Page 7 - MEOG Annual Review 2021

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monthly exports for that purpose, so that Iraq deficit of around $3bn.
will be more than 100% sure it can meet its obli- It is worth noting that Jabbar has repeatedly
gations under such deals.” reiterated Iraq’s commitment to the cuts, though
compliance has continued to be poor.
Regional wrangling Exports increased significantly during the
Meanwhile, Jabbar said that while talks with the first half of February, and while only indicative
Kurdistan Regional Government (KRG) about of production, Bloomberg has estimated that
Erbil’s rights to its share of Federal spending the pace of exports suggests that output for the
remain ongoing despite the draft Iraqi budget full month could exceed the self-imposed quota
having been put forward in December, he is opti- of 3.6mn bpd or even the OPEC+ mandated
mistic about a deal being reached. 3.857mn bpd level.
As with previous budgets, the KRG should It quoted an industry official who said on con-
receive 12.67% of the total budget equating to dition of anonymity that Baghdad had intended
around $13bn, but there remain issues related to to increase exports during the first half of the
budget payments to Erbil being contingent on it month in anticipation that inclement weather
handing over 250,000 barrels per day (bpd) of could rein them in later in February.
crude to SOMO and giving the revenues to the Jabbar’s deputy Karim Hattab was quoted
central treasury. recently by the Iraqi News Agency as saying:
He said that discussions were continuing “Iraq is committed to the [OPEC+] agreement
between Baghdad and technical and financial to cut production in light of the current chal-
teams from the KRG, noting that a “formula has lenges facing the international oil market and
been agreed”, in reference to the 250,000 bpd global oil producers due to the coronavirus that
condition mentioned above. He added “Further led to the contraction and recession in the global
formulas are under discussions also and I think economy.”
the issue is heading towards a solution.” He added that the “increase in oil prices is a
Meanwhile, Jabbar opined that the KRG’s result of the commitment of producing countries
existing contracts with field developers had to the agreement”.
been signed during tense political times, adding Meanwhile, with Iraq having produced
that they were “unsuccessful” for not bringing 3.807mn bpd during January, below its OPEC+
enough revenue to Erbil. quota, Hattab said that “any future increase
in production or exports hinges on oil market
Eyes on exports needs”, noting that the MoO’s priority would be
As we approach March and the next meeting increasing gas production and the development
of the OPEC+ group, the focus has returned to of the refining sector.
Iraqi oil production, with the country having S&P Global Platts quoted data from OPEC+’s
pledged to make compensatory cuts following Joint Ministerial Monitoring Committee which
its failure to comply with group-wide reduction showed that Iraq had overproduced by a cumula-
targets. tive 626,000 bpd through the final eight months
While Jabbar last year noted that Iraq’s inten- of 2020, meaning that it has a further 576,000
tion was to increase prices rather than sales bpd of compensatory cuts still to make.
volumes, the country’s Finance Minister and With prices rising into the $60-70 per barrel
Deputy Prime Minister Ali Allawi has publicly range and Iraq’s government continuing to run
questioned the long-term feasibility of maintain- at a deficit, so it will be a major challenge not to
ing the status quo of restraining oil production succumb to the temptation to sell more oil while
while the government operates at a monthly the going is good.™

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