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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
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