Page 5 - MEOG Week 14

MEOG Commentary MEOG
whereby the IOCs’ payments are not a burden on the government’s limited finances while at the same time making sure the IOCs continue to operate in the country, he said.
Iraq is struggling to shore up its finances despite its ability to pump at will as of April 1 following the breakdown of OPEC’s talks earlier this month.
The foreign oil firms have received the letter from Iraq asking for a 30% cut in budgets, but they have not made a decision yet, a source with 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( see following story).
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.™
Week 14 08•April•2020 w w w . N E W S B A S E . c o m P5