirmation of payment for December's Shaikan crude oil export sales," said the CEO of Gulf Keystone Petroleum, Jon Ferrier, which operates the Shaikan oil field.
"This is the fourth consecutive monthly payment," he added.
On the other hand, an official from DNO, which operates the Tawke oil field, in December said the size of the KRG monthly payments was insufficient to justify the company making further investments in oil and gas development in the region.
DNO and Genel Energy, the two biggest producers of Kurdish crude, indicated in separate statements that the KRG had made partial payments of $30 million apiece for crude delivered for export in December from Kurdistan's Tawke and Taq Taq fields respectively.
A third group of international contractors led by Gulf Keystone received a $15 million gross payment from the KRG for crude exports for Shaikan crude.
Gulf Keystone, which has a 75% working interest in the field, said its net share was $12 million.
Genel, which indirectly holds a 44% interest in Taq Taq, said its share of the KRG payment for Taq Taq crude came to $16.5 million.
The field is operated by Taq Taq Operating Co., a joint venture between Genel and Sinopec in which the partners hold 55% and 45% stakes respectively.
DNO, which operates Tawke with a 55% working interest, said the payment for Tawke crude exports would be shared pro-rata with Genel, its license partner with a 25% stake in the field.
KRG is seeking to expand the throughput capacity of its export pipeline to 1 million b/d in 2016 from 700,000 b/d now.
Exports through the pipeline for delivery to the Turkish port of Ceyhan averaged 600,769 b/d in November, government figures indicate.
