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China’s Sinopec Studies Taking Over Kurdistan’s Gulf Keystone

China’s Sinopec has approached debt-ridden Kurdish oil producer Gulf Keystone Petroleum for talks over a possible takeover, Bloomberg reported on Tuesday, citing people familiar with the negotiations.

China Petroleum & Chemical Corp, as Sinopec’s official name goes, has been working with advisors on talks with Gulf Keystone Petroleum, but no decisions have been made and no guarantees are given that talks will lead to any deal, Bloomberg’s sources say.

Gulf Keystone Petroleum is an independent operator and producer in the Kurdistan Region of Iraq. It operates the Shaikan field with current production capacity of 40,000 barrels of oil per day.

On the other hand, Sinopec owns, via a subsidiary, Addax Petroleum, which operates in Kurdistan in the Taq Taq oil field, located less than 50 miles north of the giant Kirkuk field.

Gulf Keystone, however, has run into financial troubles after missing a bond payment in April this year, amid lower oil revenues with the oil price crash and the Kurdistan government’s irregular payments to the company for the oil sales.

The company said last week that it had received a gross payment of US$15.0 million from the Kurdistan Regional Government (KRG) for Shaikan crude oil export sales in September 2016. Still, Gulf Keystone and the KRG’s Ministry of Natural Resources continue to work on the terms for the final form of payments due from May and September this year.

Related: OPEC Jump Starts Oil Bull Market

The missed bond payment in April, however, forced London-listed Gulf Keystone to start a debt-restructuring program. In late September, a London court approved the debt restructuring in which bondholders won control of the company.

Before that, in July this year, Norway’s oil and gas operator DNO ASA launched a proposal to buy Gulf Keystone Petroleum for US$300 million. Back then, the Kurdish company rejected the offer, saying that it was focused primarily on restructuring and would not engage in “any additional process that causes the Company to be distracted from that objective”.

By Tsvetana Paraskova for Oilprice.com

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