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Kurdistan struck two agreements with Norway’s DNO and British Genel Energy to structure oil exports and debt repayment, according to an announcement by the oil producers on Thursday.
Debt repayment-related concerns have caused multinationals interested in Kurdistan to step back from their production ambitions in Kirkuk and related fields. Unstable relations with Baghdad and an expensive war against the Islamic State have made it difficult for Erbil to meet its financial commitments to oil companies active in the oilfields under the KRG’s control.
After the deals, DNO’s shares rose 6.5 percent, while Genel’s jumped by 6.9 percent.
DNO received an additional 20 percent stake in the Tawke oil field, bringing the company’s total interest in the operation to 75 percent. The KRG also cancelled DNO’s payment obligations for a $150 million water purification installment, which it declared to be unnecessary, and a $25 million production bonus.
DNO will also receive 20,000 more barrels per day from the Tawke field than the 60,000 bpd it is already entitled to. This provision is meant to encourage DNO to continue developing Kurdish fields.
“The net impact should be an increase in corporate valuations driven directly by higher equity stakes, plus a greater commitment by the companies to invest in their existing fields,” analysts at RBC Capital Markets said.
It is important for Erbil to maintain its credit and good faith with multinational companies, particularly if Kurdistan plans to be successful as an independent nation. A referendum on a potential separation from Iraq is due to be held on September 25th, to the chagrin of the United States, Iran, and several other countries involved in the war against terror in the region.
“Our point right now is to stay focused like a laser beam on the defeat of ISIS and to let nothing distract us,” U.S. Defense Secretary Jim Mattis told reporters before his meet with KRG President Massoud Barzani on Tuesday.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…