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 Genel's Tony Hayward says Iraq's Kurdistan oil row too big to last

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Genel's Tony Hayward says Iraq's Kurdistan oil row too big to last  8.9.2012 

Genel chief executive Tony Hayward said the company was making progress across all areas of its business. Photo: AFP/Scanpix.
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September 8, 2012

ERBIL-Hewlęr, Kurdistan region 'Iraq',— Iraq and its Kurdistan region both have too much at stake not to settle their dispute over oil, although they may take a year or so to do it, the head of the largest producer there said.

"The scale of the opportunity for Kurdistan and for Iraq is so large that there will be a resolution," Genel Chief Executive Tony Hayward, former boss of BP, said in an interview.

"Over the next year or two, Kurdistan production capacity will grow towards 1 million barrels a day - that's too much oil to be shut in as a consequence of a political dispute. So one way or another, it's going to get resolved."

Kurdistan's oil can be shipped to world markets through a Baghdad-controlled pipeline from Kirkuk to the Turkish port of Ceyhan.

The Kurdistan Regional Government (KRG) halted exports in April in a dispute over payments from Baghdad to companies working in the region. It restarted them, but warned it would cut shipments by mid-September if there were no progress on payments.

"We'd like to be exporting and believe strongly that over the next year or so, if not well before, that resolution will be arrived at," Hayward said in the telephone interview.

London-listed oil explorer Genel, the first to arrive in the mountainous region, has complained that it has not been paid for the majority of oil exported in 2009 and 2011. Other operators have voiced similar grievances.

But Hayward said if exports were to stop, production from the Taq Taq and Tawke oilfields - where it is involved - would be sold into the domestic market.

That local business - which fetches about $60 a barrel, well below that on world markets - would be enough to keep both projects in the money. "Very much so," he said.

Taq Taq is now pumping 105,000 bpd. Tawke is running at 70,000 bpd, but should be up to 100,000 bpd by the end of the year.

Baghdad says it has the sole power to export oil. But Kurdistan has signed exploration oil deals with foreign companies, contracts Baghdad says are illegal.

Taq Taq and Tawke are the backbone of KRG exports, between them contributing roughly 80,000 barrels per day of an overall 120,000 bpd. Khurmala, the northernmost part of the giant Kirkuk oilfield, makes up the remainder.

A new pipeline linking Taq Taq to Khurmala - the entry point to the Iraq-Turkey pipeline - is expected to be up and running by October, easing delivery of the oil to world markets. Crude from the field is now transported by tanker trucks.

"If there's an agreement between Baghdad and Erbil to continue exports, then Taq Taq will be tied directly to the export infrastructure," said Hayward.

In the meantime, KRG energy minister Ashti Hawrami - aiming to reduce the region's energy reliance on Baghdad - is carrying out plans to export oil and gas directly to Turkey, just to the north.


Apart from its oil plays, Anglo-Turkish Genel - its longer term sights on Turkey's gas market - is also building up its position in Kurdish gas. It splashed out $450 million last month on a stake in the Miran gas discovery and also acquired a piece of the Bina Bawi gas discovery.

"The Kurdistan Regional Government has made it very clear that they would like to see gas in Kurdistan exported to Turkey, so building a gas business in Kurdistan focused on both the domestic market in Kurdistan but also the Turkish export market makes a great deal of sense," said Hayward.

Genel spent more than $700 million last month to bolster its position in Kurdistan. Hayward said the company could take on more, but acknowledged that options were now limited.

"If we see opportunities where we can create a lot of value, then we'll continue to add," he said. "But there's been a lot of consolidation in the course of the last nine months and the opportunity set is undoubtedly diminishing."

The Genel chief has also been trying to diversify the firm's sources of oil, recently taking acreage in Morocco and Malta. It has earmarked around $1 billion to buy further assets.

"We've said we'll focus on the Middle East and Africa and that's what we're doing," said Hayward. Genel was formed last year when Hayward and financier Nathaniel Rothschild's bid vehicle bought Turkey's Genel Enerji.

In Kurdistan, Hayward expects to see further consolidation. Oil majors Chevron (CVX.N), Total (TOTF.PA) and Gazprom (GAZP.MM) have joined Exxon (XOM.N) with their own deals in there, provoking warnings from Baghdad that those with oil deals with the federal government might be at risk.

"The supermajors have moved in - we haven't got much room for many more, frankly," he said.

"We'll see further consolidation and the emergence of half a dozen serious operators - of which Genel will be one."

By Peg Mackey, Reuters

Copyright ©, respective author or news agency, Reuters  


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