DNO, the Norwegian company that operates the Tawke field in Iraqi Kurdistan, gave a briefing on Thursday morning to discuss its oil exports through Iraq’s main pipeline to Turkey.
Although when the exports began on June 1 there was great excitement about them, there was one big problem: there is no agreement on how the exporters will get paid.
That affects not only DNO, but also Heritage Oil, the operator of the potentially vast Miran field, which is now merging with Genel of Turkey, and Addax Petroleum, operator of the Taq Taq field, which is in preliminary talks about a takeover or deal with KNOC of Korea.
After the briefing, which is available as a webcast, (registration required), I spoke to Helge Eide, DNO’s managing director, who made it clear that the company was still waiting for a contractual framework so it could get paid for its exports.
He said the Kurdistan Regional Government was working to agree a framework “as soon as possible”, but declined to give any further indication of when it might come.
He argued that there was “a strong incentive” for the KRG to agree a payment mechanism, saying:
It is not only important to us, but to all the companies operating in Kurdistan or thinking of investing there, that we can see the contracts work, and that we will be paid.
It is in all the parties’ interests that the discussions do not take too long.
The problem for the KRG is that while the stand-off with Baghdad over oil revenues persists, paying DNO and their other companies for their oil sales would leave it out of pocket. Ashti Hawrami, the KRG oil minister, has promised that the companies will get paid. But to a cynic, his assurances sound suspiciously like “the cheque is in the post”.
DNO began exports at 10,000 b/d, and plans to raise that to 50,000 b/d in four weeks’ time. How long will it be prepared to continue those exports, worth about $25m per week, without knowing when or how it will be paid?