Oil firm to scale back in Kurdistan Region over export concerns

ERBIL, Kurdistan Region - Norwegian oil firm DNO on Thursday said it was scaling back operational spending and drilling in the Kurdistan Region over export uncertainty through the pipeline to Turkey.

Turkey closed a key pipeline pumping oil from the Kurdistan Region to its port of Ceyhan in the Mediterranean on March 25 after a ruling by the International Chamber of Commerce (ICC).

Four days after the ruling, Norwegian oil and gas operator DNO said it had begun a shutdown of production at its operated Tawke and Peshkabir oil fields. 

In a statement, DNO said the decision had been made as a result of the “uncertain timing of export resumption and, importantly, of payments by the Kurdistan Regional Government for previous oil sales.” 

“Until export restarts and regularity of payment for past and ongoing oil sales is established, DNO cannot provide any projection of full-year Kurdistan production” it added. 

DNO produced an average of 107.000 barrels per day in 2022 in Tawke and Peshkabir oilfields, which amounts to nearly a quarter of the Kurdistan Region’s total exports.

The firm had previously announced it had diverted oil production to its production storage, but its capacity is limited. 

The arbitration court ruled that Ankara had breached a 1973 pipeline agreement between Iraq and Turkey that obliges the Turkish government to abide by instructions issued by Iraq regarding the transport of crude oil exported from Iraq. 

Baghdad and Erbil signed an agreement on April 14 to resume oil exports to Ankara, but these are yet to take place. Certain aspects of the deal are still expected to be resolved, while Turkey, currently busy with upcoming elections, is yet to agree to the terms.