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Shares in the Kurdistan-focused oil explorers have spiked sharply in the past week after the first of the super-majors made its move into the semi-autonomous region of Northern Iraq.
ExxonMobil signed contracts with the Kurdistan Regional Government for six oil blocks, which is seen as a massive vote of confidence in the area. Of late the region has become a magnet for mid-tier players.
However, the American titan’s interest takes the hype to a different level. This is underlined by the share price reaction of the London-listed firms that have blazed a trail in this politically sensitive part of the world and are now seen as potential takeover targets.
Concerns: Iraq says Kurdistan has no right to unilaterally award such deals
Afren has advanced 19 per cent since Exxon’s interest was revealed last Friday. Petroceltic and Gulf Keystone Petroleum have fared even better, rising 26 per cent and 36 per cent respectively in that time.
Vallares, the oil investment vehicle fronted by former BP boss Tony Hayward and backed by the financier Nat Rothschild, has placed all its chips on Kurdistan by throwing in its lot with a Turkish company called Genel Energy, which is also active in the region.
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In fact Genel, which will take a London listing after its $4billion merger with Vallares, is a partner with Gulf Keystone in what could turn out to be one of Kurdistan’s biggest finds.
Hayward, meanwhile, recently described Kurdistan as one of the last great oil frontiers. And American investment bank Citi, citing data from the US Geological Society, suggests the region could hold over 50billion barrels of oil – which means it is comparable in scale to Libya.
Counterbalancing this excitement is uncertainty over the production sharing contracts.
Iraq says Kurdistan has no right to unilaterally award such deals. These concerns are further exacerbated by the news that some companies aren’t receiving full payment for their oil exports.
The reaction of the Iraq government earlier this week to Exxon’s involvement in Kurdistan simply underlines the growing tension between Baghdad and Erbil.
‘Exxon has violated the ministry directions and instructions concerning the companies working in Kurdistan,’ said Abdul-Mahdy al-Ameedi, director of the Iraqi oil ministry’s contracts and licensing directorate.
‘It’s a violation of the contract and the law. As a consequence the oil ministry will take steps to end the contract.’
At this stage it is unclear what sanctions Iraq might actually take to prevent the deal. However Prime Minister Nuri al-Maliki’s government seems to have more leverage with Shell, which is said to have withdrawn from oil development talks in Kurdistan to protect its interests in the rest of the country.
For Shell the stakes are high after a $17billion gas deal with the Iraqi government cleared its last major hurdle on Tuesday. In the meantime others big oil companies including Chevron and the Italian giant ENI are rumoured to have held exploratory talks with the KRG.
However neither has yet followed Exxon’s lead. Its move into KRG may have caused some excitement, but hasn’t irrevocably transformed the landscape of Kurdistan for investors.
In fact if anything it has muddied the waters somewhat. And it certainly doesn’t appear to be a prelude to a major land-grab, which could see UK listed stocks such as Afren, Petroceltic and Gulf Keystone taken out.
This consolidation will probably only happen when, or should I say if, the enmity between the KRG and Baghdad dissipates and oil legislation finally makes it onto the statute books. Certainly this is the view of the researchers at Citi.
‘The approval of an Iraqi oil and gas law and resolution of the outstanding issues between Erbil and Baghdad could be the trigger for the oil majors (currently focused in southern Iraq) to enter the region and consolidate the smaller names with large resource positions,’ analysts Michael Alsford and Mukhtar Garadaghi wrote recently.
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ExxonMobil signed contracts with the Kurdistan Regional Government for six oil blocks, which is seen as a massive vote of confidence in the area. Of late the region has become a magnet for mid-tier players.
However, the American titan’s interest takes the hype to a different level. This is underlined by the share price reaction of the London-listed firms that have blazed a trail in this politically sensitive part of the world and are now seen as potential takeover targets.
Concerns: Iraq says Kurdistan has no right to unilaterally award such deals
Afren has advanced 19 per cent since Exxon’s interest was revealed last Friday. Petroceltic and Gulf Keystone Petroleum have fared even better, rising 26 per cent and 36 per cent respectively in that time.
Vallares, the oil investment vehicle fronted by former BP boss Tony Hayward and backed by the financier Nat Rothschild, has placed all its chips on Kurdistan by throwing in its lot with a Turkish company called Genel Energy, which is also active in the region.
More...
CITY INTERVIEW: Hayward claims he has plenty of fuel left in the tank
Oil and gas producer could see value grow as it further explores sites
Former BP boss Tony Hayward to pick up £3m as Genel boss
In fact Genel, which will take a London listing after its $4billion merger with Vallares, is a partner with Gulf Keystone in what could turn out to be one of Kurdistan’s biggest finds.
Hayward, meanwhile, recently described Kurdistan as one of the last great oil frontiers. And American investment bank Citi, citing data from the US Geological Society, suggests the region could hold over 50billion barrels of oil – which means it is comparable in scale to Libya.
Counterbalancing this excitement is uncertainty over the production sharing contracts.
Iraq says Kurdistan has no right to unilaterally award such deals. These concerns are further exacerbated by the news that some companies aren’t receiving full payment for their oil exports.
The reaction of the Iraq government earlier this week to Exxon’s involvement in Kurdistan simply underlines the growing tension between Baghdad and Erbil.
‘Exxon has violated the ministry directions and instructions concerning the companies working in Kurdistan,’ said Abdul-Mahdy al-Ameedi, director of the Iraqi oil ministry’s contracts and licensing directorate.
‘It’s a violation of the contract and the law. As a consequence the oil ministry will take steps to end the contract.’
At this stage it is unclear what sanctions Iraq might actually take to prevent the deal. However Prime Minister Nuri al-Maliki’s government seems to have more leverage with Shell, which is said to have withdrawn from oil development talks in Kurdistan to protect its interests in the rest of the country.
For Shell the stakes are high after a $17billion gas deal with the Iraqi government cleared its last major hurdle on Tuesday. In the meantime others big oil companies including Chevron and the Italian giant ENI are rumoured to have held exploratory talks with the KRG.
However neither has yet followed Exxon’s lead. Its move into KRG may have caused some excitement, but hasn’t irrevocably transformed the landscape of Kurdistan for investors.
In fact if anything it has muddied the waters somewhat. And it certainly doesn’t appear to be a prelude to a major land-grab, which could see UK listed stocks such as Afren, Petroceltic and Gulf Keystone taken out.
This consolidation will probably only happen when, or should I say if, the enmity between the KRG and Baghdad dissipates and oil legislation finally makes it onto the statute books. Certainly this is the view of the researchers at Citi.
‘The approval of an Iraqi oil and gas law and resolution of the outstanding issues between Erbil and Baghdad could be the trigger for the oil majors (currently focused in southern Iraq) to enter the region and consolidate the smaller names with large resource positions,’ analysts Michael Alsford and Mukhtar Garadaghi wrote recently.
[You must be registered and logged in to see this link.] [b]
