As it strives to become the world-class enabler of shareholder value, Genel Energy is committed to socially responsible, low-cost production of oil and gas. The company is currently taking steps to protect its operations after proposals to discontinue its Bina Bawi and Miran production sharing contracts (PSCs).
The company received the notice from the Ministry of Natural Resources stating its intentions to terminate the contracts, which has forced Genel to submit formal disputes to the Kurdistan Regional Government (KRG) to protect the operations.
Genel’s Oil and Gas Production in Kurdistan
Genel’s portfolio is centred around operations in the Kurdistan Region of Iraq. In 2020, the company recorded a total output of 32,000 barrels of oil per day (BOPD) and holds reserves of 117 million barrels of oil or natural gas. The company’s low-cost oil and gas production provides a rapid return on investment, creating a lot of value for its shareholders.
Maintaining Working Relationships and Company Value
Following the impending termination of the company’s operations, it is taking the necessary steps to ensure projects can continue while also appealing for compensation.
‘Genel believes that the KRG has no grounds for issuing its notices of intention to terminate’, the company said in a stock statement. ‘Genel wishes to continue operations under the PSCs and to work with the KRG on the development of these fields. However, Genel will take steps to protect its rights under the PSCs and, if necessary, seek compensation, including for its material investment’.
‘As a first step, Genel intends to issue [a] notice of [the] dispute to the KRG under each PSC, contesting the right of the KRG to issue any such termination notice and, in doing so, trigger an obligation to hold good faith negotiations to resolve this matter promptly and without the need for either party to refer the matter to international arbitration’.
Genel has also highlighted it has had difficulty communicating with the KRG to obtain permissions for the new development of the assets, after preparing the required proposals and submitting them to the KRG in line with the terms and conditions that were agreed in 2019.
‘Genel had earlier reached a commercial understanding with the KRG in September 2019 to develop the fields using a staged and integrated oil and gas development concept. [...] In the course of those negotiations leading to updated terms of the parties' agreements, the KRG confirmed to Genel that it would not serve notice of intention to terminate the PSCs while these negotiations remain ongoing’.