Nechirvan Barzani - An open letter to Kurdistan PM over GKP

Nechirvan Barzani - An open letter to Kurdistan Prime Minister over Gulf Keystone Petroleum — Kurdistan Prime Minister Nechirvan Barzani. Photo: AFP

Rizgar Khoshnaw | Exclusive to iKurd.net

Dear Mr. Prime Minister,

Greetings,

I would like to start by saying that I am being sincere when trying to help my people by exposing some possible “funny” business transactions and dealings in Kurdistan and I hope that you would consider my advice.

In the past few weeks, I have literally read thousands of pages related to oil issues/contracts (lawsuits, PSC/addendums/mergers and acquisitions…etc.) and oil companies activities, financials and their balance sheet and I have gained great knowledge about what is going on in this industry.

After reading so much material, I have discovered/learned some very interesting, and disturbing, practices that many foreign oil companies operating in Kurdistan are involved in. It seems to me that no one within the Kurdistan Regional Government (KRG) is noticing and asking questions about what oil companies are doing and how they come up with their financial figures.

Of course I do not expect the newly appointed Finance Minister, Mr. Rebaz Hamlan, to understand anything that I am talking about here. I do not blames him as he is very inexperienced and does not have the proper education to be entrusted with such huge responsibility. Furthermore, he does not speak a word of English ( I met with him for more than an hour during my last trip to Sulaimani 3 months ago) and all these contracts are written in English.

If I was a decision maker, I would remove him immediately and replace him with someone, with experience and older, that understands international finance so he can help your government succeed in this field. At a very young age and no experience at all, you can not expect him to succeed in this highly visible and important ministry.

I do not think I need to prove my self to you when it comes to my ability to investigate/research, as I have done plenty of that, any issues that is related to finance and economics once I put my mind to it. When we met the first time 18 years ago and I began to work/research the oil-for-food program and I promised you that I will find financial corruption and stop it and I did just that.

You have known me since then (we met more than a dozen times) and you know that I am capable of finding the truth and expose the dishonest and the wrongdoers. Having said that, I hope you will take my advice and act on what I am about to suggest in this letter.

In the past few months, I have been reading many news articles about foreign oil companies filing lawsuits and complaining about the KRG and I decided to research this subject and see what is going on and who is telling the truth and who is misleading the public. I wanted to see if the blame falls on the KRG or not. To my surprise, this time I do NOT put the blame on the KRG, but the oil companies instead!

I say that after reading some of the balance sheet and the financials of these oil companies. I will use only one example, even thought there are many more, in this letter and let you decide what to do. At the same time, I honestly think you have some corrupt and unqualified people working with the KRG and I would hope you will address this issue and act on it. I believe the time has come where a good “shake up” of the oil ministry is needed.

The oil company example that I am referring to is: Gulf Keystone Petroleum– a Bahamas Listed company.

This company, Gulf Keystone Petroleum (GKP) has interest in four different blocks in Kurdistan. They are a public company and therefore, they must have their financial known/open to everyone and anyone can view their activities and the balance sheet. I say that now so you will know every number/figure that I am using here came out of the “Year end” financial of the company that is available to all. I did not “cook” these numbers/figures as they came directly from their own web sites.

What I found out about GKP, according to them, is that they have most of their work force located in Kurdistan. They list a total of 600 Employees, as of year 2015, working for the entire company and they have their office on the third floor of one building in Erbil. They categorize their employees in this manner: National staff, expats and independent contractors. This means that their labor cost (what the company pays in salary for the entire staff of the company) is all concentrated on Kurdistan employees.

And, what is very interesting, is that with an office that manages 600 Employees in Kurdistan, they have ONE office phone number for contacts and this is a cell phone number- 964 750 755 xxxx!! I am assuming that whoever answers this cell phone number takes home when they are done with work at 2:00 pm! This only proves that most, if not all, of the 600 Employees are laborers, guards and lower level positions that are paid very low wages, unlike the top company executives.

What GKP is doing, by paying exuberant salaries and bounces to their top guys, is not illegal, it is legal, but it is taken advantage of the KRG since ALL company expense comes out of Kurdish oil! And, from what I am seeing, the KRG never ask questions and to be honest, I do not think some KRG personnel even knows this at all and know where to look for information and how to interpret them.

According to GKP’s year end financial, they have listed a total amount paid in “salary” to all employees for year end 2013 (see on pages 100-101 of their year end reporting balance sheet) as follows:

	Algeria	*Kurdistan*	*United Kingdom*	Corporate	Elimination	Total
31 December 2012
	$’000	$’000	$’000	$’000	$’000	$’000
Revenue
Oil sales	–	32,190	–	–	–	32,190
Inter-segment sales	–	–	16,132	–	(16,132)	–
Total revenue	–	32,190	16,132	–	(16,132)	32,190

Cost of sales
Production costs	–	(32,190)	–	–	–	(32,190)
Gross profit	–	–	16,132	–	(16,132)	–

General and administrative expenses
Allocated general and administrative expenses	(4,946)	(1,577)	(16,862)	(75,697)	17,678	(81,404)

We see that total revenue is only $32 Million for the whole year while the UK two offices employees, in salary payments, received $75.6 Million and $16.8 Million in salaries alone! This “corporate” office that is located in London received the biggest share which is $75,697,000 ! I wonder how many people they have in that one office in London to warrant a $75.6 Million in salary payments for just one year? This $75.6 Million figure makes absolutely no sense, unless they literally have thousands of employees in that one office in London!!

While most of the 600 Employees they have are located it in Kurdistan and yet for the entire year those miserable 600 employees, most likely all Kurds, have received a total of only $1.5 Million for the entire year. Some thing does not seem right here!

Furthermore, why do they have two different offices and two different expenses in the same city, which is in London?? A “corporate” office as they mentioned below, is usually the main office and only a hand full of people are located in such office. Then how will that office have a salary expense of $75.6 Million??

The huge salaries that these top executives are paying themselves comes mostly from the KRG and the investors that have no idea what is going on. Speaking of investors, this company stock seem to be declining in value and to a dangerous level. As a matter of fact, the stock, according to Gulf Keystone own web site, show a decline of over 90% from its high ( from 411 GBp in year 2012 to 40 GBp today’s close price) in just three years time and while Mr. Todd Kozel, the CEO, has received a ” bonus” of $13,582,000, and a total payout package of over $20.8 Million , see below, in just one year and all while the inventors are losing their shirts!

Single total figure of remuneration $’000s

Furthermore, Mr. Todd Kozel has cashed out, in this period, about $8 Million in stock option (sold 3 million shares) what does this say about the company’s if the CEO is selling his stock of the company that he is controlling/running? Since he sold his shares, the price of the company stock is continuously dropping in value. He also received a “bonus” of $ 13,582,000 while the company lost $31 Million at the same time!!

There is nothing illegal about such move, but I feel that it is very unethical and unjust to have the top guys at the company make so much while the investors, the local employees and the KRG are not benefiting.

Mr. Prime Minister, I truly hope that you would not only look into this company’s activities, but other oil companies operating in Kurdistan. May be by doing so, this might stop the international lawsuits that some foreign oil companies have brought up against the KRG. Do not believe every financial figure and expense they show to be the truth and accept it as 100% accurate! All bills must be thoroughly investigated and studied prior to paying it with Kurdish oil.

Respectfully,

Rizgar Khoshnaw
Mclean, VA
USA

Rizgar Xoshnaw, a senior Kurdish writer based in Washington, a longtime contributing writer and columnist for iKurd.net.

The opinions are those of the writer and do not necessarily represent the views of iKurd.net or its editors.