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Thanks HGNAMED
Yes, DNO seems very confident in the future, wondering what they know we don’t? Also paying a divi!
GENL has also been increasing day by day( they have a 25% stake in Tawke).
I am surprised GKP hasn't gone up on such encouraging news and the price obtained for their oil.
Hi Morbox,
Good find, wonder if my old company XOM is there as its headquarters are in Houston. However they have pulled out of Iraq mainly due to the expected backhanders that all the Iraqi officials expect for doing their base job. Makes it impossible to comply with strict company ethics standards when they wont do anything unless given additional incentives which is a generous payoff. We are not talking a dollar or two for carrying bags , but blatant demands for serious sums such as permission to drill such and such wells with supporting infrastructure. Refuse and it sits in their in tray fore ever. Time is money for all western companies and they know it and play on it.
Glad to see they are looking at gas integration projects. The hardware for these is very expensive and it wont be cheap but they most certainly do need it, thats if you want to clean /treat and process the gas and not just re-inject it.
Exporting it collectively to Turkey and then into Europe would be best, and I'm sure Turkey would love to get involved but they wont do it for peanuts, and a good starting position would be getting Kurdish crude flowing again.
Its important to note that although SOMO has stated the the IOC's get more than the current awarded contracts and they require a law tweak to pay the rate, they have not said that the amount the IOC's receive is unfair. No one is looking for flaws in our current contracts and we should not go down this route at all. lets hope we here something substantial soon.
Fantastic drive to market Iraq and its resources. Can only be good news for the peoples of Iraq.
However:
Must get payments sorted out, a stable export structure, Kurdistan annexed (or cut out)….. and work at keeping your promises - or nobody will touch investing in you r country with a barge pole.
belgrano, with your comment this morning on the subject of international investment, interesting to see the below. hope they say why would we work with you when you treat companies like ****.
“ iraq’s prime minister courts american energy titans in houston roundtable, exploring opportunities in energy sector”
https://solarquarter.com/2024/05/08/iraqs-prime-minister-courts-american-energy-titans-in-houston-roundtable-exploring-opportunities-in-energy-sector/
DNO - very positive and encouraging report regarding Kurdistan...
* Production from flagship Tawke license (DNO 75 percent and operator) in
Kurdistan largely restored after March 2023 Iraq-Türkiye Pipeline shutdown
* Oil prices in Kurdistan cash and carry sales now in upper USD 30s per barrel
* Company engaged directly and with peer companies in discussions with
Kurdistan Regional Government to facilitate the reopening of the export
pipeline, which, if opened, would double DNO’s Kurdistan revenue
* Stepping up investments in Tawke license by restarting completion of three
development wells that were discontinued last year following pipeline shutdown
Link for DNO Presentation:
https://www.dno.no/media/yr0louwz/q1-2024-interim-results-presentation.pdf
I've spent the last year accumulating cheap stock, it'll eventually get sorted out and has allowed me a chance of finally getting some returns here with an achievable average which wasn't the case before the priorliwas closed.
I've waited 15 years so will continue to be patient and wait, good luck everyone else that's held strong.
I don't believe that any party will try to break GKP's contract by going into the nitty gritty and trying to claim this or that. Its a scaremongering tactic only. They would have to do it with every IOC in Kurdistan. This is at a time when Iraq and Kurdistan are trying to work together and get more international investment into the country. What kind of message would that send to any likely suitors.
Don’t think it will change anything but just had an X on it.
https://www.iraqoilreport.com/news/new-leadership-for-somo-46509/
Any of you guys/gals get the impression that year after year we are just being jerked around at the whims of those in power who are working to their own personal agendas ?
Article 40. Force Majeure
Most of the textual references in this clause are in respect of the CONTRACTOR, but the final 2 sub-clauses also bear scrutiny.
