Kurdish region of Iraq’s oil goals hit by ISIL conflict

Iraq’s Kurdish region, where Genel Energy and DNO pump oil, delayed a target to produce 1 million barrels per day as the cost of fighting ISIL militants saps resources.

The Kurdistan Regional Government now expects to reach that goal by the end of next year rather than this year, said the minister of natural resources, Ashti Hawrami, on Tuesday at a conference in London. The region produced about 636,000 bpd in November, according to official estimates.

The cost of fighting ISIL, which controls tracts of territory in Iraq and Syria, has strained Kurdistan’s budget at a time when oil’s collapse has curbed funds to pay energy companies. The KRG, which resumed payments to the producers in September following an eight-month hiatus, said on Tuesday that it recognised the need for regular disbursements.

The government is committed to honouring contract terms, Mr Hawrami said. Kurdish deputy premier Qubad Talabani said earlier that the KRG would continue to pay arrears to the oil companies even though it is being tested by a “series of crises”.

The government said it authorised November’s payments to the oil companies on Monday. Gulf Keystone Petroleum, an operator in the region, said on Tuesday it was still waiting for the funds.

Production growth in the northern Iraqi region is dependent on a steady stream of payments flowing to the investors. In October, Genel cut its output forecast for this year citing payment delays, while DNO said on Tuesday its Kurdish volumes had fallen by 50,000 bpd since spring. Gulf Keystone said it would not invest to boost Kurdish output until arrears are paid.

“We could have been at 1 million bpd by now had it not been for the ISIS disruption for 2014, which slowed down all the activities,” Mr Hawrami said at the conference. “We are one year behind, but it will happen through 2016.”

The KRG does not export any oil produced by ISIL militants, the minister said, adding that the government is fighting ISIL on “all fronts”, including economic.

“Every barrel of crude oil which passes through our infrastructure is accounted for,” Mr Hawrami said. “We are working closely with our international coalition and antiterror forces to identify targets and disrupt attempts by ISIS to fund their terror through the production and sale of oil.”

ISIL pumped about 40,000 bpd, mostly in Syria’s Deir ez-Zor area, said Sandra Oudkirk, director for the Middle East and Asia at the bureau of energy resources at the US state department, at the conference.


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