ERBIL, Iraq, Aug. 27 (UPI) -- A move to issue regular payments to oil companies operating in the Kurdish north of Iraq should help them endure the market downturn, the government said.
The Ministry of Natural Resources of the semiautonomous Kurdish government said it would issue the first batch of regular payments to oil companies by the middle of next month. The decision came after a Kurdish oil council approved the allocation of between $75 million and $100 million of the revenue generated from direct oil sales.
The Kurdish government said it recognized that international oil companies are struggling to maintain normal operations because of the lack of payments during a depressed oil economy.
"Regular payments will allow the exporting companies to cover their ongoing expenses and plan for further investment in the oil fields, which will in turn boost production," the ministry said in a statement.
The Kurdish government in early 2015 reached a deal with the federal government in Baghdad to export some of its crude oil in exchange for a portion of overall oil revenue. The KRG under the terms of the agreement funnels 250,000 barrels of oil per day to Baghdad and agrees to use the federal State Oil Marketing Organization for marketing.
British energy company Gulf Keystone Petroleum, one of the key players in the Kurdish oil sector, in early 2015 suspended crude oil exports through Turkey and directed sales to the local market briefly because of a lack of payment from the Kurdish government.
The company in a statement on first-half results said revenues of $30.1 million represented a 61 percent increase from the same period last year. Security risks stemming from the Islamic State insurgency and payment cycle uncertainty present challenges to the company nevertheless.
Gulf Keystone Petroleum operates primarily in the Shaikan oil field in the Kurdish north of Iraq, where production is expected to progress from 40,000 barrels of oil per day to 100,000 bpd.
"This [payment agreement] will provide us with the necessary means to recommence investment into the field and progress toward further increasing production, and subsequently value, for all stakeholders," Gulf Keystone Chief Executive Officer Jon Ferrier said in a statement.