The Kurdish Crush

The Kurdistan producers are in a tough spot brought about by COVID-19 and the collapse in oil prices. Earlier this year, the KRG said it would delay payments in respect of October 2019 to February 2020 deliveries as its cash to pay producers was stuck in a Lebanese bank account with the bank itself facing liquidity issues.

The KRG had struck a deal to pay producers for the backlog later in 2020. Payments in respect sales from March 2020 were not affected and continue to be paid. However at the current low oil prices, payments to producers have slumped.

Tawke: Received USD8.5 million for April deliveries split between partners DNO and Genel. This compares to the March payment of USD34.6 million.

Taq Taq: Received USD1.9 million, down from USD4.6 million in March with Genel's net share of the payment being USD1.1 million.

Shaikan: Gulf Keystone had submitted an invoice to the KRG for a nil amount as the realised price was negative with the Shaikan crude/transportation discount being below Brent.

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All Tawke on Peshkabir: Is Tawke production declining?

The Tawke PSC encompasses the Tawke and Peshkabir fields. In 2017, operator DNO commenced production at Peshkabir and in 2018, drilled the Peshkabir-4 and -5 wells taking production up to 30-35mbopd.

However, the limited disclosure by DNO means it is difficult to break out the production on the Tawke PSC between the Tawke and Peshkabir fields. Based on various disclosures between DNO and partner Genel, it appears that production at Tawke is declining, masked by an uptick in Peshkabir.

The Tawke PSC has been producing just c.110mbopd. However closer study reveals that Peshkabir production is now compensating on falling production on the main Tawke field, and hence maintaining the c.110mbopd levels across the PSC.

Although more production history is required, there are now concerns of the problems encountered at TaqTaq by Genel where reserves and production were significantly reduced as water started to be produced from the reservoirs.

#Tawke #Peshkabir #TaqTaq #waterbreakthrough #Kurdistan #DNO #Genel

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Kurdistan E&Ps get paid for January sales

Genel has announced that the Tawke and Taq Taq partners have received payment from the KRG for January oil sales.

• The Tawke partners (DNO 75% and Genel 25%) have received USD56 million and will also share in a USD13 million overriding payment

• The Taq Taq partners partners received USD8 million this month

The continuing payments by the KRG is constructive for sentiment and critical in bringing interest and investment back into the region. Many E&Ps have held off investing in the country with payments being a big concern. While the continuing payments are clearly positive, questions remain on the longer term ability of the KRG to pay producers given loss of crucial income following the referendum with the taking back of the Kirkuk area by Baghdad. For now the KRG is managing, largely with the help of investment/cash injection by Rosneft at the end of large year.

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Kurdistan players receive payment for November exports

Genel Energy and DNO have received payment from the KRG for November oil sales.

DNO received USD54.73 million for crude oil deliveries to the export market from the Tawke. The funds will be shared by DNO and Genel pro-rata to the companies' interests in the licence (75% DNO/25% Genel). Separately, a payment of USD4.7 million was received by DNO, representing 3% of gross Tawke licence revenues during November, as provided for under receivables settlement agreement from August 2017.

The Taq Taq partners have received a gross payment of USD11.05 million, with Genel's share of the payments being USD6.08 million.

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Kurdistan producers get paid for September

DNO and Genel Energy have reported receipt of USD54 million from the KRG for September crude sales from the Tawke licence - shared by DNO (USD40.7 million) and Genel (USD13.6 million) in line with the interests in the licence.

In addition, a payment of USD10.8 million has been received by Genel and DNO, representing 7.5% of gross Tawke licence revenues during October 2017, as provided for under the receivables settlement agreement.

Separately, the Taq Taq field partners have received a payment of $9.7m from the KRG for September oil sales - Genel's net share of the payment is USD5.3 million.

This is the first set of payments that has been made following Kurdistan’s independence election and the choking back of oil exports from the Kirkuk Area, which has limited the KRG’s cash flows. Although a positive, concerns will continue around the continuity of payments.

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Kurdish operators receive July crude export payments

Kurdish operators have announced receipt of oil sales payments from the KRG today towards July exports:
DNO has confirmed that the Tawke partners have received USD39.5 million
Genel has confirmed that the Taq Taq partners have received and USD10.4 million

These payments are in line with recent payments and should be the last under the "old" system (i.e. before the recent change in terms in exchange for settlement fo historical receivables).

Payment for August sales should be made in November - these should increase with DNO's greater share in Tawke and Genel's elimination of the 30% Capacity Building Payment. However, the recent referendum results casts uncertainty on the way forward between the neighbours in the region and therefore the risk to Kurdistan's financial position and therefore payments has increased.

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Kurdistan E&Ps have been paid for May shipments

Kurdistan E&Ps have been paid for May shipments.

The Tawke partners have confirmed receipt of USD39.6 million. The amounts will be shared pro-rata by DNO (55%) and Genel (25% WI) and comprises USD33.2 million towards May deliveries and USD6.4 million towards past receivables.

The Taq Taq partners have received USD12.2 million and will be shared pro-rata by Genel (44% WI) and Addax (36% WI). The payment comprises USD11.1 million towards May deliveries and USD1.2 million towards past receivables.

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Turkey-Genel gas update

In 2013, Turkey established Turkish Energy Company (“TEC”) as a vehicle to enter into partnerships with IOCs for dealings in Kurdistan. TEC was a state-backed entity and an offshoot of Turkish Petroleum International Company (“TPIC”).

Earlier this year TEC was placed under BOTAS, the state-owned oil and gas pipelines and trading company, with gas coming back to one of the top items on the agenda of the Turkish government. It is now commanding attention at the highest levels of government, driven by a strong will to secure Kurdish gas to strengthen its hand against Russia.

To this end, TEC and Genel have been in continuing dialogue over the way forward for the Miran and Bina Bawi gas fields, with the talks intensifying in recent months. For Turkey, the interest in the project is strategic and necessary. For Genel, the securing of Turkey as a guaranteed long term offtaker is important in helping in reviving the company’s fortunes following a succession of problems including reserve write downs and production underperformance.This has been compounded by a series of management changes with Tony Hayward and Nat Rothschild leaving the board in June 2017 and the departure of Ben Monaghan on 30 June 2017.

Genel is now craving some stability with focus turning to delivery of the gas project which will take a few years to develop. In the meantime, managing production at Taq Taq remains a near term priority.

Related recent entries:

• Kurdistan independence referendum
• Kurdistan: The Rosneft connection

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