Norwegian oil and gas company DNO has ramped up investments in Iraqi Kurdistan, increasing production despite the ongoing Iraq-Turkey pipeline shutdown. In the second quarter of 2024, the company reported a 5% production increase from its Tawke license, reaching 83,500 barrels of oil equivalent per day. With profits of $35 million, DNO is pushing forward by drilling new wells and selling oil locally while navigating export challenges due to the pipeline’s closure.
Increased Spending to Boost Production in Kurdistan
DNO increased its investments in the Kurdistan Region during the second quarter of 2024 to optimize production from existing wells. The flagship Tawke license, in which DNO holds a 75% stake, has seen a 5% rise in production compared to the previous quarter. Gross output from the Tawke and Peshkabir fields averaged 83,500 barrels of oil equivalent per day (boepd) during the first half of the third quarter, reflecting a steady increase in output throughout the year.
To address the natural decline of its wells, DNO is preparing to mobilize a new rig, marking the first drilling since early 2023. In addition, the company has launched a 72-day testing program for its B-3 well on the Baeshiqa license, in which DNO holds a 64% stake.
Iraq-Turkey Pipeline Shutdown and Local Sales
The shutdown of the Iraq-Turkey pipeline since March 2023 has complicated oil exports from the Kurdistan Region. A Paris-based arbitration court ruled that Ankara had breached a 1973 pipeline agreement by allowing Erbil to independently export oil starting in 2014. Consequently, oil exports through the pipeline have been halted, and DNO has had to rely on selling oil to local traders at a reduced price of $30 per barrel. Despite these challenges, DNO generated $137 million in total revenue during the second quarter.
DNO’s Executive Chairman Bijan Mossavar-Rahmani expressed the company’s determination to overcome the difficulties posed by the pipeline closure. He stated, “We are not realizing full value for our Kurdistan barrels with the shutdown of the Iraq-Turkey export pipeline… Until the knot is cut, we will compensate by spending more to produce more and by requiring payments in advance to our international bank accounts.”
Financial Performance and Production Growth
DNO reported significant financial results in the second quarter of 2024, doubling its net profit to $35 million. The company’s net production rose 6% to 79,400 boepd, with 59,800 boepd from Kurdistan, 16,300 boepd from the North Sea, and 3,300 boepd from West Africa. The company’s strong financial performance is further supported by increased spending to maintain and boost production.
In the Tawke and Peshkabir fields, DNO continues to increase production despite the export challenges, with the fields producing an average of 83,500 boepd during the first half of the third quarter.
Expanding Operations and Future Prospects
Looking forward, DNO is optimistic about its operations in Kurdistan and beyond. The company plans to drill its first new well on the Tawke license since 2023, further expanding its output capacity. In addition to its activities in Kurdistan, DNO is also advancing operations in the North Sea, where it has made a gas condensate discovery.
With the company’s financial health and a 25% dividend increase, DNO remains well-positioned for growth, despite the geopolitical and logistical hurdles in its key markets.
