The KRG’s $850mn Oil Arrears Problem

9 Oct 2020 Issue: 63 / 41 By: Waylon Fairbanks

Erbil owes foreign operators nearly $850mn in back payments. It says it will pay up in 2021 or when prices recover to $50/B, but the financial outlook for both Kurdistan-focused IOCs and the KRG itself looks increasingly precarious.

On the surface, Iraqi Kurdistan’s oil sector is slowly getting back to business as it navigates the aftermath of the Covid-19 oil price shock. Exports of KRG crude from the Turkish Mediterranean port of Ceyhan are holding steady at around 420,000 b/d, companies are slowly stepping up operations, and the cash-strapped KRG has managed to make five consecutive monthly payments to foreign operators – most recently in late September.

But even as things edge towards seeming normality, both the KRG itself and the slew of foreign firms operating in the region face a critical arrears question that could yet derail Iraqi Kurdistan’s oil sector. The Erbil-based government missed four oil monthly payouts to foreign operators from November 2019 to February 2020, adding further to its own significant debt burden and exacerbating cashflow problems for Kurdistan-focused IOCs. (CONTINUED - 931 WORDS)