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Cont..........
None responded to requests for comment.
Shwan Zulal, managing director of Carduchi Consulting and a close follower of the KRG oil sector, said it was unlikely any of the IOCs would terminate their contracts with Erbil in favor of Baghdad, at least in the short term.
"But if SOMO takes over the marketing of the oil, the next step would be establishing relationships between the IOCs in [the Kurdistan region] and the federal government, as they will be getting their payments from Baghdad if oil sales go through SOMO," Zulal said.
Yerevan Saeed, a research associate at the Arab Gulf Institute in Washington, likened Baghdad's recent moves to "arm twisting ... to strengthen its negotiation position."
"Baghdad is aware that under no circumstance, the KRG will allow IOCs to operate in the Kurdistan region if they sign separate and independent contracts with Baghdad," Saeed said. "If they do, Erbil is likely to shut down their operations and take them to international courts for compensation. "
The urgency and political pressure being applied is likely being amplified by the need to develop replacement streamers of hydrocarbons to the European market the geopolitical location of Kurdistan and it’s pipe line connection to Turkey is an obvious target for future expansion the international community will be contingency planning for a total ban on Russian oil and gas in order to do this they need a long term solution GKP could be sitting on part of that solution
NATURAL GAS | OIL 23 May 2022 | 16:57 UTC
KRG to Baghdad: Negotiate oil and gas law, don't interfere in IOC contracts
Editor Richard Rubin
Natural Gas, Oil
HIGHLIGHTS
Iraq says will set up company in Kurdistan to rewrite oil deals
KRG warns it will not cede control over oil exports
KRG exported 454,000 b/d of crude in April
Kurdish officials on May 23 asked federal Iraqi authorities not to unilaterally seize control of the semiautonomous region's oil sector and meddle in the contracts it has signed with foreign operators, in the escalating internal dispute in OPEC's second-largest crude producer.
Register Now Baghdad has said it will establish a new oil company in Kurdistan to negotiate new service contracts with international oil companies operating there, as it aims to implement a February ruling by Iraq's Supreme Court that ordered the region to hand over its oil assets to the federal government.
The Kurdistan Regional Government has said the court ruling is an attack on its sovereignty enshrined in the Iraqi constitution, and weeks of negotiations between Baghdad and Erbil have failed to reach a resolution.
"Unilateral decisions won't help any side; we prefer negotiation and dialogue to solve our outstanding issue," KRG spokesman Jotiar Adil told S&P Global Commodity Insights. "Any decision should be according to the Iraqi constitution. We are always ready to negotiate and solve outstanding issues through dialogue."
Iraq's oil ministry has sent letters to oil companies operating in the Kurdistan region to sign new contracts with federal state marketer SOMO, an official told S&P Global on condition of anonymity, confirming a previous media report, though he declined to elaborate on what the letters stated or if any companies have replied.
Baghdad reportedly wants the KRG to allow SOMO to open an office in Kurdistan and control its oil exports, which Erbil relies on for the bulk of its finances.
In April, Kurdistan exported 454,000 b/d of crude oil via the Turkish port of Ceyhan, out of Iraq 's total 3.834 million b/d, according to federal data. That is down from a peak of nearly 600,000 b/d in late 2017, before the federal government retook several Kirkuk-area oil fields the KRG had claimed when the Islamic State were driven out.
The Iraqi oil ministry on May 12 said its analysis of production contracts found that the financial terms in deals signed by the federal government were better than the KRG's.
'Arm twisting'
Kurdish officials have said Iraq needs a federal oil and gas law to regulate the country's production and exports, with several attempts over the years to draft one failing.
A number of international oil companies and traders have contracts with the KRG, including Chevron, Oslo-listed DNO, Russia's Rosneft and Gazprom Neft and the UK's General Energy and Gulf Keystone Petroleum.
888 trades on Friday, it’s the Chinese signalling again I tell ye!
When the legal experts employed by the companies reached their opinions, there were no legal rulings on the interpretation of the relevant Articles within the Constitution; now there is the one from the FSC.
Q1 Would those same experts give the same advice now?
Production SHARING Contracts are never used by the CGI, they believe that you cannot share the PHYSICAL oil production from one area within the country with an IOC, because they fundamentally believe it belongs to all of the people throughout the country.
They have no problem with selling the oil and then sharing the proceeds with the IOC through a SERVICE contract.
With the GKP PSC, the MNR has never let the company take its share of production and sell it independently, it does on its behalf and then shares the proceeds via the monthly receipts.
Q2 Is that a deliberate tactic to introduce a bit of fuzziness, “…honest guv the oil itself never really gets shared.”?
PSCs often include as standard, clauses referring to the use of International Arbitration to resolve disputes arising from the contract between the company and the Government which issued the PSC.
Q3 The CGI didn’t issue the contract in the first place, so why would any company be able to take the CGI to International Arbitration?
Q4 Is there any mechanism by which the IOCs can appeal the FSC ruling, either within Iraq or externally?
May 21, 2022
2:21 PM GMT+1
Last Updated 36 min ago
Iraq aims to establish new oil company in Kurdistan region
By Rowena Edwards
May 21 (Reuters) - Iraq's federal government aims to establish a new oil company in the Kurdistan region, the oil ministry said on Saturday.
The aim of the new company will be to enter into new service contracts with oil firms currently operating there under the Kurdistan Regional Government (KRG), according to a statement.
