Genel Energy, the Anglo-Turkish oil company led by former BP chief executive Tony Hayward, expects to boost output in Kurdistan by at least half this year as its oil finally finds a route to market, according to a latest report by the Financial Times. The completion of a pipeline in Kurdish territory in December, beyond the control of Iraq’s federal authorities in Baghdad, will allow it to export via the Turkish port of Ceyhan.
To date, a diplomatic stand-off between the Kurdistan Regional Government based in Erbil and Iraq’s central government over who should control revenues from oil and gasfields in the autonomous region has largely stymied attempts to export in large volumes from the area. On Thursday Mr Hayward said he was hopeful that a deal could be struck soon to end the dispute between Baghdad and Erbil that would end doubts of the legitimacy of exports from Genel’s fields. "A lot of progress has been made, and concessions made, but there is no agreement,” he said. "But negotiations are continuing, and there’s traction behind them. There are a small number of things they are still discussing, including how the oil is going to be marketed. There’s a real incentive to agree.” Mr Hayward’s comments came as Genel predicted it would raise output this year to an average of between 60,000 and 70,000 barrels of oil a day.
More costly exports of oil from Kurdistan by truck are expected to continue, but the company said production volumes were "expected to grow significantly year on year as the new pipeline comes into operation”. Without a clear agreement on how to apportion revenues generated by production from fields in Kurdistan, analysts suggest that the regional government and its operators will push on regardless with exports output via the new pipeline without Baghdad’s consent. "We remain optimistic that regular flows will begin and be sold later this year,” said analysts at Arden Partners.
Mr Hayward said his company’s prospects had also been boosted by a recent deal between the KRG and Ankara for the sale of gas to Turkey from 2017, which would help meet the country’s growing demand for energy. Full-year revenues, based primarily on the sale of output in the domestic market controlled by the KRG at less lucrative prices, rose from $333m to $348m in 2013, based on production that held steady at about 44,000 barrels of oil a day. However, pre-tax profit rose sharply from $75m to $186m as Genel booked exploration credits and reduced depreciation costs against assets held in the Kurdistan region. Genel, which has embarked on an exploration campaign off the coast of Morocco, ended the year with cash balances of $700m. It is expecting to achieve revenues of between $500m and $600m this year.
