Iraq has made the biggest change in the way it deals with international oil companies in decades, by relying onprofit sharingin contracts for developing oil and gas production projects and developing reserves.
According to the Specialized Energy Platform (based in Washington), the 13 new contracts signed by the Ministry of Oil yesterday, Wednesday, August 14 (2024), relied on a profit-sharing model instead of technical service conditions.
Iraq has made the biggest change in decades in the way it deals with international oil companies in an attempt to attract more money to the oil and gas sector in order to develop its huge reserves.
Baghdad signed preliminary agreements for 13 blocks and oil and gas exploration fields, which a number of companies won in a May licensing round, giving the companies profit-sharing contracts that include more attractive terms than those for technical services.
Details of new contracts
Profit-sharing models provide a share of revenue after deducting royalties and cost recovery expenses, an oil ministry official told Reuters.
Iraq adopted profit-sharing contracts for the May licensing round instead of formulating deals based on prior technical service terms to try to attract more investments.
The recent oil licensing rounds aimed to grant licenses to about 29 projects in 12 Iraqi governorates, to international and local companies, as 22 companies competed to develop the proposed fields and blocks.
Traditional technical services contracts pay a fixed price for each barrel of oil produced after offsetting costs, and are less lucrative for foreign investors than production sharing terms.
Last year, Iraq struck a $27 billion oil deal with France’s Total Energy by offering a faster, lower-risk recovery through greater revenue sharing, a model it said at the time could be replicated to attract more foreign companies.
Oil investments in Iraq
Many major oil companies have complained that the terms of traditional oil service contracts mean they cannot benefit from higher oil prices, and lose out when production costs rise.
Iraq is the second largest producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia, and currently has the capacity to produce approximately 5 million barrels per day.
Foreign investment in the oil sector in Iraq has declined since the wave of deals that followed the US invasion of the country more than a decade ago, which contributed to the stagnation of oil production.
Last year’s Total deal was widely praised as a major achievement in attracting major Western companies to Baghdad.
Chinese companies dominated the bidding round last May, which offered 29 oil and gas projects, winning 10 of the oil and gas blocks and fields put up for auction.
The competition activities for the licensing rounds in Iraq (the fifth supplementary and the sixth) continued for 3 days during last May, as 7 Chinese companies acquired the license to develop a number of Iraqi oil projects, while no licenses were granted to any of the other foreign or Arab companies applying, other than… Local companies.
The Iraqi Ministry of Oil said that the agreements would increase production by 750,000 barrels of crude and 850 million standard cubic feet of gas.
Through the licensing round, Iraq seeks to increase the production of natural gas, which it wants to use to operate power plants that rely heavily on gas imported from Iran.
Oil Minister Hayan Abdul Ghani said that increasing gas production may allow more flexibility to supply gas to electric power stations. https://www.alsumaria.tv/news/economy/497157/تقاسم-الأرباح-العراق-يجري-أكبر-تغيير-بطريقة-تعامله-مع-شركات-النفط-منذ
Minister Of Oil: We Stopped Burning 65% Of The Gas
Deputy Prime Minister for Energy Affairs and Oil Minister Hayan Abdul Ghani confirmed today, Thursday, the contracting of all gas fields and the cessation of burning 65% of its quantities, while pointing out that
Iraqi gas is distinguished globally by containing ethane used in petrochemical industries.
Abdul Ghani told the official agency and his follower, “Al-Ma’louma”, that
“there are no difficulties or technical problems in the process of developing exploratory fields and patches within the fifth complementary and sixth licensing rounds, as all the information needed by the companies that were signed with is available in an information bag that includes many standards and information.
” Through which companies can submit their prices, in addition to that there are deadlines set for companies to submit these offers, as the process took more than six months to study this information.” He added,
“During this period, the Ministry of Oil was answering all inquiries submitted by these companies, with the aim of facilitating the process of submitting offers and preparing them at the required level.” He pointed out,
“The expected production rates for the patches are estimated at 700 to 750 thousand barrels per day, in addition to investing 850 mqmq per day of gas, but
it is hoped that the real levels will be higher than the speculative levels,” noting,
“There are fields that are now producing large quantities.” From the gas that is used to the national grid that equips the various power stations, the percentage of gas investment has reached more than 65 percent, while the quantities that are currently burned and have not been invested so far do not exceed 35 percent of the total gas quantities.” He continued,
“All gas fields have been contracted to invest and employ them through various contracts,” pointing out,
“There are contracts in Dhi Qar Governorate that have been signed and are now being implemented in contract with (the American Baker Hughes Company), where the completion rate has reached more than 65 percent.” %, and there are contracts signed with the French company Total to invest gas from five oil fields, which are (Majnoon field, West Qurna 2 field, Luhais field, Tuba field, and Artawi field), and through these contracts, all the gas that is currently being burned will be invested.” He stressed,
“The Ministry of Oil plans to completely stop burning gas at the beginning of 2028, and use all the gas produced to generate electric power and other industries,” adding that
“Iraqi gas is distinguished internationally by a specification that differs from other types of gas, as it contains a high percentage of the ethane compound.” Which can be employed and used in the petrochemical industries.” Ended 25 n
https://almaalomah.me/news/73464/economy/وزير-النفط:-أوقفنا-حرق-65-من-الغاز
Financial Advisor To The Prime Minister: Iraq’s Total External Debt Does Not Exceed $9 Billion
Baghdad Times Financial Advisor to the Prime Minister, Mazhar Muhammad Salih:
Iraq’s total external debt does not exceed $9 billion, and
the general budget provides annual allocations to tighten it and its benefits under the heading of debt amortization.
Saleh: Iraq has not recorded any default on its debts for 20 years, which gave it a stable credit rating.
https://baghdad-times.net/مستشار-رئيس-الوزراء-المالي-مجموع-الدي/
Internal debt increased by 11%… Iraq borrows 10 trillion dinars
The head of the “Future Iraq”Foundation for Economic Studies and Consultations, Manar Al-Obaidi, revealed that theIraqi government borrowed 10 trillion dinars during the past 6 months, which led to an increase in internal debt by 11%.
Al-Obaidi said in a blog post on Facebook followed by Iraq Observer,
“In just 6 months, the government borrowed 10 trillion dinars, and the following came:
3 trillion dinars from government banks,
4 trillion dinars from commercial banks, and
3 trillion dinars from selling bonds,”
pointing out that this Borrowing increased the internal debt by 11% within six months.” He added,
“The total borrowing from these parties amounted to 21 trillion dinars, representing
17% of the volume of commercial and government bank deposits and representing
10% of the banks’ assets, in addition to the obligations of the Ministry of Finance to the Central Bank, amounting to 41 trillion dinars, representing
21% of the assets of the Central Bank.”
“In other words, approximately 15% of the financial sector’s funds exist as debts with the central government.”
It would have been better to invest this money in an investment fund that would provide revenues for the state that would increase the volume of non-oil revenues and would be a guarantee for the future of generations, according to Al-Obaidi.https://observeriraq.net/الدين-الداخلي-ازداد-11-العراق-يقترض-10-ترل/
