IOCs Cut Kurdistan CAPEX due to Payment Trouble

IOCs Cut Kurdistan CAPEX due to Payment Trouble
DNO, Genel and Gulf Keystone's combined CAPEX in Kurdistan has fallen considerably as a result of the Kurdistan Regional Government's lack of payment to producing international oil companies.

DNO, Genel and Gulf Keystone’s combined capital expenditure (CAPEX) in Kurdistan has fallen considerably as a result of the Kurdistan Regional Government’s lack of payments to producing international oil companies, according to DNO Executive Chairman Bijan Mossavar-Rahmani.

Addressing delegates at the Kurdistan-Iraq Oil & Gas Conference held in London Tuesday, Mossavar-Rahmani said that the total CAPEX of all three companies in Kurdistan in the first half of the year fell to below $200 million from $800 million for the full year in 2014. The DNO Chairman also revealed that around $4 billion is being lost in revenue per year due to production decreases in Kurdistan which have been partly caused by the uncertain payment strategy for IOCs by the KRG.

Rigzone, which was attending the conference, heard Mossavar-Rahmani state:

“In each of 2013 and 2014, DNO, Genel and Gulf Keystone between us spent in excess of $800 million in capital expenditures in Kurdistan. $800 million dollars a year. In the first half of this year, that figure was below $200 million a year, as spend was curtailed due to the uncertain payment situation. Even more disappointing, at the end of 2015 production from all fields operated by companies licensed by the Kurdistan Regional Government are running 300,000 barrels a day below…projections published just over a year ago.

“Some of it because operators are scaling back investments until there is a greater clarity and certainty on payments for exports. To put this figure in perspective, 300,000 barrels per day in unrealized production translates into close to $4 billion a year in lost revenue even at today’s oil prices.”

The Kurdistan Regional Government’s Ministry of Natural Resources announced Aug. 3 that the KRG will pay producing international oil companies a portion of the revenue from its direct crude oil sales, on a monthly basis, from September 2015 onwards. Although it has begun paying these companies, the KRG still owes IOCs more than a billion dollars, according to Mossavar-Rahmani.

“As for my company, DNO, the size of our unpaid receivables now tops $1 billion dollars…Payments to us on account for exports for the past couple of months is around half of our monthly entitlement under our production sharing contract,” Mossavar-Rahmani said in a presentation at the conference.

Despite the KRG’s payment issues, the DNO Chairman stated that the company remains “fully committed to Kurdistan”.

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