GKP to export oil from Kurdistan while Shahristani dismisses KRG’s ambitions

oil refinery

By Shwan Zulal

Gulf Keystone Petroleum (GKP), a successful oil company operating in the Kurdistan region, has this week issued an update on its operations. The company said that the Kurdistan Regional Government’s Ministry of Natural Resources has asked it to prepare to export up to 5,000 bopd from the Shaikan block. GKP is making all the legal arrangements to start production, pending final approval by the KRG. The facility is capable of producing closer to 22000 bopd, but the KRG has exercised caution due to the political implications and transport logistics.  It will be no surprise if production is increased in the coming months, once the KRG has assessed Baghdad’s reaction and resolved the logistical problems.

GKP said that technical limitations prevent it from measuring the rate of oil flow, but they are optimistic and believe they are on the right track. It is going to undertake a flow test at its Sheikh Adi-1 following the promising results from Shaikan-2. Extensive tests will be carried out on the Jurassic section of the Sheikh Adi-1 after drilling is complete. The Shekhan-4 spud is good news for the company which says that they will spud by end of May. John Gerstenlauer, GKP Chief Operating Officer, is upbeat about the progress and said: “We will soon have four exploration appraisal wells underway in Kurdistan with further wells expected to spud before the end of the summer… steady progress in the Shaikan-2 and Sheikh Adi-1 drilling is highly encouraging…Kurdistan Regional Government confirming release of the first oil export payment to the KRG as an extremely positive development… ”

Meanwhile, SEY (Sterling Energy) has issued an update on their operation in the Sangaw North block in Kurdistan where they have a 53.33% working interest. “The Sangaw North-1 well has been drilled to a total depth of 4,190 metres, within the Triassic Kurra Chine formation. Wireline logs have been run across the open hole section and are currently being interpreted.” The testing has been conducted by wirer logging which indicates that difficulties remain. Nevertheless the company says it has directed its partners to carry out a flow test across the open hole section. This is estimated to take about three weeks and it is an indication of the company’s optimism about the well’s prospects that they are prepared to bear the cost of the test.

Angus MacAskill, SEY’s Chief Executive said: “We are pleased to have reached the planned well depth in this very challenging drilling environment and look forward to the outcome from the ongoing programme of data acquisition.”

The problems SEY and other partners have faced and the GKP success highlight the fact that there are plenty of oil and gas reserves in Kurdistan, although not without their challenges. Oil exploration remains lucrative in the largely unexplored Kurdistan region but, for the parties involved, it is proving to be a long-term game rather than a short-term money-making exercise.

The export plans are good news for  GKP and for the region. The Shekhan block on its own is capable of producing much more oil over time. As the drilling programme progresses, the size of reserves will become clearer. GKP has discovered the largest amount of oil in Kurdistan since exploration companies began drilling there. Nevertheless, investors remain concerned about the logistics of exporting the oil and the uncertainties of Iraq’s Oil and Gas Law.

The latest development in Kurdistan oil exploration highlights the need for the proposed pipelines connecting to the Nabucco pipelines and for an accelerated program to improve Kurdistan’s infrastructure. If the KRG wants to become a big player in the oil market, it must step up current projects and invest more in the infrastructure.

As this good news was reported, Hussein Shahristani, Iraq’s deputy prime minister for oil, dismissed the idea of allowing the Kurdistan region to connect to the Nabucco pipelines running through Turkey and start exporting oil. Shahristani told Rudaw: “Only the federal government can export oil and it’s same for gas. Turkey or the EU countries will not buy gas if it doesn’t have the federal government’s approval.”

This remark by Shahristani has brought the future of Kurdish oil exports into focus. It is clear that the current Iraqi government still opposes the independence of the Kurdistan region’s oil policy and does not recognise the contracts signed. Nevertheless, the reality on the ground is different and the Kurdish government will not easily back down from its position.

The standoff between the KRG and Shahristani over the future of oil exports will play out in the coming months leading to the enactment of oil and gas legislation. Moreover, the KRG’s relations with Turkey are better than ever and it has become more likely that Turkey will allow Kurdish oil to flow through Turkey. The Turkish parliamentary elections in June will therefore be significant in terms of their impact on Turkish-Kurdish relations.

This article first appeared on Kurdish Views

 

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