Page 5 - MEOG Week 43
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MEOG COMMENTARY MEOG
partner for incumbent operator Korea Gas Corp. Meanwhile, the average remuneration fee per
(KOGAS). barrel of non-heavy oil produced over an initial
threshold level is less than $6 per barrel. Long-
Cash concerns term service contracts (LTSCs) awarded to IOCs
With Iraq dependent on oil revenues for nearly during the first two bidding rounds feature per
the full government budget, the coronavirus barrel fees ranging from $1.15 (Lukoil at West
(COVID-19) pandemic has necessitated a signif- Qurna 2) to $5.50 (GazpromNeft at Badra).
icant short-term rethink. IOCs have been asked While these fees offer a comparatively meagre
to make significant production cuts – as much return for developers, Baghdad has still strug-
as 350,000 bpd. gled to pay, with the country’s net income per
At Iraq Petroleum, Jabbar said that payments barrel having been eroded by weak oil prices.
to international operators had been affected In June, Jabbar said that the federal govern-
by the downturn but said that the delays and ment was keen to cut costs at fields producing
compromises reached were “acceptable” for all heavy, sour crude grades to prioritise invest-
parties. ments in lower-cost assets with lighter, more
Iraq has struggled to pay IOCs for their work valuable output.
to develop oilfields, with their fees fixed and oil He alluded to the government’s flexible
prices having fluctuated wildly in recent years. approach in his conclusion: “Without welcom-
Average per barrel extraction fees in southern ing external funds we will not manage the devel-
Iraq, which is home to the majority of the coun- opment of the oil sector. We have daily meetings
try’s most productive assets, are $1-2 per barrel with the IOCs to facilitate their investment, we
excluding capex and $4-6 per barrel including believe in the partnership with the IOCs [and]
capex. This puts the region on a par with Saudi we believe in [a] win-win scenario with the
Arabia, and among the cheapest in the world. IOCs.”
Week 43 28•October•2020 www. NEWSBASE .com P5