Oil & Gas Editorial: From Kurdistan With Love & The Land Of The Delta Blues

Tim Haïdar

Hopes of an uptick in the oil price took a knock this week as political skies brightened in two major hydrocarbons producing nations.

In battle-weary Iraq, oil exports are set to increase by five per cent in the coming days, after an agreement between the Northern Oil Company (NOC) and the Kurdistan Regional Government (KRG) was reached.

Since 2010, regular disputes over oil revenues and the ravages of warfare have meant a staccato supply from the autonomous region, which would have the 10th largest oil reserves in the world if it were an independent nation. Shipments from three oil fields in Kirkuk - Baba Gorgor, Jambour and Khabbaz – will resume and add 150,000 barrels to the country’s current oil output.

A continent and 8,000 kilometres away, hostilities seem to be winding down in the troubled Niger Delta. Extending over some 70,000 km2 of southern Nigeria, the Delta is home to 25 per cent of the country’s population and virtually all of its hydrocarbon resources.

Upwards of 90 per cent of the country’s export earnings and 70 per cent of government revenue is derived from the Nigerian oil sector, which has been harried by armed paramilitary groups since 2003. In the past week, one of then main belligerent groups, the Niger Delta Avengers (NDA), has called a ceasefire to enter into negotiations with the government of Muhammad Buhari. This will result in a boost for an oil industry that recent saw its lowest rates of production in 20 years after ExxonMobil (XOM) and Chevron (CVX) cut production in the wake of militia attacks.

These two coinciding lulls in enmity are about to collide with the fact that the Chinese city of Hangzhou is holding the G20 Summit in early September. The Chinese state has previously enacted short-term clean-air initiatives before a host of important international events, such as the Beijing Olympics in 2008 and 2014’s Asia-Pacific Economic Cooperation meeting. In these instances, global commodity prices have taken a sharp dive – the meeting of the world’s most powerful nations will likely have the same result.  

Absent drastic action from OPEC, September is shaping to be a month of tumbling prices. Who would have imagined that the promise of peace and clear skies would have lead to that?....