Page 5 - MEOG Week 11 2021

MEOG COMMENTARY MEOG

the establishment of a new SOMO company in approved the final version of the Federal Oil and
which there are Kurdish members on the Board Gas Law (FOGL). This has been referred to the
of Directors.” Council of Ministers for approval, after which it
He added that it should be restructured to would move to the House of Representatives to
include Kurdish members on its board of direc- be enacted into Law.
tors to “handle the issue of oil prices in an appro- According to Ahmed Mousa Jiyad, a for-
priate manner, serving the country, including the mer senior economist at Iraq National Oil Co.
Kurdistan Region.” (INOC) and the MoO, the urgency and surprise
with which this was passed gives rise to believe
Passing bills it may be connected to the passing of either the
In addition to the budget vote, Iraq’s Cabinet and Iraqi budget or the proposed amendment to the
other advisory boards have been busy consider- INOC law.
ing other important legislation. According to
Hassan Mohammed Hassan, the deputy direc- Compensation
tor-general of the Basra Oil Company in charge Meanwhile, Iraq continues to struggle to comply
of licensing rounds affairs and the head of the with its quota under the OPEC+ production cuts,
joint management committee of West Qurna 1, and the country has also failed to make extra cuts
contracts apportioned under Bidding Round 5 to compensate for historic non-compliance.
in 2018 are still being negotiated. February production stood at 3.89mn bpd
In June 2018, the MoO signed three contracts in February, according to a recent S&P Global
with Sharjah-based Crescent Petroleum cover- Platts survey, showing that it overproduced by
ing the Gilabat-Qumar and Khashim-Injana around 33,000 bpd compared to its quota.
non-associated gas fields in Diyala Province, Facing a growing budget deficit and with for-
near the Iranian frontier, and the Khudr al-Maa eign companies responsible for the vast majority
oil block on the southern border; two with Chi- of the country’s oil production under technical
na’s Geo-Jade Petroleum for the Naft Khana services agreements (TSAs), Iraq has struggled
block in Diyala and Huwaiza in Missan; and one to rein in output. Meanwhile, Zobaei was quoted
with fellow Chinese firm United Energy Group as saying that the MoO had agreed terms with
for the Sindbad block, in the east of the oil-rich IOCs to compensate them for holding back
Basra province. The latter three areas are located production, without providing any further
along the Iranian border. information.
At the time, the MoO expressed disappoint- Separately, MEOG understands from sources
ment that five of the 11 blocks offered had failed within the MoO that technical work is being
to attract any bids, though this was largely put undertaken to ramp up exploration activi-
down to the speed with which the auction ties around the Nasiriyah oilfield as it seeks to
process was conducted and uncertainty over increase the production capabilities of the state-
contractual terms – somewhat like the recent owned Thi Qar Oil Co.
pre-payment term crude supply tender agreed Meanwhile, work is ongoing at the southern
with China Zhehua Oil Co. which has since been Majnoon oilfield to raise output to 450,000 bpd
postponed. over the next two years, with output from the
Meanwhile, in February, the MoO’s Opin- asset having been reduced to 130,000 bpd in an
ion Board announced that it had discussed and attempt to comply with OPEC+ quotas.™

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