Gulf Keystone Petroleum could double output at its Shaikan field
GKP can double Kurdish field output if payment spat solved
LONDON, August 26, 2015
Iraqi Kurdistan oil producer Gulf Keystone Petroleum (GKP) could double output at its Shaikan field within 18 months but the lack of government payments for exports makes investing there impossible, its new chief executive said.
GKP, one of a handful of foreign oil producers in the autonomous region of Kurdistan in Iraq, is owed $260 million by the Kurdistan Regional Government (KRG) in payments for exported oil as well as its share of investments in its fields.
The debt and lack of consistency in payments from the government has squeezed GKP's pockets to a point where it has just enough cash flow to keep its operations going.
"It's really frustrating not to be able to invest right now," Jon Ferrier, a former Maersk Oil executive appointed as GKP chief executive two months ago, told Reuters in an interview.
"Our costs are exactly in line with what we're being paid so we're down to the bone."
GKP's Shaikan oil field, a discovery of 12.5-13 billion barrels in place made in 2009, has the potential to produce 100,000 barrels of oil per day (bpd), but the lack of money to invest means it is currently stuttering away at 45,000 bpd.
The KRG, embroiled in a dispute with Iraq's central government over oil riches ownership, promised earlier this month it would start making regular payments to producers from September.
"Hopefully transparency of these payments will be very helpful," said Ferrier.
Once the KRG makes its remaining payments, GKP can start thinking about investing in Shaikan, he
added. Production at the field could reach 100,000 barrels a day within 18 to 24 months, he said.
GKP, which will report first-half results on Thursday, is still in the process of finding a buyer for some of its assets in a bid to raise capital.
"I've never known an M&A environment like this. There's such a gulf between buyer and seller expectations on oil price," Ferrier said.
GKP is in talks with four potential buyers and a start of regular KRG payments would move the process forward more quickly, he said.
"If payments turn out to be a fact in September, that could be a catalyst for change in the region."
--Reuters
