Headlines
• Kurdistan – An Example to All Governments: In that sense, it is perhaps a lesson for us all to heed, especially when we look at our own politicians, who with far more at their disposal seem to achieve far less. While the risks associated with operating in Kurdistan are higher than compared with those in Europe or North America, it is substantially lower than in wider Iraq, and in our opinion a better risk option than operating in places such as Venezuela, Ecuador, Bolivia or Argentina.
• Gulf Keystone Petroleum (LON:GKP – 15p) – KRG Payments – Good for GKP, Good for Kurdistan: We believe that GKP's current valuation is undemanding in relation to its asset size, which is exacerbated by the fact that the risks associated with development in Kurdistan, which although elevated, isn't as high as the market believes. While there are short term risks, GKP gains increasing favour the longer our time horizon becomes.
Comment
Kurdistan – An Example to All Governments
Today's news that Kurdistan has made more payments to international operators is good news, not just for the operators, but for the fledgling state of Kurdistan also, and for a number of reasons too.
First and foremost it separates itself clearly from the rest of Iraq, in that Baghdad has become a joke in the international oil community for being an oil province governed by ministers and officials with oft questionable approach to rebuilding its oil industry, focusing mostly on self-aggrandisement and not with providing much needed revenue and jobs, which in itself create stability and security.
Secondly, it proves month after month that terrorism will not work in the long run, demonstrating clearly that despite all the ravages that Daesh try to inflict on the people of Kurdistan, that they resist and continue to do what is best in the face of such people, which is to go about their lives as normal, even flourish.
While it is easy to criticise the liberation of Iraq in 2003, and blame the allies for not having a plan, which is undoubtedly true to some extent, but what is becoming increasingly clear is that no matter the extent of the plan that had been developed or devised ahead of the 2003 military action, Iraq would be exactly where it is now, and the reason for that is the people in charge. At some point you have to look at the evidence before you, and acknowledge (even if begrudgingly) that the reason why the Kurdistan government has become the instrument to heal and grow Kurdistan is that by and large the KRG key positions are just filled with better a better calibre of people dedicated to growing the nation than they are in Iraq.
Nowhere is this better articulated than with the approach to the oil industry, where collaboration and risk sharing is enshrined in the approach the KRG has taken. Given all of the moaning and groaning about perceived slights that happens in the developed world about the oil industry, at least here in Kurdistan there is a palpable and tangible sense that people see the contribution that the industry oil makes to society, whether it is in the form of heat, power or fuel, or in the sense of taxes, jobs, investment and much needed funds to pay for the infrastructure in Kurdistan, that is being used so effectively to turn the tide against Daesh.
In that sense, it is perhaps a lesson for us all to heed, especially when we look at our own politicians, who with far more at their disposal seem to achieve far less. While the risks associated with operating in Kurdistan are higher than compared with those in Europe or North America, it is substantially lower than in wider Iraq, and in our opinion a better risk option than operating in places such as Venezuela, Ecuador, Bolivia or Argentina.
News Items
Gulf Keystone Petroleum (LON:GKP – 15p) – KRG Payments – Good for GKP, Good for Kurdistan
Today's news that the KRG has made a payment to GKP is good news, mostly for the Company, but Kurdistan too. Cash flow for the Company is good news in the most obvious way possible, in that it provides the Company with the means to continue to operate, make its interest payments and keep the operations ticking over. We believe that Kurdistan is a better place to operate that mainland Iraq, and we reflect that in our risking approach.
We believe that GKP's current valuation is undemanding in relation to its asset size, which is exacerbated by the fact that the risks associated with development in Kurdistan, which although elevated, isn't as high as the market believes. While there are short term risks, GKP gains increasing favour the longer our time horizon becomes.