Oil minister Ihsan Ismael said on May 7 that the ministry would start implementing a February federal court ruling that declared the legal foundations of the Kurdistan region's oil and gas sector unconstitutional. read more
Iraq then wrote to international oil firms operating in the semi-autonomous region requesting they sign new contracts with state-owned marketer SOMO rather than the Kurdistan Regional Government (KRG). read more
The letters marked the first direct contact between the ministry and oil firms operating in the Kurdistan region. The move follows years of attempts by the federal government to bring KRG revenues under its control, including local court rulings and threats of international arbitration.
The oil ministry will pursue legal action against companies that continue to operate under "unlawful production sharing contract schemes" and that "do not engage in good faith negotiations to restructure their contracts," according to the statement.
"The expert in the field of oil and gas, Rebwar Muhammad Amin, spoke about the reason for the failure of the Iraqi Oil Ministry to control the oil file in the Kurdistan region, noting that "the situation for Baghdad is not good now."
Amin added (May 20, 2022) that "foreign oil companies have great experience and skilled legal consultants, and after careful scrutiny, these companies concluded contracts in the region. Some contracts stipulated not to change the situation with the legal changes in Iraq, as the contracts confirmed." to resort to international arbitration when internal problems arise, which represents another obstacle.
He pointed out that "because Iraq is a member of OPEC and is under pressure from the United States and Europe to increase oil exports, and since OPEC joined the Russian-Chinese front and stood against American demand, so Baghdad cannot create problems at this time to export more than 600,000 barrels of oil per day." from the region, further disrupting the global oil market, and raising oil prices.”
Good morning BB.
You may well be right, as yet we don't know and lots of implications in what seems crunch time.
I would love to know what carrots are being dangled in front of Kurdish oil companies to sign new deals with SOMO.
There has also not been much opinions expressed on potential positives/negatives on oil companies making a switch, would a new contract downgrade be boosted with guaranteed monthly payments, removal of several risk attachments etc.
I have used the term " downgrade " as i would expect any service contracts with SOMO to not be as rewarding to IOC than what they are currently contracted with a PSC.
In any case no 1 Kurdish oil company will risk signing up, it would have to be all for one, otherwise it's a instant death wish with Erbil.
Interesting times, but could well drag on for months/years, we could do with a flycam in Barzani's office.
Hi Cookie,
when I read "manage the export file" I think immediately of control of the Faysh Khabur export metering- and pumping station, just 2km W of Dayrabun village and 4.6km SW of the Ovakoy crossing.
(DNO ran their own pipeline directly to FK from the Tawke PF).
You may recall the tensions here, back in Oct-2017 when the Iraq Gov gave Barzani 24 hrs to hand over to their control the so-called Faysh Khabur border crossing / pontoon bridge linking Iraq and Syria (actually also 4.6km directly W of the FK station). As I recall, the US had to step in at the last minute to prevent a full scale firefight between the Kurds and the Central Gov., as the stated intention then was to take control of both the pontoon bridge and the metering station.
Baghdad to manage Erbil's oil exports-document
Iraq News
2022-05-19 21:34
Shafaq News / A document obtained by Shafaq News agency revealed that the Federal ministry of oil will manage the file of the Kurdistan Region's oil exports, based on the Federal Supreme Court's (FSC) decision.
The document showed that the Federal government addressed the Kurdistan Regional Government (KRG) to nominate two persons to represent it while implementing FSC's decision, but no response has been received until the moment.
The Ministry, according to the statement, implemented a series of measures to manage oil-related operations to maximize incomes based on FSC's decision.
Why the sudden pressure and urgency to push for reviewing Kurdistan’s contracts ,what is the motivation they have been in place for years apart from the usual politics could we be on the verge of large investment pouring into the oil sector and the large players taking on expansion in this region there are no certainties only probabilities in business but the sand could be shifting in GKP’s favour
No signy!!!, without the Consent of Barzani!!!!,
Simples!!!!
GLA LTH, He wont allow Baghdad to interfere in its right to Govern and control Kurdish Assets!!!!!!. NEVER!! until OIl and Gas Law signed first!!!
An Iraqi oil ministry legal adviser, who spoke on condition of anonymity, told Reuters that a joint government committee including representatives from the oil ministry including the minister, Iraq’s National Oil Company (Inoc) and the Federal Board of Supreme Audit (FBSA) will conduct a contractual review.
The aim is to eventually sign contracts with the central government and not the KRG, the adviser added.
Foreign oil firms present in the Kurdistan region including Genel Energy, Chevron and Gulf Keystone, and Cleary Gottlieb declined to comment, while Iraq’s oil ministry and oil and gas firm DNO did not immediately respond to requests for comment.
The oil ministry has yet to receive responses from the companies concerned and could take further legal measures in the case of no response, one oil ministry official said, without elaborating.
Foreign oil firms are unlikely to engage with Baghdad directly without coordination with the KRG, one oil firm representative told Reuters.
Back to real news..
May 19, 2022
1:28 PM GMT+1
Last Updated 37 min ago
Iraq tells energy firms in Kurdish region to sign new deals with SOMO
Reuters.
May 19 (Reuters) - Iraq’s oil ministry has asked oil and gas firms operating in the Kurdistan region to sign new contracts with state-owned marketer SOMO rather than the Kurdistan Regional Government (KRG), in a fresh bid to control revenues from the semi-autonomous republic.
Oil minister Ihsan Ismael said on May 7 the oil ministry would start implementing a February federal court ruling which deemed the legal foundations of the Kurdistan region's oil and gas sector unconstitutional after talks with the KRG failed.
The Iraqi oil ministry appointed international law firm Cleary Gottlieb Steen and Hamilton to reach out to oil and gas firms operating in the Kurdistan region to "initiate discussions to bring their operations into line with applicable Iraqi law", according to a copy of a letter sent on May 8 seen by Reuters.