Guess Who Else Produces $1 Per Barrel Oil? The Kurds
The Kurdish government may be in some serious financial trouble due to low oil prices, but the region is also home to companies that can take oil out of the ground for as low as $1 a barrel.
“The lowest cost of production within the European E&P universe I look at is in onshore Kurdistan,” James Hosie, an analyst at Barclays, told Bloomberg. “It’s conventional wells, onshore. Those wells produce at very high rates.”
Despite the fall in oil prices and the rise of Islamic State, Kurdistan has two oil companies that managed to keep costs down pumping out incredibly cheap-to-produce oil. Genel Energy, for example, has reported keeping production expenses down to $1 per barrel of oil produced.
“Genel does stand out from the majority of its peers,” Hosie said. “It has very low-cost operations in Kurdistan.”
Genel, however, has seen its share price drop 80 percent in the last year, according to Bloomberg, but analysts at Barclays says the company is poised to survive low oil prices.
But the biggest problem facing Kurdistan’s oil exporting industry is government. The Kurdish regional government is responsible for paying these companies for the oil they produce — after Iraq’s central government gets its cut.
Currently, the Kurdish regional government owes exporters $1.7 billion for past oil sales, according to Bloomberg.
Kurdistan isn’t the only place boasting $1 per barrel oil. Iran has also claimed its oil production costs are as low as $1 to $1.50 per barrel, and some have argued its low production costs will only add to an already faltering oil market.
But that’s only part of the story. Iran actually needs oil prices to be substantially higher than they are now to fund its government — even if its production costs are about $1 per barrel.
Iran’s oil minister says the cost producing a barrel of oil is generally around $5 a barrel, and it can break even at $10 per barrel. Data compiled by Reuters found Iran needs oil to sell for $136 per barrel to finance government operations.
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