Page 9 - MEOG Week 22

MEOG PerFormanCe MEOG
Iraq rig count falls after IOCs ordered to cut
Iraq
IRAQ’S oil-rig count has tumbled by almost two- thirds this year after international oil companies were ordered to cut spending because of the oil crash and OPEC’s second-largest producer has agreed to stringent new OPEC+ cuts.
The total rigs now operated by IOCs this month in Iraq, now averages 32, down from 88 in December 2019, Iraqi sources told S&P Global Platts. Federal Iraq is averaging 31 rigs this month, compared with 76 in December, while the semiautonomous Kurdish region in the northern part of the country is averaging only one rig in May compared with 12 in December.
Iraq’s state-run Basrah Oil Co. in March asked IOCs to cut budgets by 30% and postpone payments to subcontractors due to the oil price crash. Oil prices received by federal Iraq were down to about $14 per barrel in April, from $60 in January, slashing oil revenue to $1.4 billion from $6.16 billion. Oil revenue accounts for more than 90% of Iraq’s federal budget.
Oil drilling is now the biggest investment expenditure of IOCs, the sources said and added that the drop in the drilling programs will allow Iraq to cut costs by 30%.
Iraq is currently in the midst of cutting its output in line with the new OPEC+ agreement that will trim a record 9.7 million bpd in May and June. At 4.54 million bpd in April – accord- ing to the latest Platts OPEC survey – Iraq’s pro- duction will have to fall by almost 1 million bpd
for the country to abide by its quota under the OPEC+ deal.
The politically splintered nation has been a consistent laggard in compliance, drawing the ire of other members, and the government faces challenging negotiations with IOCs and the Kurdish region to fulfil its cut commitment.
The country is fully committed to the new OPEC+ cuts, acting oil minister Ali Allawi said earlier this month. The existing rig count should be sufficient to keep Iraq’s production at least within the OPEC+ target, the sources said.
Unlike other producers in OPEC, led by top producer Saudi Arabia which pumped at record levels in April, Iraq was not able to open the taps last month despite the expiry of the old OPEC+ cuts agreement in March.
The Kurdistan Regional Government (KRG) has its own burdens. According to a report by Deloitte, the KRG last year had to pay $2.2pb to transport crude by pipeline to the Turkish bor- der, $3pb to the Turkish energy ministry and $14.80pb to IOCs. The KRG also received $1.573 billion from traders as an advance payment, and at the end of the year owed $3.4 billion.
More recently, federal Iraq told the KRG in a May 22 letter that it must develop an oil and budget deal within 30 days before it will approve future salary payments. The KRG is now send- ing a delegation to Baghdad for talks, the sources said.™
PoLICy
Turkey to launch East Med exploration under Libya pact
tUrkey
TURKEY may begin oil exploration in Eastern Mediterranean within 3-4 months as part of an agreement with the Libyan government, Energy and Natural Resources Minister Fatih Dönmez said on Friday.
Speaking at a ceremony to mark the launch of Turkey’s first drillship Fatih oil-and-gas drill- ing ship to the Black Sea, Dönmez said Turkish Petroleum (TPAO), which had applied for an exploration permit in the Eastern Mediterra- nean, would begin operations in areas under its license after the application process was completed.
“Within the framework of the agreement we reached with Libya we will be able to start our oil exploration operations there within three to four months,” the minister said.
On Nov. 27, Ankara and
Libya’s U.N.-recognized Government of National Accord (GNA) signed two separate pacts, one that encompasses military coopera- tion and the other maritime boundaries of the two countries in the Eastern Mediterranean.
The maritime pact asserted Turkey’s rights in the Eastern Mediterranean in the face of uni- lateral drilling by the Greek Cypriot adminis- tration, clarifying that the Turkish Republic of Northern Cyprus (TRNC) also has rights to the resources in the area. The pact went into effect on Dec. 8.
Dönmez earlier this month said that TPAO has applied to Libya for an exploration permit in the Eastern Mediterranean, stressing that the exploration would begin as soon as the process is completed.
Turkey’s first drillship, Fatih, set sail from
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