Genel on Track for Large-Scale Oil Exports From KRG

Source: Reuters 10/30/2013, Location: Middle East

London-listed oil firm Genel Energy expects a big rise in output from the Kurdistan region of Iraq, enabling large-scale exports of oil and eventually gas.

The company, whose boss is former BP chief executive Tony Hayward, said on Wednesday that early next year it expects both to be able to start exporting oil to Turkey via pipeline and for a deal to be in place to allow it to sell its gas there.

Genel has stakes in huge fields in Kurdistan, in northern Iraq, but disputes between Kurdistan and the Iraqi central government over oil payments have limited Genel's ability to sell its oil outside of Kurdistan where crude fetches a higher price.

The road ahead could be bumpy, however, as Kurdistan has infuriated Baghdad by building the export pipeline. Baghdad has threatened to sever ties with Turkey and slash the Kurds share of the budget if exports go ahead without its consent.

"It's clearly not a risk free environment we are operating in, although we have seen very strong commitment from Kurdistan and Turkey to facilitate this happening," Genel's Chief Financial Officer Julian Metherell said in an interview.

The company's oil sales beyond the land-locked region's borders have to date been via truck to Turkey, but this is set to change with the opening of the new pipeline which Kurdistan said would be ready for use by the end of the year.

Metherell said that Genel would up production by at least 65 percent, or 30,000 barrels per day, as soon as the pipeline was open.

"It's key to our business that the independent infrastructure from Kurdistan to Turkey is completed. You can see an almost tripling of production...and obviously a very significant increase in revenue," he said.

Metherell said the tripling of production would come by 2015 when Genel would increase production to 140,000 bpd.

Genel said in a market update on Tuesday that it was on track to meet 2013 production guidance of between 45,000 to 55,000 bpd and maintained its annual revenue forecast of between $300 million and $400 million.

The company also said it expects Kurdistan to agree a gas sales agreement with Turkey in the first three months of the year, paving the way for it to be able to sell big volumes of gas from its two gas fields from 2017.

"Completing the contractual framework for those exports is very important," Metherell said.

He estimated that gas provided by Genel could supply 20 to 25 percent of Turkish demand.

"We continue to see Genel as a good long-term investment benefiting from falling political risk across Kurdistan and increasingly mature oil province," Edison (Milan: EDNR.MI - news) analyst Will Forbes said.

Shares in the company were up 1 percent in mid-morning trading.

Outside of Kurdistan, Genel is also exploring for oil and gas across the Middle East and Africa and will start drilling off the coast of Morocco before the end of the year.

The company's geological data gathering activities in the Somaliland region of Somalia have been suspended due to a deterioration in the security environment, it said, adding that it was in talks with the regional government about a restart.

For more information about related Opportunities and Key Players visit Iraq Oil and Gas Projects


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