This is an interview between James Stafford of OilPrice.com and Tony Hayward, former CEO of BP who was forced to resign as a consequence of the Deepwater Horizon oil spill.
James Stafford: On 29 September, a series of attacks targeting security forces in the Kurdish capital of Erbil killed six, sparking fears that the conflict in Syria maybe be spreading Kurdistan. Will this do anything to investor confidence in the region?
Tony Hayward: Kurdistan has been a beacon of stability and security in an unstable region, but sadly nowhere is immune to terrorism. As this is the first such incident in Kurdistan for six years, we have no reason to think that it will or should change investor perception.
James Stafford: Right now, Kurdistan is one of the hottest emerging venues out there, and the media is fascinated with the Kurds' success in forging oil and gas independence despite threats emanating from Baghdad. As the largest oil producer in Kurdistan, Genel naturally fields the majority of tricky questions related to these political dynamics. Is there anything that can stop Kurdistan from continuing to pursue oil independence at this point?
Tony Hayward: The impending completion of the pipeline is clearly a significant milestone for the oil industry in the Kurdistan Region of Iraq. The relationship between the KRI and Turkey is now very strong, and this has helped the Kurdistan Regional Government to take control of its own exports. The strength of this relationship has helped to give significant momentum to the Kurdistan oil and gas industry.
The signing of an Energy Framework Agreement between Turkey and the KRG in March 2013 was an important step, and we have seen clear evidence of its implementation - KRI crude oil is exported by truck to international markets via Turkey, and a Turkish state-backed energy company has also entered the upstream sector in the KRI, signing 6 PSCs with the KRG and partnering with Exxon in a number of licences. Finally, Turkey and the KRG have agreed a framework for the export of KRI gas to the Turkish gas market – we expect this Gas Sales Agreement to be signed by the end of the year.
Kurdistan has always had the resources, now it is building the infrastructure and has a significant market for its oil and gas. It is a good place to be.
James Stafford: How far along is the pipeline at present?
Tony Hayward: The pipeline from Taq Taq to Fishkabur is very close to completion – welding is now in sight of the pumping station. We expect the entire system, capable initially of exporting some 300,000 barrels a day, to be fully operational around the end of the year. This will be a major inflection point for the Kurdistan Region of Iraq and of course for Genel, allowing us to increase production and realise international prices for our exports.
James Stafford: What can we expect in terms of production once the new pipeline to Turkey comes on line, as planned for the fourth quarter?
Tony Hayward: We have not yet given guidance for production for 2014, but developments at Taq Taq and Tawke are on track to deliver 140,000 barrels a day of working interest production capacity by year end-2014.
James Stafford: What will Baghdad's response be?
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