Economy 2024-08-15 | 4,627 views Alsumaria News – Economy Iraq has made the biggest change in the way it deals with international oil companies in decades, by relying on profit sharing in contracts for developing oil and gas production projects and developing reserves.
According to the Specialized Energy Platform (based in Washington), the 13 new contracts signed by the Ministry of Oil yesterday, Wednesday, August 14 (2024), relied on a profit-sharing model instead of technical service conditions.
Iraq has made the biggest change in decades in the way it deals with international oil companies in an attempt to attract more money to the oil and gas sector in order to develop its huge reserves.
Baghdad signed preliminary agreements for 13 blocks and oil and gas exploration fields, which a number of companies won in a May licensing round, giving the companies profit-sharing contracts that include more attractive terms than those for technical services.
Details of new contracts
Profit-sharing models provide a share of revenue after deducting royalties and cost recovery expenses, an oil ministry official told Reuters.
Iraq adopted profit-sharing contracts for the May licensing round instead of formulating deals based on prior technical service terms to try to attract more investments.
The recent oil licensing rounds aimed to grant licenses to about 29 projects in 12 Iraqi governorates, to international and local companies, as 22 companies competed to develop the proposed fields and blocks.
Traditional technical services contracts pay a fixed price for each barrel of oil produced after offsetting costs, and are less lucrative for foreign investors than production sharing terms.
Details of new contracts
Profit-sharing models provide a share of revenue after deducting royalties and cost recovery expenses, an oil ministry official told Reuters.
Iraq adopted profit-sharing contracts for the May licensing round instead of formulating deals based on prior technical service terms to try to attract more investments.
The recent oil licensing rounds aimed to grant licenses to about 29 projects in 12 Iraqi governorates, to international and local companies, as 22 companies competed to develop the proposed fields and blocks.
Traditional technical services contracts pay a fixed price for each barrel of oil produced after offsetting costs, and are less lucrative for foreign investors than production sharing terms.
Last year, Iraq struck a $27 billion oil deal with France's Total Energy by offering a faster, lower-risk recovery through greater revenue sharing, a model it said at the time could be replicated to attract more foreign companies.
Oil investments in Iraq
Many major oil companies have complained that the terms of traditional oil service contracts mean they cannot benefit from higher oil prices, and lose out when production costs rise.
Iraq is the second largest producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia, and currently has the capacity to produce approximately 5 million barrels per day.
Oil investments in Iraq
Many major oil companies have complained that the terms of traditional oil service contracts mean they cannot benefit from higher oil prices, and lose out when production costs rise.
Iraq is the second largest producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia, and currently has the capacity to produce approximately 5 million barrels per day.
Foreign investment in the oil sector in Iraq has declined since the wave of deals that followed the US invasion of the country more than a decade ago, which contributed to the stagnation of oil production.
Last year's Total deal was widely praised as a major achievement in attracting major Western companies to Baghdad.
Last year's Total deal was widely praised as a major achievement in attracting major Western companies to Baghdad.
Chinese companies dominated the bidding round last May, which offered 29 oil and gas projects, winning 10 of the oil and gas blocks and fields put up for auction.
The competition activities for the licensing rounds in Iraq (the fifth supplementary and the sixth) continued for 3 days during last May, as 7 Chinese companies acquired the license to develop a number of Iraqi oil projects, while no licenses were granted to any of the other foreign or Arab companies applying, other than... Local companies.
The Iraqi Ministry of Oil said that the agreements would increase production by 750,000 barrels of crude and 850 million standard cubic feet of gas.
Through the licensing round, Iraq seeks to increase the production of natural gas, which it wants to use to operate power plants that rely heavily on gas imported from Iran.
Oil Minister Hayan Abdul Ghani said that increasing gas production may allow more flexibility to supply gas to electric power stations. https://www.alsumaria.tv/news/economy/497157/تقاسم-الأرباح-العراق-يجري-أكبر-تغيير-بطريقة-تعامله-مع-شركات-النفط-منذ
The competition activities for the licensing rounds in Iraq (the fifth supplementary and the sixth) continued for 3 days during last May, as 7 Chinese companies acquired the license to develop a number of Iraqi oil projects, while no licenses were granted to any of the other foreign or Arab companies applying, other than... Local companies.
The Iraqi Ministry of Oil said that the agreements would increase production by 750,000 barrels of crude and 850 million standard cubic feet of gas.
Through the licensing round, Iraq seeks to increase the production of natural gas, which it wants to use to operate power plants that rely heavily on gas imported from Iran.
Oil Minister Hayan Abdul Ghani said that increasing gas production may allow more flexibility to supply gas to electric power stations. https://www.alsumaria.tv/news/economy/497157/تقاسم-الأرباح-العراق-يجري-أكبر-تغيير-بطريقة-تعامله-مع-شركات-النفط-منذ