Bloomberg/London

Oil producers in Iraqi Kurdistan are unrelenting in their goal to boost output even after the collapse in international prices to below $50 a barrel.
Genel Energy, headed by former BP chief Tony Hayward, is sticking with plans to increase capacity 74% to 400,000 bpd this year at its Kurdish Taq Taq and Tawke fields. Norway’s DNO owns 55% of Tawke.
“The operational side of the business remains very resilient and very strong and we maintain our production increase targets,” Genel chief financial officer Julian Metherell said by phone from London. “Even at $50 a barrel we are looking at a revenue of $350mn to $400mn.”
Gulf Keystone Petroleum Ltd, another oil producer in the semi-autonomous region, last month raised output by 60% to 40,000 bpd and sees 70,000 bpd in 2017. The company will keep increasing its output and seek to cut transportation costs by about 60%, chief executive officer John Gerstenlauer said in a phone interview.
Oil prices dropped below $50 a barrel this month from $115 in June as the US pumped crude at the fastest rate in more than three decades and the Organisation of Petroleum Exporting Countries resisted calls to cut output.
The UAE and Qatar estimate surplus crude of 2mn bpd.
Prices may be near a bottom and should start to rise in “a few months,” said Gerstenlauer, who has worked in the industry for 38 years and seen three or four similar routs in the market.
“First the oil price finds a bottom, which I think we might be there, then the price bounces along the bottom for a few months,” he said. “Because of low energy costs, the economy starts to pick up and the price starts to increase. If we are not at the bottom right now, we’re close to it.”
Iraq is pumping at a record pace and will continue to boost exports this year amid a supply glut that’s pushed prices down, Oil Minister Adel Abdul Mahdi said on January 19. The nation, holder of the fifth-largest crude reserves, is rebuilding its energy industry after decades of wars and economic sanctions.
“Because of the new challenges, especially the price of oil, Iraq has to try its best to raise its oil production and exports,” Deputy Prime Minister Rowsch Nuri Shaways said last Wednesday at the World Economic Forum in Davos, Switzerland.
An agreement in December resolved months of feuding between Iraq’s Kurdish region and the central government in Baghdad over who had the right to export crude from the semi-autonomous area.
The deal allowed for as much as 550,000 bpd to be shipped through Turkey from northern Iraq, including 250,000 a day from the Kurdish region. The central government previously threatened legal action against buyers of crude from Kurdistan.
Genel’s share of output from its two oilfields in the area rose 58% to 69,000 bpd in 2014 and it targets 90,000 to 100,000 bpd this year, it said on Wednesday.
“Genel is exposed to some of the lowest cost rocks globally with a big resource base that should be the envy of many,” Thomas Adolff, an analyst at Credit Suisse Group, said in a note to investors. “Within the Kurdish Region of Iraq, it has the best asset base, and there is positive above-ground momentum politically and operationally.” Operating expenditure is about $2 to $3 a barrel and “cash break-even” is $30 to $35 a barrel, Genel’s Metherell said.
Oil prices may yet fall further as members of Opec, which includes Iraq, resolve to keep pumping crude and US supply rises, according to Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.
Prices have yet to fall as much as in 2008, when benchmark Brent crude reached $36.20 in the wake of the financial crisis.
Genel is “well positioned to continue to grow even in a period of sustained low oil prices,” CEO Hayward said on Wednesday in a statement.