Kurdistan Oil & Gas Sector Continues to Face Challenges

Kurdistan: A Region Abundant in Oil & Gas Reserves

According to a recent report by “DOR Organization for Kurdistan Oil and Gas Information, the Kurdistan Region of Iraq “is the world’s 8th in terms of its oil and gas reserves, and it will be last place in the world to run out of oil.”  And “according to the [same] report — the Region will export 1.65 million barrels of oil and 10 billion cubic feet of natural gas [in] 2016.”

????????????????????????????????????????????????????????????????????????????And as the Financial Times has reported: “[Kurdistan’s] deposits are huge, amounting to roughly a third of those in Iraq, where one in ten of the world’s accessible barrels are to be found. Kurdistan is among the cheapest places to drill for oil on earth. The total cost per barrel – a measure that includes exploration and extraction spending – is around $12, compared with about $50 for US shale, [according to] Will Forbes, head of Oil and Gas at research advisory Edison in London.”

International oil companies’ Kurdistan efforts: Stalled or shuttered

Despite the abundance of oil & gas reserves in Kurdistan, several obstacles continue to plague the northern Iraq region’s oil and gas sector.  As the Financial Times reported last month, “Genel Energy, run by ex-BP boss Tony Hayward, Norway’s DNO and the UK’s Gulf Keystone – are “caught in the stand-off between the Iraq’s central administration in Baghdad and the semi-autonomous Kurdish Regional Government (KRG) over how the spoils of Kurdistan’s oil reserves should be shared.”  And they face this after having already “sunk [their| wells, started drilling, [and] extracted tens of millions of barrels of oil for export. But a year down the line, [they] still haven’t been paid.”

And as BAS News reported last week:  “A joint venture between US operator Hess and Dublin-based Petroceltic to explore and drill for oil [in Kurdistan] is being wound-up.  According to the report, the company cited “significant operational challenges and the current oil price environment” as central to their decision – which will likely see the company now focus on the US shale market.

Baghdad and Erbil still remain at odds

Rudaw reported earlier this month that the Kurdistan Regional Government and the Iraqi Central Government remain at odds over an “agreement [that] was supposed to mend a year of tensions and restart payments from Baghdad for the running of the regional government.”

They interviewed Ashti Hawrami, the Kurdistan Region’s Minister of Natural Resources, who argues that “The issue is not technical, it is money and political.”  Hawrami maintains that despite the recent insurgency, foreign oil companies have come back to the region after a brief hiatus.  He hopes for production of between 800,000 and 850,000 barrels of oil in 2015.  But says a total of 600,000 will keep the regional government afloat. The Turkish Government and foreign oil companies have all loaned the Kurdish Regional Government money in return for oil guarantees.

These long-term disagreements, however, continue to impede the region’s oil market from advancing effectively.  Time will tell as to whether a durable agreement can be reached and activity by international oil companies can expand.

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