40.2 For the purpose of this Contract, “Force Majeure” means any event that is unforeseeable, insurmountable and irresistible, not due to any error or omission by the CONTRACTOR but due to circumstances beyond its control, which prevents or impedes execution of all or part of its obligations under this Contract. Such events shall include the following:
(My NB: there follows a list of events that can trigger FM, (a) thru (h))
40.2.(g) except in respect of the GOVERNMENT and/or any Public Company which may be a CONTRACTOR Entity, any acts or orders of the GOVERNMENT, any minister, ministry, department, sub-division, agency, authority, council, committee, or other constituent element thereof, or any corporation owned and/or controlled by any of the foregoing, and
40.2.(h) any acts or orders of any government claiming or asserting jurisdiction over the subject matter of this Contract, any minister, ministry, department, sub-division, agency, authority, council, committee, or other constituent element thereof, or any corporation owned and/or controlled by any of the foregoing.
40.3 The intention of the Parties is that Force Majeure shall receive the interpretation that complies most with prudent international petroleum industry practice. Force Majeure affecting a CONTRACTOR Entity of an Affiliated Company of a CONTRACTOR Entity shall be deemed Force Majeure affecting the CONTRACTOR if the consequences of such Force Majeure prevents the performance of any of the CONTRACTOR’s obligations under this Contract.
Provocative final Q: Is Texas Keystone still an "Associated Company" - or has it been fully absorbed?
@straycat, wrt #5.
On signing, the contract is either legal or illegal at creation and hence non-existent.
So I don’t believe adding clauses within the same contract, to protect yourself from it being illegal, would offer any protection. No-one can gain anything from a contract which was illegal at creation, which includes protection from the consequences of it being so.
There is some legal precedence that offers support to the KRG having the right to write the contract. That was at an International level in a London court. The FGI though can always choose to ignore such rulings and as the song goes, carry on regardless.
“Which he’ll be working on as we speak. At least I hope so…”
I think you’ll find that little is happening currently (still)
Art. 43.3.
I’ve looked at this critical clause several times, and it’s problematic on several fronts:-
1) It was badly framed;
2) The main purpose of its inclusion should have been to pre-empt and prevent any external influence or interference in a contract freely negotiated and entered into between the Contractors and the KRG;
3) Clearly it was intended as a defensive mechanism to counter any anticipated legal attack by the ICG/FGI who might wish to challenge its legitimacy;
4) And although it’s very clumsily constructed, I reckon it does provide some ‘cover’ under English law. Certainly it was an attempt to protect the Contractors from any external threats to their investment positions;
5) But one of the key issues wasn’t addressed. Were the KRG acting ‘ultra vires’ when they entered into the contract in the first place?:
‘The Contractor has entered into this Contract on the basis of the legal, fiscal and economic framework prevailing at the Effective date.’
Well that’s all well and good, but if the ICG were to contest the very validity of that framework prevailing in 2007 and therefore its legitimacy, and if they were successful, then where did that leave the Contractors? Where did they go for recompense? And under what terms?. And who did they renegotiate their position as a producer with? And how did they recover their delinquent debt?;
6) That issue could/should have been covered in the Contract (and GKP should have insisted on it to safeguard their position);
7) I think the lawyers anticipated legal challenges as to the efficacy of the Contract. All parties’ were already accepting that it had risks associated with it, risks that the Contractors had agreed to and had embraced. Hence 43.3;
8) But did GKP know of the complexities of the constitutional relationships in place when they signed the contract? Because if they did, there’s an argument that they should have checked out the contractual legitimacy of their arrangements with the KRG before they signed off the agreement by covering their position with the ICG. And that would have involved a more protracted negotiation with the ICG…hindsight’s a wonderful thing…;
9) However, legally it seems to me that GKP may have a winning argument under English law. Unless they acted in bad faith.
But In the end, this won’t be settled in the English courts anyway.
There will be a significant renegotiation of terms with the ICG and JH will have to make serious judgments about what’s in GKP’s best interests.
And if he can’t get a result that works for GKP in the longer term, then he needs a back up plan.
Which he’ll be working on as we speak. At least I hope so…
All IMHO, DYOR.
Yawn
Broadford is only here to post negative points of view, surely you must all realize that by now!!!!
@BB, 43.3 reads to me as protecting the IOC’s commercial benefits from any amendments to the contract imposed by any entity, from anywhere, instigated by changes to any laws - rather all encompassing.
So IF it’s legal at signing it is protected - any amended one must be commercially equivalent.
In order to force through an uncommercial equivalent or withdraw it completely, the FGI would have to show it was illegal at signing.
