London-listed Gulf Keystone Petroleum (GKP), the operator of northern Iraq's 55,000 b/d Shaikhan field, said today it is taking action to preserve liquidity by reducing costs across its business in Iraqi Kurdistan — days after it gradually halted its production.
The company's decision is a result of Turkey's temporary shut-in — which began on 25 March — of exports of Iraqi Kirkuk blend from its Ceyhan port and has dragged on for over a month. The pipeline is the only export route for crude produced by northern Iraq's oil fields. GKP's production prior to the pipeline suspension averaged 53,700 b/d, it said.
"The company is significantly reducing the full year [2023] planned net capital expenditures to an estimate of $80mn-85mn from a prior guidance of $160mn-175mn," Gulf Keystone said. "While our review is ongoing, we currently expect May to December 2023 net capital expenditures of $35mn-40mn," GKP added.
GKP is also considering the previously declared final 2022 ordinary annual $25mn dividend, part of its ongoing review.
The halt to loadings from Ceyhan has cut roughly 470,000 b/d from Iraq's crude exports since late last month — around 400,000 b/d of KRG crude normally flows through the Kirkuk-Ceyhan pipeline along with an estimated 70,000 b/d of federal Iraqi oil.
"Following the suspension of exports, GKP produced at reduced rates into storage facilities prior to shutting in production at PF-1 on 31 March 2023 and at PF-2 on 13 April 2023," the company said today.
Canada-based Forza Petroleum, the operator of northern Iraq's 15,000 b/d Hawler field, confirmed to Argus on 25 April that its "production is mostly shut-in". Forza Petroleum said it is "maintaining production at a low rate at certain wells in order to protect artificial lift pumps. The related oil is being directed to storage".
Norway's DNO, which partners with Genel in the Peshakbir and Tawke field with a combined 110,000 b/d production capacity, halted production on 14 April.
Turkey's decision was triggered by an international arbitration ruling that said Ankara had breached a 1973 pipeline agreement by allowing KRG oil to be exported without Baghdad's consent between 2014 and 2018. While Iraq's federal government and the KRG signed a temporary deal on 4 April paving the way for exports to resume, a few technical sticking points between the two is one barrier further delaying export resumption.
Ankara's hold out is bound by a pending agreement with Baghdad over the compensation ordered by the ruling and clarity over Iraq's position regarding a second arbitration case, again brought by Baghdad, on the same issue and relating to the period since 2018.
Earlier this year, GKP said it planned to increase Shaikan's nameplate capacity dependent on clarity surrounding KRG's payments for oil sales. The company said overdue receivables for the months of October 2022 to January 2023 total $102mn.
The projected growth is underpinned by contributions from two new wells — SH-17 and SH-18 — which are due on stream in the first and second quarters of this year, respectively. GKP said it had completed the drilling of SH-18 and "the well is now being hooked-up".
"Upon the resumption of exports, production will be gradually ramped up with the objective of safely returning to full export capacity," GKP added.
