What's Going on in Kurdistan? Q&A with Gulf Keystone CEO
The rise of the so-called Islamic State in Iraq and Syria this year has thrown a spotlight on Iraq's oil industry, particularly those medium-sized businesses that have chosen to operate in the Kurdistan region of the country. Independent oil firms operating in the region have seen their share prices hammered amid the Islamic State insurgency and continuing disagreements between the Kurdish Regional Government (KRG), the government in Baghdad and Turkey.
Rigzone recently caught up with John Gerstenlauer, CEO of Gulf Keystone Petroleum, which holds 75 percent of a production sharing agreement that contains Kurdistan's Shaikan heavy oil field, for his views on the situation in the region.
Rigzone: What is happening with the security situation in Kurdistan at the moment? The authorities had told companies to move their staff out of Kurdistan. Is this still the case?
Gerstenlauer: "The Kurdistan Regional Government never did that. They were encouraging everybody to stay. The unhelpful thing came from the British government. They warned all their citizens that they should not be in Kurdistan. Some of our British expats got nervous from that and we temporarily moved out of the country about 30 non-essential expats and 14 dependents for some of those non-essentials. So we shipped 44 people by bus up to Turkey and flew them out... But that lasted for about two weeks. They are all back in country now.
Rigzone: How close is the Islamic State to oil operations in Kurdistan?
Gerstenlauer: "The Islamic State is not in Kurdistan at all… They're still in control of all or part of Mosul, so that's the closest they are. And Mosul from Shaikan is 40 to 50 kilometers away, but it's outside Kurdistan.
"Up in our area the invasion of Kurdistan by the [Islamic State] forces happened on the first day. They kind of caught the Peshmerga [the Kurdish armed forces] napping and there were a couple of pick-up trucks with machine guns that went down one road and another couple that went down another road. They drove hell-bent for leather until they got pretty close to the new trunk line, and there they met some resistance. They made a quick U-turn and they raced back out of Kurdistan, and that was the whole invasion right there."
Rigzone: How soon can companies operating in Kurdistan expect payments from the KRG for oil exported?
Gerstenlauer: "Hopefully very soon. The amount in arrears is getting quite substantial and a big part of the Kurdistan Regional Government's plan for increasing revenue and putting in a buffer between then and the occasional budget shenanigans that go on in Baghdad is to have increased oil production. If they want to increase oil production the companies doing the producing need to get revenue for that production because nobody else is going to be motivated to do anything if the producers don't get paid."
Rigzone: Are you still selling oil into the local market?
Gerstenlauer: "We've sold oil into the local market for 45 days straight. But right now I think we're getting pretty close to a solution on exports in which case we go back to exporting everything."
Rigzone: Do you see any progress on the long-awaited oil law for Iraq?
Gerstenlauer: "The rhetoric coming out of that seems more hopeful than it has in a long time. Eventually, hopefully, they are going to pass an oil law down in Iraq but the chance of Kurdistan getting their share of the federal budget is probably better now than it has been in quite a while because I think they need the Kurds more than they have in a long time."
Rigzone: And how is the relationship between Turkey and the KRG?
Gerstenlauer: "A lot of the Kurds in Syria are PKK [the Kurdistan Workers' Party] and they've been a bone of contention with the Turks for a long time, so the Kurds in Syria who are fighting at Kobani there and not having any help from the Turks, that's more of a PKK thing than having anything to do with the Kurds in Kurdistan. I don't think there's a lot of quid pro quo there*.
"But the Turks are making a lot of money off of Kurdish oil exports and the Kurds certainly need a route out because they're a landlocked country. So, I see that relationship being pretty stable."
*Since this interview, Turkey has opened a corridor through its territory to allow Peshmerga fighters from northern Iraq to relieve the Syrian town of Kobani, which has been under siege from the Islamic State.
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