By Sharmila Devi

ERBIL, Kurdistan Region - Oil companies focused on production in Iraqi Kurdistan saw their share prices rise in Europe on Monday amid speculation that Erbil was on the verge of a deal to export up to 10 per cent of Turkey’s gas needs.

The companies were also benefiting from the Kurdistan Regional Government (KRG) announcement last Friday that it would make an initial payment of around $75 million to oil producers and that it intended to make regular payments in the future.

Ankara and Erbil are reported to have agreed a package of deals including gas exports.

Under the agreement, the KRG will sell gas to Turkey at the low price of $6-$7 per 1,000 cubic feet (mcf), which is “attractive for Turkey given current purchase prices of as much as $12-$14 mcf,” said an analysts’ note written by Bank of America Merrill Lynch (BoAML). It was issued last week but widely reported in European newspapers on Monday.

London-listed Genel Energy, headed by former BP chief Tony Hayward, was seen as benefiting from the Kurdish-Turkish gas deal because it could enter into a gas offtake agreement, in which it would agree to sell a portion of its future production in the region.

Genel, which saw its share price rise by 12 per cent at one point on Monday, has almost 40 per cent of its assets in Kurdistan in the form of the Miran and Bina Bawi gas fields.

The company refused to comment on the BoAML note. Analysts expect it to disclose more details about its gas business when it releases a trading update on Thursday.

Investment bank UBS upgraded its recommendation for Genel in the wake of the KRG’s payments announcement from “neutral” to “buy”, saying that “oil and money [are] both flowing” in Kurdistan.

The bank said it had worried that a “significant strain” on KRG finances posed by humanitarian and defence issues could have resulted in further delay of payments.

“The payments loop has closed quicker than expected,” the bank said. “Record production levels confirm contractors are making good operational progress on the ground, notwithstanding the political and security situation in the wider region.”

The KRG has exported oil valued at $2.87 billion in cash and bartered goods so far this year via trucks and a pipeline. Under their production-sharing agreements, companies had barely received any payments until the $75 million announced on Friday.

Gulf Keystone had said publicly it would stop infrastructure investment. After the payments announcement, John Gerstenlauer, the company’s chief executive, said: “With a regular payment cycle, we look forward to moving forward with our stated ramp up in production from our Shaikan field [in Kurdistan].”

Gulf Keystone shares rose by around 9 per cent. DNO, a Norwegian oil company, saw its share price jump by about 13 per cent.

Rudaw