Bloomberg
The number of oil producers in Kurdistan will slump by three-quarters in five years with the biggest in the industry taking control in the region, according to Genel Energy Chief Executive Officer Tony Hayward.
“It’s likely that we’ll end up with, perhaps, five or six of the largest companies operating, with Genel, Exxon, Chevron ending up as major operators,” Hayward said in a November 21 interview during the Atlantic Council conference in Istanbul. “It’s what happens in most hydrocarbon provinces.”
ExxonMobil Corp, Chevron Corp and DNO ASA of Norway are among more than two dozen international oil companies with a combined 35 licenses in the Kurdish Regional Government area. The companies export about 350,000 barrels a day of crude, pumping it through a Turkish pipeline to the Mediterranean.
Genel has spent more than $1bn since 2012 on acquisitions in Kurdish-controlled northern Iraq, giving the London-based company joint ventures in seven of the region’s oil and gas fields. This month it agreed to pay $150mn for OMV AG’s 36% stake in Bina Bawi, making it the sole owner of the gas field.
“Having made four or five investments in the region, we are continuously looking for opportunities,” Hayward said.
Genel fell 4% to 758 pence by 12:50 pm in London, valuing the company at £2.12bn ($3.3bn).
The producer expects approval by the end of this year for an agreement signed with the KRG last week to develop the Miran and Bina Bawi gas fields, which will start sending Turkey 4bn cubic metres of gas a year from 2018. That export volume could more than double by 2020 and increase fivefold to 20bn cubic meters by 2025, Hayward said. Officials in Turkey said the country plans to build a pipeline to import the fuel.
Development starts next year at Miran, which has gas reserves of 4tn cubic feet, and Bina Bawi, with double that volume, according to Hayward. Genel will sell unprocessed gas from the two fields to the KRG at a price of 78 US cents permn British thermal units after investing in drilling wells and flow lines, he said.
“We will earn our return through the condensate we’ll strip from the gas and the oil associated with the gas field and KRG will get this gas at a very cheap price,” Hayward said. The KRG will build a gas-processing plant in which Turkish builders and lenders will participate, he said.
Genel, which doesn’t need partners for the gas fields, would have to spend about $1bn over three years to develop them, Hayward said. The KRG’s processing plant would cost as much as $6bn, with potentially about half coming from Turkish bank loans and the rest as equity from Turkish contractors, he said.
The KRG will sell the gas to Turkey at $7 permn Btu, according to a 2013 agreement between the regional government and Turkey, he said. The wholesale market price for gas-fired power plants in Turkey is $10 to $11 permn Btu, Hayward said. Turkey imports almost all of its gas needs, with Russia supplying 60%.
“This is one of the lowest-cost prices in the world today, actually, and right on the Turkish doorstep, only 100 kilometers away,” Hayward said. “Kurdish gas has certainly the potential to match Russian gas for the Turkish market.”
Turkey plans to build a pipeline extension to the Iraqi border to import gas from Kurdistan, two Turkish officials with knowledge of the matter said last week. It would carry as much as 20bn cubic meters of gas a year, one of them said.
