DNO, the Norwegian oil company operating in the semi-autonomous Kurdistan region of Iraq, announced on Thursday that its oil production in the area has largely rebounded following a significant export pipeline shutdown almost a year ago. However, the company noted that the recovered production is being sold locally at a discounted rate.
Last March, crude oil flows of approximately 450,000 barrels per day from northern Iraq to Turkey were abruptly halted due to an arbitration ruling by the International Chamber of Commerce (ICC). Despite efforts, there is still uncertainty regarding when exports through the pipeline could resume.
"Investment and operational updates from DNO indicate that by year-end, gross production from the DNO-operated Tawke license had largely recovered from the March 2023 export pipeline shutdown, averaging 80,000 barrels of oil equivalent per day," the company stated in a release.
Prior to the pipeline shutdown, DNO was producing around 95,000 barrels of oil equivalent per day (boepd) from the Tawke and Peshkabir fields in the Tawke license. However, during the third quarter of 2023, production plummeted to approximately 35,000 boepd.
To compensate for the halted exports, DNO has ramped up its sales to the local market, utilizing road tankers for transportation. Despite this, the company has been forced to sell its oil at prices in the low-to-mid $30s per barrel, representing a substantial discount compared to international rates. However, with reduced operational spending due to a drilling halt, these local sales are still generating approximately $10 million per month in free cash for the company.
Commenting on the situation, DNO's Executive Chairman, Bijan Mossavar-Rahmani, expressed frustration, stating, "Surely no one is pleased to leave significant money on the table with every barrel sold."
Looking ahead, DNO anticipates that gross production at the Tawke license will continue to average 80,000 barrels of oil equivalent per day. The company holds a 75% stake in the Tawke license, with the remaining 25% held by its partner, Genel Energy.
The situation underscores the challenges faced by oil companies operating in politically and economically volatile regions, where disruptions to infrastructure and export routes can have significant ramifications on production and revenue.
