Page 9 - DMEA Week 14 2020

DMEA COMMENTARY DMEA
a foreign oil company told Reuters. Foreign oil operators in Iraq are also looking for savings from their suppliers.
ExxonMobil, for example, has already asked all its suppliers in Iraq to cut costs, the US super-major said in a letter to those suppliers seen by Reuters.
Iraq, which relies on oil revenues for 95% of its budgetary income, is one of the least diversi- fied economies in the Middle East. It will likely have to enforce strict austerity measures after its fellow OPEC member and the cartel’s de facto leader, Saudi Arabia, launched an all-out oil price war with Russia.
According to Moody’s, Iraq is one of the most vulnerable oil producers in this price crash and could see its fiscal revenues and exports drop in 2020 by more than 10% of GDP this year.
Iraq ‘s state-run Basrah Oil Co. has asked four IOCs operating in the country to cut budgets by 30% and postpone payments to subcontractors due to the oil price crash.
The March 22 letter from Ihsan Ismaeel, Basrah Oil’s director-general, was sent to BP, lead operator of the Rumaila oilfield, Italy’s Eni, which works at the Zubair field, ExxonMobil, operator of West Qurna 1, and Russia ‘s Lukoil, which works at West Qurna 2. The fields have a total production capacity of about 3mn barrels per day (bpd), well above more than half of the
country’s total output.
Emergency Meeting called
Iraq’s 2020 budget was the largest in its history and was focused on revamping the nation’s dilapidated infrastructure and hopefully dows- ing the outbreaks of street protests, but the cut in the oil price has greatly undermined this plan.
As a result, Iraq was one of the OPEC mem- bers who called for an emergency meeting of the cartel to discuss ways to support oil prices, which crumbled in March to as low as $25 a bar- rel Brent.
Iraq may see its wish granted soon, after US President Donald Trump intervened in the oil price war between Saudi Arabia and Russia and discussed the oil market with Saudi Crown Prince Mohammed bin Salman (MbS) and with Russian President Vladimir Putin.
“The Kingdom calls for an urgent meeting for OPEC+ states and another group of countries, with the aim of reaching a fair solution to restore a balance of the oil markets,” Saudi Arabia said on Thursday, via its official Saudi Press Agency, while President Trump said that he expected and hoped the Saudis and Russia to cut back “approx- imately 10 million barrels, and maybe substan- tially more.”
While any possible cuts will help Iraq, they are unlikely to solve this budding crisis.™
TRANSPORT
Algeria launches new pipeline to ramp up exports
ALGERIA
ALGERIA has commissioned a new pipeline to connect gas fields in its south-west with its main distribution hub at Hassi R’Mel, state-owned Sonatrach said last week.
The 4bn cubic metre per year GR7 pipeline will deliver gas from the Hassi Ba Hamou and Hassi Mouina fields to Hassi R’Mel, from where supplies can be exported to southern Europe. It serves as an extension of the GR5 system, which transports gas from the recently launched Touat, Reggane Nord and Timimoun gas fields to Hassi R’Mel.
“The new pipeline will allow the capacity of Sonatrach’s system Reggane-Hassi R’Mel to reach some 13 bcm per year,” Sonatrach said in a statement. Previously GR5’s capacity was only 9 bcm per year.
In recent years, Sonatrach has prioritised the development of fields in south-west Algeria as well as the infrastructure to bring their gas to market. It began pumping gas from the 4.7 bcm
per year Touat field in September last year, where it is partnered with Neptune Energy.
Earlier, the company and partners Total and Cepsa began production from the 1.8 bcm per year Timimoun field in February 2018. The 2.8 bcm per year Reggane Nord field was launched in December 2017.
Both the Hassi Ba Hamou and Hassi Mouina projects have fallen significantly behind sched- ule. Sonatrach had initially aimed to bring them into operation by 2018, but both are still several years away from achieving first gas.
Hassi Ba Hamou will comprise three gas treatment and compression units, slated to flow a combined 4 bcm per year.
Norway’s Equinor won a licence for the Hassi Mouina area in 2005 and went on to make sev- eral gas discoveries. However, it later withdrew from the venture, leaving Sonatrach as its sole developer. Development plans indicate the pro- ject could yield 2.8 bcm per year.™
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