Iraq’s semi-autonomous Kurdistan region will postpone payments for oil sales made between November 2019 and February 2020 while committing to paying regularly for the following months, London-based Genel Energy said on Friday.
The Kurdistan Regional Government (KRG) pays international oil firms, including Genel and Norway’s DNO, to pump oil on its territory.
“Payment of invoices relating to oil sales from November 2019 to February 2020 will be deferred, interest free, for at least nine months,” Genel said in a statement, citing a message from the KRG.
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“Should the oil price recover to about $50 a barrel, a payment program to recover the deferred invoices will be put in place,” it added. It did not say how much it stood to lose as a result of the deferments.
The price of crude has collapsed this year amid the COVID-19 outbreak, with Brent benchmark down some 60 percent year-to-date to around $28 per barrel on Friday.
The KRG has however committed to settling further monthly sales invoices by the fifteenth day of the following month and Genel said it has already received the payment for March.
Genel said it welcomed the KRG’s steps to provide clarity and predictability for overdue and future payments and was seeking to clarify the repayment mechanism.
In a research note analysts at DNB bank said the payments would help the short-term liquidity of Genel and DNO, but payments remained challenging as the KRG needed an oil price of between $50 and $60 per barrel to balance its budget.
Analysts at RBC said the deferred payments amounted to around $300 million, with DNO accounting for three-quarters and Genel the rest.
DNO was not immediately available for comment.
The Kurds, who control Iraq’s only northern pipeline, have exported oil independently since 2013. Iraq on Tuesday said the Kurdistan region was included in oil production cuts as part of an agreement between OPEC, Russia and other producers.