Tony Hayward moves into Kurdistan with Genel Energy as tensions rise

Vallares, Tony Hayward and Nathaniel Rothschild’s oil investment vehicle, will issue its Genel prospectus at lunchtime on Friday – three days sooner than expected.

By Garry White
10:16PM GMT 17 Nov 2011

The move means the shares can start trading in London on Monday morning, completing the reversal of private Turkish group Genel Enerji into the cash shell. Vallares will then be renamed Genel Energy.

Genel’s main asset is the Taq Taq oil field in Kurdistan, Northern Iraq, which is currently producing 90,000 barrels of oil per day (bpd). However, the reversal comes amid escalating tensions over revenues sharing with the Iraqi government.

The semi-autonomous Kurdistan Regional Government (KRG) inked a deal with Exxon Mobil last week – before a deal on revenues sharing has been agreed with the Iraqi central government. Vallares has insisted that its agreements with the KRG over Taq Taq and other blocks in the region were still valid.

Government ministers have publicly committed to block the Exxon deal, calling the agreement “unconstitutional” and a “violation of the law.”

Reports from Iraq suggest that Royal Dutch Shell has now backed away from discussions with the KRG, fearing the power struggle in Northern Iraq over revenues could jeopardise its lucrative contracts in the south. Shell declined to comment.

Mr Hayward, who was forced to leave his position as chief executive of BP following the disastrous Gulf of Mexico oil spill, believes he can extract oil from the Taq Taq field in Kurdistan for just $4 a barrel.

However, the Iraqi central government is only allowing limited exports of 100,000 bpd from the entire region – below the 150,000 bpd Genel plans to produce next year.

There were some signs of compromise last week, however, as Barham Ahmad Salih, the KRG prime minister, said that the Iraqi government had agreed to increase this quota to 175,000 bpd in 2012.

Mr Hayward refused to comment on the political troubles. “It is not for me to enter the political debate,” he told The Daily Telegraph in Erbil earlier this week. However, he thinks Exxon’s interest in Kurdistan is positive for the region. “It validates everything that is going on here,” he said.

Ashti Hawrami, the Kurdish Regional Government’s natural resources minister, and Hussain al-Shahristani, Iraq’s deputy prime minister, met on Thursday to try to solve the spat over the Exxon Mobil deal.

“Mr al-Shahristani is playing hardball,” Malcolm Graham-Wood, an oil analyst at VSA Capital, told The Daily Telegraph. Mr Graham-Wood believes that an agreement will eventually be reached between the two governments and is very positive on the prospects for Kurdistan. “It’s one of the few places left with massive frontier acreage.”

Genel Energy will have a $2bn (£1.3bn) war chest, which it plans to use for acquisitions, in and outside of Kurdistan.

“Libya is a place that would consider looking at, as well as the broader Middle East and North Africa region,” Mr Hayward said.

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