Bloomberg News

DNO Expects First Payment for Iraqi Oil Exports Before Year-End

November 02, 2012

DNO International ASA (DNO), the Norwegian oil producer which gets most of its output from Iraqi Kurdistan, said it expects the regional government to pay the company part of the money it’s owed for exports by the end of the year.

Iraq’s central authorities and the Kurdistan Regional Government came to an agreement over export payments on Sept. 13. Baghdad agreed to pay international companies 1 trillion Iraqi dinars ($858 million) and the KRG has received a first tranche of 650 billion dinars, DNO said on Oct. 8, adding that the company didn’t know when it would be paid or how much it would get.

“We hope that’ll come by the end of the year,” DNO Chairman Bijan Mossavar-Rahmani said by phone from New York yesterday. “I don’t expect we’ll have to wait longer than that for the first payment.”

DNO, which was the first foreign company to drill for oil in Iraq after the U.S.-led invasion in 2003, has been caught in a payment dispute between Kurdish authorities, with which the company signed its oil contracts, and the central government, which doesn’t recognize those deals.

DNO has been forced to sell much of its oil locally at lower prices than on global markets, and has only received two export payments since it first started operations in the region. The last payment received by DNO was in September last year.

DNO, which also produces oil in Oman and Yemen, got about 75 percent of its output from its Tawke field in northern Iraq in the second quarter. It’s now boosted production there to about 65,000 barrels a day, of which 60,000 are being sold into international markets, after exports resumed in August.

‘Greater Transparency’

Following the Sept. 13 deal, central and regional authorities agreed to boost production from Kurdistan to 250,000 barrels of oil a day in 2013.

“We’re optimistic that a process has started which will over time add greater transparency and predictability to the payments, on the basis of our existing contracts,” Mossavar- Rahmani said yesterday.

DNO owns 55 percent of Tawke, while Genel Energy Plc (GENL) has a 25 percent stake. The Norwegian company is seeking to raise capacity at the field to 100,000 barrels of oil a day by the end of the year and to 200,000 barrels by the end of 2014.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net


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