OSLO--DNO ASA (DNO.OS) said Thursday it has been given the green
light to independently seek international buyers for the crude it
produces in the Iraqi region of Kurdistan, potentially boosting its
prices if political and legal obstacles can be overcome.
"Everyone wants to buy oil at the right price. If the price is
right and with good quality, the buyers will line up from here to
Houston," DNO Executive Chairman Bijan Mossavar-Rahmani told The
Wall Street Journal in an interview.
The Oslo-listed oil producer, with operations in the Middle East
and North Africa, said the Kurdistan Regional Government, or KRG,
had given it permission to look for international buyers for its
oil, which can be shipped by pipeline from Kurdistan to the Turkish
port of Ceyhan, where tankers can carry it worldwide.
"It's very important," said Mr. Mossavar-Rahmani. "The situation
for us as a company [in Kurdistan] is normalizing, with time, more
and more."
Mr. Mossavar-Rahmani said the biggest obstacle is that Kurdistan
is landlocked and doesn't have its own ports, so it has to rely on
other countries for access to international markets. DNO could
potentially move out between 120,000 barrels a day and 130,000
barrels a day from Kurdistan, he added.
"The ability to sell our oil to whoever we think is the best
possible buyer, at the best possible price, is a right we have,
embedded in our contracts. And with normalization, that right will
be exercised," he said.
The KRG has been shipping several oil cargoes from Turkey
lately, but struggled to sell the crude amid threats from Baghdad
to punish buyers with legal action and exclusion from southern
Iraq's substantial oil sales. The U.S., which favors a unified
Iraq, has also warned buyers of legal risks.
"This doesn't solve those problems. It's worse for DNO to be in
dispute with the U.S. and the Iraqi government than it is for the
KRG. These obstacles must be overcome," said Arctic Securities
analyst Henrik Madsen. "Stable exports and payments aren't exactly
right around the corner, but this is a small step in the right
direction."
DNO acknowledged that there are still political and legal
challenges to exporting oil from Kurdistan, but said DNO would get
a significant premium by selling its Kurdish oil on international
markets. The company said it would typically sell Kurdish barrels
locally for $55 per barrel to $60 per barrel.
"We certainly know it will be a much higher price than into the
local market, probably in the order of $30 to $35 per barrel," Mr.
Mossavar-Rahmani said. "We will be a lot closer to international
prices."
The company said 2.2 million barrels of oil were exported to
Turkey in the second quarter from its main asset, the Tawke field
in Kurdistan, but no revenues had been recorded from those
volumes.
-Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
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