Page 6 - DMEA Week 24

DMEA COMMENTARY DMEA

Iraq makes first moves to comply

with OPEC quotas

Last week NewsBase highlighted the difficult situation that Iraq was facing, having

to cut its main revenue earner – oil and gas – in order to meet production quotas

agreed by OPEC+ to try to bolster the selling price of oil

IRAQ THE proposals approved by the Iraqi govern- Rumaila is the third-largest producing field in
ment to try to balance its budget were drastic and the world and now delivers nearly a third of Iraq’s
WHAT: included stopping the disbursement of “unnec- oil – around 1.5m bpd. Apart from BP, the mas-
Iraq requests cuts in its essary” government expenditures and renegoti- sive field is also being developed by a national
major oilfield at Rumaila. ating with oil companies operating in Iraq under Iraqi firm, Basra Oil Company (BOC), as well
licensing rounds to review contracts and ease the as PetroChina.
WHY: financial burden on the state.
Iraq is obliged to meet its Ihsan Ismaeel was appointed Deputy Prime BP takes hit of up to $17.5bn as it fore-
share of OPEC+ output Minister for Economics and Energy, overseeing casts cheaper oil
cuts the oil ministry, and has the challenging task of As BP comes to the negotiating table, it will do
boosting Iraq’s production and export capac- so under changed circumstances from those
WHAT NEXT: ity after years of underinvestment and infra- that applied only a few months ago. The com-
Making cuts and structure damage resulting from war, as well as pany has said it expects oil prices to be lower than
balancing its budget will negotiating contracts with international oil com- predicted from now until 2050 as governments
be a Herculean task. panies (IOCs), many of whom have been dissat- speed up plans to cut carbon emissions in the
isfied with the fiscal terms offered for upstream wake of the coronavirus (COVID-19) pandemic.
partnerships. The oil giant forecasts the price of Brent crude
Renegotiating contracts to save money for to average $55 per barrel and has also said that
the Iraqi government as well as satisfying the because of this it would revise down the value of
oil companies would appear to be a difficult its assets by as much as $17.5bn (GBP13.8bn).
path to follow, and when added to the need to As a result, BP said it would have to become a
meet OPEC’s demands for a cut in output the “leaner, faster-moving and lower-cost organisa-
task appears to be even more of a challenge. Iraq tion.” Last week, the firm announced plans to cut
provoked the ire of Saudi Arabia and Russia by 10,000 jobs following a global slump in demand
missing its target in May, when it pumped more for oil.
than 600,000 barrels per day above its quota of It is likely that these facts will play out in the
3.6mn bpd, so it will feel obliged to try to meet coming discussions; no doubt Iraq will have
its international commitments. other measures in mind but this is the first card
The first signs of how this might be achieved to have been played. ™
came in a statement by Oil Minister Ihsan
Ismaeel in an interview with Sharqiya TV that
Iraq will export an average of 2.8mn bpd of oil in
June, adding that it was in the country’s interests
to comply with an OPEC+ deal to cut output.
He also said his ministry had requested the
Kurdish authorities in northern Iraq to export a
maximum of 370,000 bpd as of June to help Iraq
abide by the OPEC+ quota.
In other moves, last week Iraq asked some
Asian refiners to forgo contracted shipments of
its crude in the first signal that it is trying to fulfil
its pledge to OPEC+.
Iraq, which has had trouble maintaining the
cuts it agreed on with other key crude export-
ers, known as OPEC+, has reportedly asked BP
to reduce output at the nation’s biggest field of
Rumaila by 10% as part of a push to comply with
the quotas.

P6 www. NEWSBASE .com Week 24 18•June•2020