Oil production at Iraqi Kurdistan's largest-producing oilfield is set to rise to as much as 140,000 b/d by the end of the month

Oil production at Iraqi Kurdistan's largest-producing field is set to rise to as much as 140,000 b/d by the end of August despite the Islamic State’s advances into the region, the General Manager of Taq Taq Operating Company (TTOPCO), Onder Tekeli, said on 15 August.

Taq Taq Oil Field is jointly owned by the KRG (20%) and TTOPCO (80%) which is a joint venture between the Anglo-Turkish Genel Energy (55%) and Sinopec’s Addax Petroleum (45%) subsidiary. Tekeli stated "We have a target to ramp up production towards 140,000 b/d and I believe we would achieve this by the end of the month."

Radical Sunni militants of the Islamic State last week advanced to within a half hour's drive of Erbil, the capital of Iraq's Kurdish region and a hub for IOCs, before U.S. military air strikes thwarted their advance.

Several IOCs, including ExxonMobil and Chevron, operating in the previously stable Kurdish controlled region have evacuated all non-essential staff while other smaller producers, such as Afren and Taqa, have suspended operations, as reported here on 11 August.

In spite of KRG-based IOCs seeing their shares fluctuate, in a manner reflecting the Kurdish forces as they retreat and regain ground, there has been little impact on the overall oil output of the region. According to company estimates, production has only been cut by 5,000 b/d, although fighting between Kurdish Peshmerga forces and Islamic State fighters in the environs of Erbil have kept firms and investors on edge.

Currently unaffected by the Islamic State’s advances, however, Tekeli insists that morale at the Taq Taq oil field, 40km (25 miles) southeast of Erbil, remains high: "The worries started about the IS (Islamic State) fighters when they attacked the Makhmour camp. But we have not stopped working and our local staffers have expressed their commitment to us.”  Makhmour to the southwest of Erbil was the closes the fighting got to the capital last week.

Ozan Guler, production superintendent, stated that in order to increase Taq Taq oil field production beyond 140,000 bpd TTOPCO will set up three well-site production facilities to boost output: "We already have the potential to boost production up to 140,000 b/dd in our wells ... We will be setting up these new facilities whose start-up period is about 10 days."

Genel Energy, which operates the Taq Taq and Tawke oilfields in Kurdistan, has said it has evacuated non-core personnel from fields that are not producing oil. Last week it said that production was still ongoing at the two fields and it was averaging a combined 230,000 b/d.

Genel's shares fell by almost a quarter in early August as Islamic State forces advanced towards Erbil, but have since rebounded by around 12%.

At the end of trading, 15 August, they were up almost 2% at £824 (US$1,378.10). Although the rebound has slowed, Genel's shares are currently up 0.5% at £829.50 (US$1386.97).

(£1 = US$1.67).

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2014 Menas Associates

Iraq: Bitter-sweet developments for KRG as US Judge rules that US$100 million oil dispute should be settled in Iraq

On 29 July we reported that a US judge, in response to a lawsuit filed by the Baghdad government, had signed an order to seize the US$100 million crude oil cargo from the United Kalavrvta tanker anchored off the Texan coast. It now appears that there have been some bitter-sweet developments for the KRG.

While US Magistrate Nancy Johnson issued an order to seize the tanker’s cargo, she also told lawyers for Iraq that the dispute should be resolved through the Iraqi court system. As the tanker is anchored 60 miles offshore, 50 miles outside of federal jurisdiction, the cargo cannot be seized.

Although the inability to seize the tanker’s US$100 million cargo is an obvious plus for the KRG it has come at a heavy price. Prior to the seizure order the KRG had managed to keep the end-buyers of its oil anonymous. However, the main US customer for the cargo has now been named as Lyondell Basell, who has subsequently stated that it would not take it, or any subsequent shipments, until the matter had been resolved by Erbil and Baghdad.  

The filing in federal court, Houston, stated that Iraq's central government has asked Iraq's Federal Supreme Court to block the Kurdistan Regional Government from exporting any crude until its ownership can be determined. The central government contends that the oil is not the sole property of the Kurdistan region of Iraq but belongs to the country as a whole. The KRG, however, asserts that its independent oil sales are their efforts to recoup the funds allocated to it, which the Iraqi central government has failed to supply them with.

The latest legal challenge follows Iraq’s bringing of criminal charges against the Kurdistan government in May, alleging theft of oil revenues. However, Kurdistan has failed to appear in court to address the charges and this "failure to comply with the summonses has effectively blocked the Federal Supreme Court from hearing the merits of the case." Harold Watson, a Houston lawyer representing Kurdistan, did not have an immediate comment on the filing when contacted by Reuters.

The U.S. government has expressed fears that independent oil sales from Kurdistan could contribute to the breakup of Iraq as the government in Baghdad struggles to contain the ultra-hardline Islamic State, a group of Sunni Islamist insurgents who have captured vast areas of the country.

Washington has pressured companies and governments not to buy crude from the KRG, but it has stopped short of banning U.S. firms from buying it outright.

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2014 Menas Associates

Iraq: Shortfall in Kurdish exports

The Oil Ministry announced this month that the KRG is not meeting its export target of 175,000 b/d. The director of Somo, the state oil marketing board, Falah Al-Ameri, told the Iraqi media that the Kurds hadn't been able to export more than 65,000 b/d. He also asserted that despite Norwegian company DNO expecting production to increase in the Tawke field, there was no way the Kurds would be able to meet such a high target.

Baghdad's criticisms are a little rich, given that the central authorities have done almost everything in their powers over the past few years to make the KRG's export of its crude as difficult as possible. The criticisms have been taken as another bid by Baghdad to have a dig at Erbil.

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2012 Menas Associates