The semi-autonomous region of Kurdistan in Iraq will defer payments to oil companies operating in the region for the oil sales they had made between November 2019 and February 2020, one of those companies, London-listed Genel Energy plc said on Friday, as Iraq and the Kurdistan region are struggling to meet their obligations after the oil price crash.
Genel Energy, which has interests in three producing fields in the Kurdistan Region – Taq Taq, Tawke, and Peshkabir – has received payment for the oil sales in March 2020, the company said today. Yet, the Kurdistan Regional Government (KRG) had proposed to Genel Energy to defer the payments due for the period between November last year and February this year, interest-free, for at least nine months.
“Should the oil price recover to c.$50/bbl, a payment programme to recover the deferred invoices will be put in place,” Genel Energy said.
“Genel welcomes the KRG’s approach to establish a framework that provides clarity and predictability for overdue and future payments, and the commitment to full repayment of deferred invoices as the oil price recovers,” the company added.
According to RBC analysts, cited by Reuters, the deferred payments are worth a total of around $300 million, of which another company operating in Kurdistan, DNO, is entitled to three-quarters of those payments. Genel will get the rest.
Iraq and Kurdistan are struggling to pay the companies extracting their oil as crude prices have crashed by 60 percent since the beginning of the year, crippling oil revenues that are vital for both Iraq and the Kurdistan region.
Iraq, which relies on oil revenues for 95 percent of its budgetary income, is one of the least diversified economies in the Middle East. The federal government saw its revenues cut nearly in half in March when oil prices collapsed, even though OPEC’s second-largest producer exported more barrels of crude last month than it did in February.
Kurdistan is included in Iraq’s commitment to reduce oil production as part of the new OPEC+ deal, Iraqi Oil Minister Thamer al-Ghadhban said earlier this week. Iraq was the biggest cheater in previous OPEC+ pacts.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.