Could Kurdistan Unrest Hit UK-listed Oil Firms?

The Kurds have awarded contracts to overseas oil companies since 2002 in an ambitious effort to hit one million barrels of oil per day within the next five years. However, its success was thrown into jeopardy late last year when a payment dispute led Kurdistan to halt oil exports to Baghdad, threatening to destroy the region's burgeoning industry.

The Kurdistan Regional Government and Iraqi authorities have since been gridlocked over the right to control the oil resources in Kurdistan, with Kurds believing it their entitlement to control their own resources while Baghdad argues all energy resources fall under the control of the national government.

James Hosie, equity analyst at RBC Capital Markets, says the situation still poses a huge questionmark for the industry.

"The outcome for those companies very much depends on how much say the Kurds get in the new government. The expectation is that the problem will get resolved one day but we have been waiting for a year to see a solution so the 'when' is still very much unknown."

But while uncertainty persists, it has done little to dampen feverish interest in those companies operating there, notably Gulf Keystone.

The company's shares have spiked this week following an operational update on Monday, with chief executive John Gerstenlauer saying he was "very encouraged" by recent log results and oil shows seen thus far in the group's Sheikh Adi-1 wells.

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