Shares of oil companies operating in the Kurdish region of Iraq rallied following news of payments from the regional government this week.
The Kurdish Regional Government paid operators about US$55 million last month, including RAK Petroleum’s DNO, for the seventh month in a row.
DNO’s shares rose by 1.1 per cent in early trading on Tuesday. The Norwegian oil and gas company reported that it had received $20.1m for March deliveries from the Tawke field.
Dana Gas is also said to have received payment. The Sharjah-based company’s shares, which spiked 11 per cent on Sunday, rose by another 3.5 per cent in intraday trading before closing flat on Tuesday.
The company could not be reached for comment.
Other operators that have received payments include the UK companies Genel Energy and its partners on the Taq Taq field amounting to $19.88m as well as Gulf Keystone grabbing $15m for exports from the Shaikan field.
Operators have had to restructure payment plans with the KRG, as losses mounted amid market volatility.
DNO reported a 59 per cent drop in revenues last year. However, the company said that as long as regular payments from the KRG continued to flow, it would further boost output on the Tawke field by at least 10 per cent this year.
Dana Gas, on the other hand, has said that it would not invest any further until some payments had been made. Last year, a London court ordered the KRG to pay $1.98 billion to a consortium that included Dana Gas.
The regular monthly payments started in September and despite facing a financial crisis, the KRG has prioritised these payments because it needs to build investor confidence, said Richard Mallison, an analyst for the UK consultancy Energy Aspect. “The total of payments for all relevant fields started out at $75m per month, but has roughly halved this year as the KRG has switched to calculating the amounts owed based on the terms of the contracts.”
He said that while this meant lower revenue for the operating firms, it still signalled favourable results. “It has been taken as a positive sign about the importance of the contracts and because it means the payments will increase if oil prices rise,” Mr Mallison said.
Yet investment is still lagging in the region’s hydrocarbon sector. Mr Mallison said that the monthly payments only covered continuing costs – which means that the billions in arrears owed by the KRG are still left in limbo. “While a small repayment towards these arrears was made this month, it is just a drop in the ocean,” he said.
“Between the challenges facing the KRG and the current oil price environment, it is hard to see these arrears being paid off any time soon, which will limit the appetite for further investment in Kurdish oilfields.”
lgraves@thenational.ae
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