KRG Revises IOC Payments Process As Internal Political Strains Grow

Iraq’s Kurdistan Regional Government (KRG) is to pay IOCs according to their Production Sharing Contracts (PSC) in a bid to boost investor confidence and cut expenses. The region’s economy is suffering as oil revenues tank and this is piling political pressure on the government. The 1 February announcement by the Ministry of Natural Resources (MNR) brings an end to the monthly payments of $75mn that began in September. The KRG will be hoping that the move will reduce expenses and galvanize the three main exporting companies – Genel, DNO and Gulf Keystone Petroleum (GKP) – into boosting production.

With IOCs previously receiving a flat fee, there was no incentive to increase production, especially as they are all owed hefty receivables from the KRG. This has resulted in production declines, with the Genel-operated Taq Taq field currently some 60,000 b/d down from its peak last year, at 83,000 b/d (see table). (CONTINUED - 1997 WORDS)

DATA INSIDE THIS ARTICLE

chart KRG Crude Export* Revenues Slump Despite Volumes At Near-Record Levels
table Table1: The KRG’S Key Foreign Operators: Sep-Dec 2015 Monthly Payments
table KRG: Key Crude Stats ('000 B/D)