LONDON, UK – “You took the risk coming in,” the Kurdistan Regional Government’s (KRG) oil minister told the head of an oil company after he had complained of disappointments in the region’s oil industry.
“There have been some high profile misses and disappointments” for international oil companies doing business in the Kurdistan Region since 2011, said Bijan Mossavar-Rahmani, Executive Chairman of DNO, speaking at the 6th Kurdistan-Iraq Oil and Gas Conference in London.
Optimism about the Kurdistan oil industry was high at the first conference in 2011, Mossavar-Rahmani said. That was when the Kurdistan Region announced its plan to independently export 1 million bpd (barrels per day) within five years.
But the expectations have not been realized, Mossavar-Rahmani pointed out.
“The success of the first international oil companies in Kurdistan, sometimes unfortunately exaggerated, had set off an oil rush,” he said. “But the geology turned out to be more complicated.”
That, combined with security concerns and the economic crisis in the Kurdistan Region “produced too much risk,” he said, adding that some companies gave up and left, while others have gone bust, despite their investments of billions of dollars.
Kurdish oil exports now stand at 550,000 bpd, 300,000 of which come from Kirkuk’s fields, according to Mossavar-Rahmani, far below expectations of 2011.
DNO, the first western oil company to begin operations in the Kurdistan Region, is hopeful that production can be increased but they cannot make further investments “without regular predictable payment from the Kurdistan Regional Government,” he warned.
Ashti Hawrami, Minister of Natural Resources for the KRG, acknowledged that they were 60 days late in making payments but added that the Kurdish government, under its financial constraints, is having difficulties making payments in general.
"I am 60 days late paying my Peshmerga so you are running at par with my Peshmergas,” Hawrami said. “So, be patient with us. We thank you for that. But there is no point to have to complain at every opportunity about our non-performance."
He told Mossavar-Rahmani that the oil companies had made the choice to open operations in the Kurdistan Region despite knowing the uncertainties.
"You took the risk coming in. There was no law and order. There was no constitution. You took the risk. There was no hell of a chance to take one barrel of oil out of the country,” he said. “But now you’re getting money, you’re getting payment.”
He added that if DNO felt they could not continue their operations in the region, "take your money elsewhere. I have no problem with that. I'm sure if you find better opportunities elsewhere, you go there."
With respect to the goal of exporting 1 million bpd, Hawrami said that figure had come from the oil companies. And now he is facing frequent questions from the Kurdish public, asking where is the oil. “We deserve the truth about our own potential because we plan,” he said.
Hawrami expressed disappointment that Mossavar-Rahmani had opted to make his concerns about the industry known so publicly without first discussing them with his ministry in private. He stressed that airing such grievances in a public forum is no one’s interest.
"I don't want messages going around, getting people off coming to Kurdistan. Kurdistan is open to business and we will succeed in that, in our objectives, as we succeeded when we invited you in."
Both Hawrami and Mossavar-Rahmani said that the potential for the Kurdish oil industry remains high. As evidence, Mossavar-Rahmani said that more oil wells are drilled in the United States every week than have been drilled in the Kurdistan Region in the past 100 years.
Hawrami said he is “confident” that companies will continue to seek to do business in the Kurdistan Region despite the negative notes expressed in the conference.
“There have been some high profile misses and disappointments” for international oil companies doing business in the Kurdistan Region since 2011, said Bijan Mossavar-Rahmani, Executive Chairman of DNO, speaking at the 6th Kurdistan-Iraq Oil and Gas Conference in London.
Optimism about the Kurdistan oil industry was high at the first conference in 2011, Mossavar-Rahmani said. That was when the Kurdistan Region announced its plan to independently export 1 million bpd (barrels per day) within five years.
But the expectations have not been realized, Mossavar-Rahmani pointed out.
“The success of the first international oil companies in Kurdistan, sometimes unfortunately exaggerated, had set off an oil rush,” he said. “But the geology turned out to be more complicated.”
That, combined with security concerns and the economic crisis in the Kurdistan Region “produced too much risk,” he said, adding that some companies gave up and left, while others have gone bust, despite their investments of billions of dollars.
Kurdish oil exports now stand at 550,000 bpd, 300,000 of which come from Kirkuk’s fields, according to Mossavar-Rahmani, far below expectations of 2011.
DNO, the first western oil company to begin operations in the Kurdistan Region, is hopeful that production can be increased but they cannot make further investments “without regular predictable payment from the Kurdistan Regional Government,” he warned.
Ashti Hawrami, Minister of Natural Resources for the KRG, acknowledged that they were 60 days late in making payments but added that the Kurdish government, under its financial constraints, is having difficulties making payments in general.
"I am 60 days late paying my Peshmerga so you are running at par with my Peshmergas,” Hawrami said. “So, be patient with us. We thank you for that. But there is no point to have to complain at every opportunity about our non-performance."
He told Mossavar-Rahmani that the oil companies had made the choice to open operations in the Kurdistan Region despite knowing the uncertainties.
"You took the risk coming in. There was no law and order. There was no constitution. You took the risk. There was no hell of a chance to take one barrel of oil out of the country,” he said. “But now you’re getting money, you’re getting payment.”
He added that if DNO felt they could not continue their operations in the region, "take your money elsewhere. I have no problem with that. I'm sure if you find better opportunities elsewhere, you go there."
With respect to the goal of exporting 1 million bpd, Hawrami said that figure had come from the oil companies. And now he is facing frequent questions from the Kurdish public, asking where is the oil. “We deserve the truth about our own potential because we plan,” he said.
Hawrami expressed disappointment that Mossavar-Rahmani had opted to make his concerns about the industry known so publicly without first discussing them with his ministry in private. He stressed that airing such grievances in a public forum is no one’s interest.
"I don't want messages going around, getting people off coming to Kurdistan. Kurdistan is open to business and we will succeed in that, in our objectives, as we succeeded when we invited you in."
Both Hawrami and Mossavar-Rahmani said that the potential for the Kurdish oil industry remains high. As evidence, Mossavar-Rahmani said that more oil wells are drilled in the United States every week than have been drilled in the Kurdistan Region in the past 100 years.
Hawrami said he is “confident” that companies will continue to seek to do business in the Kurdistan Region despite the negative notes expressed in the conference.
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