There are those in Iraq who believe that to be true, based on their interpretation of the Constitution - basically the KRG could not sign an oil related contract without FGI involvement and approval, which was not forthcoming.
Not surprisingly there are others in Iraq who believe the Constitution does give the KRG the right to act independently of the FGI in such matters.
Nice start to the May, lets hope it continues
Https://shafaq.com/en/Economy/Iraqi-Cabinet-to-discuss-and-approve-budget-law-next-Tuesday
Broadfordbay i read your messages for years you got to be working Baghdad.
Belgrano,
1. Pay BOTAS the increased tariff of $5 - $7/bbl for transporting the re-introduced Kirkuk Grade.
2. Accept a deal with TR to take most of the Kurd Heavy Crude that cannot be accepted into the Ceyhan pipeline (and that cannot be sold to the local refineries) and truck this to a new export tank farm near Ceyhan.
TR gets a nice little earner once again, and SOMO don't have to market that horrible heavy stuff.
One question I'd like some help with, and that's putting a rough value to Turkey of getting imports from Kurdistan going again. Does seem Baghdad may have tried to circumnavigate Kurdish crude by trying to mend the alternative pipeline and send crude to Turkey that way cutting out the Kurds and IOC's.
However apart from problems keeping it flowing through Kurdish territory, I expect Turkey views it OK as an extra, but not sufficient recompense for Kurdish crude losses, to warrant opening the dam sluice gates.
Apart from the Turkish owned export pipeline which carries transit fees, Knew Turkish companies or wealthy Turkish citizens hold strong positions in IOC's. Can anyone shed light on how strong?
Hi TM,
it certainly appears the KRG/MNR made a cross for their own backs when formulating the Art. 43 clauses.
Art 43.5 states: Without prejudice to the generality of the foregoing, the CONTRACTOR shall be entitled to the benefit of any future changes to the petroleum legislation or any other legislation complementing, amending or replacing it.
Baghdad may indeed be saying: you broke it - you fix it!
Hi Theoryman, you pose two questions which I expect they are asking. "Why should the FGI now have to pay off the excess for the rest of the lifetime of the contract". Well its all about base risk, and any investor here since the start is certainly not awash with profit that's for sure. However its more about image if they want overseas investment for anything, you cannot try to change contracts mid term just because some feel the original terms were too generous originally. World of difference in extracting easy oil from already producing wells with access and some infrastructure already built, from have literally nothing at all.
This is at a time when they are trying to get foreign investment in, it sends wrong message to any observer hoping to invest in Iraq in order to make a decent profit.
Very few companies invest in Iraq because they love the people. putting up with the poor living standards, hygiene, lack of electricity, high crime, extortion, need for constant security, tough working conditions and harsh climate with Islamic rules is only done so for profit, so those doing it expect a decent return.
If they don't think this is true, just look at the exodus of western companies from Iraq. They know the truth, they are just trying it on the way some thieving Arabs often do. Could quote plenty of other examples and not singling out Iraq or Kurdistan, but you find it in every Arab nation that any frequent and world wise traveller will confirm.
Under a TSC the FGI take on the risk of finding no commercial oil, they take in 100% of the benefit and pay out X% to the IOC.
Under the Shaikan PSC the KRG get circa 53% at the moment for doing NOTHING, no upfront risk, nothing…
The FGI see this as giving away 47% to the IOCs, which is a lot more than the X% it would be under a TSC.
There argument will be that the KRG were stony broke when they signed the PSC, they could not have funded the exploration phase needed under the TSC. That situation was of their own making, it’s not what the FGI would have done.
So why should the FGI now have to pay out the excess for the rest of the lifetime of the amended contract?
It will need a complete reset of how the FGI think about oil contracts - unless of course Clause 43.3 nails down the asked for “commercial equivalence”.
@Belgrano - I think you’ve missed one party out whose blessing is required before anything happens.
Barzani has gone to Iran “ According to an official from Barzani's office, the visit is of "significant importance", coming after "extensive talks" with political leaders in Baghdad, which the Kurdistan Region President described as "ushering in a new phase in the relations" between Baghdad and Erbil.”
https://shafaq.com/amp/en/Kurdistan/President-Barzani-lands-in-Tehran-for-an-official-visit
Will bending the knee be sufficient or has he had to take some lubricants with him?