International Oil Companies Begin To Receive Payments From Kurdish Government

International oil companies are finally consistently receiving payments from the semiautonomous Kurdistan Regional Government (KRG). The region’s decimated economy had previously prevented the government from dishing out money to companies in exchange for their oil production. Some major conglomerates, frustrated by the lack of compensation, pulled their staff out of the region and closed up shop. Now, though, the Kurdish government is selling the black gold at a more consistent rate, and the international oil companies are reaping the rewards — a major turning point in what until now has been a questionable venture for companies.

Genel Energy, one of the biggest energy companies in the world and a dominant player in the Iraqi Kurdistan oil market, confirmed this week that its partners in one of its fields in the region received about $30 million in export payments from the KRG for oil exported through the Kurdistan region to Turkey. It was the fourth export payment by the KRG since September. Before that time, payments had stopped because the government said it was focused on spending its money fighting the Islamic State group, also known as ISIS. Gulf Keystone, Genel Energy and DNO produce hundreds of thousands of barrels a day, and according to a recent oil and gas report, the KRG owes them $1.7 billion for past exports.

The now frequent payments by the KRG to the international oil companies have pushed them to ramp up production.

There are several oil fields in Iraqi Kurdistan that are pumping oil for transport to Turkey, and more international companies have signed on to exploration blocks for production. The growing oil market in Iraqi Kurdistan has pushed the semiautonomous region into a new economic status — one that, though deprived in the past, could have a bright future if it continues to capitalize on oil investment.

The KRG began exporting crude in May 2014 using its independent pipeline, also known as the Kirkuk-Ceyhan Pipeline. Baghdad at one point could access it, but fighting and damage to the infrastructure shut the central government off. The Kurdish government, though, hoping to revive its economy via the oil trade, began exporting through its own independent pipeline that connects to the larger Kirkuk-Ceyhan Pipeline. There are also several smaller pipelines throughout Iraqi Kurdistan that connect to the big pipeline.

The oil sector, and all of its transactions, continue to be overseen by the KRG, led by President Masoud Barzani.

The announcement by Genel and other large international oil companies comes amid condemnation by Baghdad about the KRG exporting independently and allegations that the KRG is working with ISIS.

The terrorist group has major strongholds in eastern Syria and western Iraq despite the U.S.-led airstrikes that have killed several of its leaders. Those strongholds include Deir Ezzor and Raqqa in eastern Syria; Fallujah in Iraq’s Anbar Province; Mosul, the de facto headquarters of the militant group in Iraq; and parts of Iraqi Kurdistan such as Hawija. The group has access to major trade routes between the two countries, allowing it to continue to transport oil and other goods to fund its so-called caliphate, according to a report prepared by George Kiourktsoglou, a researcher at the University of Greenwich in the U.K.

Three weeks ago Russia displayed satellite images to show that ISIS was shipping its oil to Turkey for sale. The KRG government denies all claims that the Sunni militant group is transporting oil from the territory it controls through Iraqi Kurdistan to Turkey.

An official from the KRG, Kifah Mahmoud, said ISIS does not transport its oil through the Iraqi Kurdish region, adding that the satellite images Russia provided as evidence are not tankers belonging to the extremist group. He said that despite Russia's claims, his government is not turning a blind eye to the ISIS oil trade.

Since joining Genel Energy in 2011, according to Bloomberg, Tony Hayward, the company's chairman, pushed the Kurds to finish building a pipeline link to Turkey so he can find buyers outside the domestic market. Kar Group, a Kurdish contractor, said it has completed 23 percent of the first 48-mile (77 km) section of the line north to the border. Turkey hasn’t said publicly it will take the oil.

Correction: A previous version of this article stated that Genel was still trucking oil to Turkey. It is not. Trucked exports ceased when the pipeline became operational. Hayward started at Genel in 2011, not last year.