Heavy crude from the Shaikan field in the north of Iraq will no longer be injected into the export stream to the Turkish Mediterranean port of Ceyhan, the field's operator, Gulf Keystone, said Thursday.
No Shaikan crude will be injected into the semi-autonomous Kurdistan Region's Kirkuk-Ceyhan export pipeline at Fishkhabour from the end of February, until further notice by the ministry of natural resources, the company said in a statement. Gulf Keystone operates Shaikan, which it discovered in 2009, with a 75% working interest. The other partners are Hungary's MOL, with 20%, and Texas Keystone, with 5%.
The company was informed by the ministry that the new arrangement was required to maintain the overall crude oil export quality and is expected to be temporary.
Production will not be affected by the new arrangement, the company said, as its output will instead by exported via trucks to Turkey. Gulf Keystone has the capacity to produce as much as 40,000 b/d of crude, which would previously have been entirely exported by pipeline to Ceyhan.
The Kurdistan Regional Government will bear all the additional transportation costs, while continuing to pay $15 million each month for sales of the crude, Gulf Keystone said.
"This new export route arrangement confirms there is a market for Shaikan crude as a stand-alone product while also ensuring Gulf Keystone, and our partner MOL, remain financially and commercially neutral under this arrangement", CEO Jon Ferrier said in the statement.
The latest data released by the ministry showed that gross production in November from KRG-administered fields averaged 598,000 b/d, of which 588,000 b/d was exported and delivered to the Turkish Mediterranean port of Ceyhan.
January output from Shaikan averaged just 37,196 b/d from early production facilities, Gulf Keystone reported earlier this month while setting a gross production guidance for 2017 at 32,000-38,000 b/d.
It hopes to increase this to 55,000 b/d with new investment, but this will depend on establishing a regular payment cycle from the KRG, the company said Thursday.
The KRG has been hit by low oil prices, along with the cessation of previous federal budget transfers from Baghdad and the costs of fighting Islamic State militants in northern Iraq. It has struggled for the past three years to pay not only its international oil contractors but also most government staff.
