Page 5 - MEOG Week 07 2021

MEOG COMMENTARY MEOG

contractual settlements with the KRG in the Following an audit by Gaffney Cline in 2019,
second half of 2017, paving the way for further Allman-Ward said that the results confirmed
development of their respective assets. This came his firm’s “belief that the Khor Mor and Chem-
after eight years of acrimonious international chemal fields will most likely be the biggest gas
legal dispute over the terms governing licences fields, not just in the Kurdistan Region Iraq, but
for the Khor Mor and Chemchemal gas fields. the whole of Iraq, making them world-class
Under the deal reached with Pearl, the con- assets”.
sortium committed to invest $400mn of the
agreed $1bn payment from the authorities in Payments
the expansion of the larger Khor Mor field to In more encouraging news, both DNO and Dana
increase production to 6.7 bcm per year by 2021. Gas spoke optimistically about continued pay-
The first expansion train is expected to come ment stability from the KRG as well as Erbil’s
into operation in early 2023, with the second ability to make up for arrears owed to IOCs
coming online in late 2024, and the Pearl Con- developing its fields.
sortium is in talks with the US Government’s The Norwegian firm said that the KRG had
Development Finance Corp. for a $250mn loan put a plan in place in December “in respect of
to help finance the expansion. the Tawke licence 2019 and 2020 withheld enti-
Allman-Ward said: “This loan has biparti- tlement and override payments ($259mn DNO
san support from both sides of the aisle in the share) such that if Brent prices exceed $50 per
US because they want, of course, to increase the barrel in any month.”
amount of gas production in Iraq and thereby This plan is based on Brent prices exceeding
reduce reliance of Iraq on Iranian gas imports. $50 per barrel in any month and the incremental
We hope to see confirmation of that in the next revenues being shared 50:50 between the KRG
months or so.” and its partners.
The move would provide Baghdad with a While other operators have not spoken pub-
sustainable and more internationally attractive licly about the new payment structure, Middle
option than maintaining the current status quo, East Oil & Gas (MEOG) learned in December
which relies on sanctions waivers from the US that the same formula would be rolled out across
government to continue imports from Iran. all IOCs. This was confirmed by Allman-Ward
However, with Iran having reduced gas last week, when he said: “The government has
exports to Iraq last year, complaining over … written to us and given us a formula for how
unpaid gas debts in the billions of dollars, Pearl those arrears will be recovered. It is linked to the
may find Baghdad keen to negotiate alternative Brent price and we believe at the current sort of
forms of remuneration. Given its historic pay- levels of Brent of $55 per barrel we will be able to
ment issues with the KRG, this may prove to be a recover the full amount of those arrears during
cumbersome negotiation. the course of 2021.”
However, Dana Gas made a significant com- While 2020 was a year to forget for the KRG,
mitment to Kurdistan in late 2020, agreeing to there are signs that 2021 could be one of signifi-
sell its onshore Egyptian producing oil and gas cant recovery and repairing the damage caused
assets for up to $236mn so that it could focus on by the payment hiatus will play a major role in
northern Iraq. this.™

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