Norwegian operator’s growing optimism for Iraqi Kurdistan prospects
Shafaq News/ Oslo-listed oil and gas operator DNO has expressed renewed optimism on its prospects in Iraqi Kurdistan, announcing a plan to spud an exploration well on one of its licences in the semi-autonomous region despite previous operational challenges and unclear timing for the reopening of a key export pipeline.
The company said in a statement that it is set to spud the hole at the Baeshiqa licence in 2024, following a discovery made in 2019.
DNO holds a 64% operating interest at Baeshiqa, with partners Turkish Energy Company holding 16% and the Kurdistan Regional Government 20%.
DNO has revealed the drilling plan as it described an improved outlook for its development activities in Iraqi Kurdistan, where gross production from its operated Tawke licence has continued to climb.
The company said average output at the asset in December to date has approached the 90,000 barrels per day of oil mark.
That lifts the projected fourth quarter 2023 production figure to 65,000 bpd, up from 26,000 bpd in the third quarter and no production in the second quarter, following the closure of the Iraq-Turkey oil export pipeline in March.
Of Tawke's total current production, close to 40% represents DNO's entitlement share, which is sold to local buyers at prices in the low to mid $30 per barrel, the company said.
However, all such sales are conditional on advance payment from customers to eliminate risks of arrears build up, according to DNO.
Responding to discounted local sales, DNO has reduced Tawke’s production costs materially since the Iraq-Turkey pipeline closure, with operational spend in the Tawke licence averaging some 65% lower than pre-export shutdown, the company said.
The Tawke licence holds the legacy Tawke field — in production since 2007 — and the Peshkabir field, operating since 2017.
“These are resilient fields and DNO is a resilient company,” executive chairman Bijan Mossavar-Rahmani said. “Even with local sales prices as low as half of those realised from export sales through the Iraq-Turkey pipeline [before its closure], strong production at Tawke generates material free cash flow for DNO,” he added.
“We remain confident that the latest challenges facing DNO and the other international oil companies will be resolved once again and we remain committed to growing our business in Kurdistan as we have over the past two decades,” he added.
Authorities in Iraq and Turkey have yet to greenlight the resumption of oil flows via the Iraq-Turkey oil pipeline to the Turkish Mediterranean port of Ceyhan that Ankara ordered to halt in March after a ruling from the International Chamber of Commerce.
The court ruled on an appeal sought by Baghdad and mandated that Ankara pay penalties to the Iraqi central government for the oil that was shipped from Kurdistan between 2014 and 2018 without prior authorisation.
The court also upheld Iraq’s claim to be in charge of loading at Ceyhan and to be able to monitor what was being loaded - a ruling Ankara reportedly strongly disagrees with.
DNO also said that its North Sea exploration and appraisal programme this year, implemented with its partners, has led to four successful exploration discoveries - Rover Sor, Heisenberg, Carmen and Norma - two successful appraisal wells at the license PL836S in the Norwegian North Sea, and two dry holes.
