As Kur­dis­tan hits new ex­port lev­els, where now for for­eign oil com­pa­nies and oil rev­enues?

The Kurdish Globe - - NEWS - By Bash­dar Pusho Is­maeel

than the $1 bil­lion dol­lars that is due.

This has a sig­nif­i­cant im­pact on the lo­cal econ­omy and the pay­ment of salaries, with most of the peo­ple still re­ly­ing on gov­ern­ment paid jobs. How­ever, a no­table squeeze is felt on the nu­mer­ous oil com­pa­nies op­er­at­ing in the re­gion, many with ris­ing debts on their books.

In the­ory, with sta­ble pay­ment cy­cles, the Pro­duc­tion Shar­ing Con­tract’s (PSC) are still very much ap­peal­ing. Oil com­pa­nies stand to make an ex­cel­lent re­turn on their in­vest­ment, es­pe­cially if rates of pro­duc­tion con­tinue to steadily in­crease.

But with mil­lions of dol­lars owed to the likes of Gulf Keystone Petroleum and Genel En­ergy, the short-term pres­sures for such com­pa­nies quickly grow mean­ing that they have to take on an un­re­al­is­tic cy­cle of in­creased debt to main­tain their pro­duc­tion lev­els and op­er­a­tions.

Of course, the sub­stan­tial monies owed for pre­vi­ous ex­ports could just as quickly trans­form the for­tunes of th­ese com­pa­nies. A regular pay­ment cy­cle has been an elu­sive goal but with the in­creased ex­port fig­ures from Kur­dis­tan and with fur­ther rises in pro­duc­tion tar­geted, Kur­dis­tan is ready to as­sume the next step in its jour­ney as a ma­jor oil player.

This may re­sult in fur­ther short-term pres­sures if the KRG-Bagh­dad oil deal doesn’t hold up, but Kur­dis­tan now has the in­fra­struc­ture and po­ten­tial to eas­ily go at it alone. Iron­i­cally, Kur­dis­tan would gain more from sell­ing its cur­rent out­put di­rectly than the 17% that they are sup­posed to get from Bagh­dad.

For the for­eign oil com­pa­nies, the long-term out­look is bright and they can reap the re­wards from the sub­stan­tial in­vest­ments that they have made in Kur­dis­tan but the pri­or­ity to get to the clearer hori­zons is ne­go­ti­ate their way through the short-term tur­bu­lent wa­ters.

The marked decline in oil prices since mid-2014, although sta­bi­liz­ing and ris­ing in re­cent weeks, has only in­creased fo­cus on the im­por­tance of a sta­ble rev­enue cy­cle.

The re­gion may yet wit­ness a con­sol­i­da­tion of the oil in­dus­try, a log­i­cal step in any blos­som­ing oil in­dus­try where many small to mid-sized com­pa­nies dot the land­scape. The Kur­dis­tan Re­gional Gov­ern­ment has a strong in­ter­est in en­sur­ing any ac­qui­si­tions and merg­ers hap­pen on the terms that pro­tect the re­gion.

OPEC took a risky move by stay­ing rel­a­tively idle as oil prices tum­bled. There are signs that this may have worked as US oil re­serves show signs of decline and the more costly shale ex­trac­tion be­gins to slow­down.

But with Saudi Ara­bian ex­port­ing oil at new records, Ira­nian crude set to re­turn to the mar­ket and with Kur­dis­tan ex­ports set to in­crease fur­ther, oil prices will not rocket back to pre­vi­ous heights and should in­stead set­tle around the $70$80 mark.

This is still a sig­nif­i­cant in­crease from the lows of Jan­uary and would be wel­comed by Kur­dis­tan and in par­tic­u­lar the oil com­pa­nies in the re­gion.

Newspapers in English

Newspapers from Iraq

© PressReader. All rights reserved.