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From advfn,
https://shafaq.com/en/Report/Iraq-bans-PKK-ahead-of-Erdogan-s-visit-analysis
Well, it's a Yes & No anser to that one...
As long as the possibility of pipeline reopening is there the GKP SP will exhibit a natural and (sometimes) frothy optimism - that*s just human nature.
Should that pipeline posibility be closed off, however, and in a clear and definitive manner, then the trading range could be subject to a sharp and brutal correction.
The detail in the (expected ) revised PSC terms will be a further aspect to be considered. I expect the terms to be less advantageous to the OilCos, but at the end of the day the human psyche can survive almost any bad news and still exhibit the will to live.
Thanks Broadford,
Thank you, appreciate both the tone and the reply! So it is an issue for the pipeline (market access) rather than exploitation of the asset itself. Good to know!
Follow-up question for me to you (or anyone) is: do you think the continued lack of pipeline (international market) access is already baked into the current SP/trading range?
My thinking is, if yes, then the potential upside is fantastic. If no, then the SP could still have a way to fall and normalise?
Senator,
there are no stupid questions, only ill-informed ones.
The pipeline agreement has nothing to do with GKP's agreement to exploit the Shaikan discovery - that will continue no matter what is agreed or disagreed re the pipeline. Obviously having a pipleine to export your crude to a Med port is of great advantage but is not essential.
With no pipeline access the profitability of the SH oilfield asset would suffer greatly but, if crude prices stay high, it would still be bearable.
Hi Broadford,
I know I might sound really stupid asking this, but it has been one of my outstanding questions to myself about GKP.
What happens when this agreement ends? For example, terminated by one party, or simply expires?
Does it mean GKP no longer has the right to drill Shaikan or other assets?
Is that simply a case of ICG saying "Thanks, but the agreement is over now, pack your bags"?
Again, will probably sound stupid, but I don't have an answer to this and I don't mind admitting I don't know.
Thanks in advance.
Hi Surfit,
Thanks for the reply. Just my opinion, but I see Kurdistan24 as very pro-KDP/Barzarni and should be seen as such. It does not mean useful information can't be gleaned from it, but as a news outlet I see it in that pro-KDP bias/context. Examples include lauding Barzani's recent trip to the US (whilst he was incidentally answering a court summons lol) being portrayed as a matter of Kurdish statesmanship, and the consistent noise about how Kurdistan 'needs American troops to stay' (diverging from the noise, whether substantive or not, originating from Al-Sudani/ICG) and how recent Supreme Court rulings are 'against the Kurds' (my translation: reducing KDP/Kurdish power).
In this trend of declining power, are the Kurds going to fight back, Peshmerga/insurgency style against ICG? I think not. The teachers and civil servants just want to be paid, and they are willing be paid from ICG rather than from Kurdistan. KDP boycotting elections is a crazy development IMO. My view is the KRG will be reduced to an administrative entity proper as statehood (and even the level of economic autonomy it has hitherto exercised) continued to ebb further away. (I have no idea how KRG political elites will adapt to this new reality...). Erdogan visiting Kurdistan is important, for the cameras, for the administrators there, but the decision-making power in most matters (PKK insurgency, pipeline, water issues, Iraq-Turkey trade route) is clearly in Baghdad now.
I believe this is GOOD for GKP. We need those contracts legitimized and with ICG to ensure a path to development. Deal direct with ICG. This situation is therefore necessary and a good thing, but as it comes to a head, the devil will be in the details... (contract terms).
Seplat, I agree with you 100% that "financial logic will be vindicated". The pipeline will almost certainly open, and I am really encouraged by all the positive noise in the media from Iraqi officials who seem willing to (somehow) honour the outstanding $150m owed to GKP. I think we are at a transformative stage for GKP and once passed, the firm can finally get on with its FDP and ramp up production...
I am a novice and these are just my thoughts. I have been a passive observer of this share for about 10 years now lol, but I am not an expert. I really value some of the contributions and perspectives on boards like this. A valuable source of news and information. I also get the impression that some here are quite older (and potentially wiser). It is good to always be in learning mode.
In the early days discussion about GKP was focused on Shaikan, the asset and the operational aspects of things. Nowadays it is more about the geopolitics: the asset is fantastic, the company is doing well, but it is the external dynamics which are buffeting this ship. Once those calm down, I hope the firm will finally have the opportunity to implement the updated FDP and reinstate dividends.
Wishing you all the best.
Consider the potential implications of Article 11 of this sovereign agreement:
"...This Amendment shall be valid for 15 years as from entering into force. The Sides start negotiating the contract conditions upon request of any of the Sides two years before its termination date. In the case where there is no need for new amendment/agreement this Amendment shall be considered as extended for an additional 5 years period of time, unless a termination note is sent in writing by one of the two Sides to the other 1 (one) year before the expiration date of this agreement".
(Copied from the agreement exactly as written)
Assem Jihad, spokesman for the Iraqi Oil Ministry, told NRT that all the reports have been prepared by the technical committee and there are no technical problems to resume oil through the port of Jayhan.
He added that the Turkish delegation during their visit gave full assurance that the oil pipelines to transport oil from Kirkuk to Turkey are fully prepared, but what has created problems are the oil contracts that are contrary to the constitution.
He added that the Kurdistan Region wants to sign contracts in the same way as Iraq, which is contrary to the constitution and cannot share with the oil companies in the oil investment by 50%. "What the Kurdistan Region wants is to share the oil companies, which is not allowed, and we are in talks with the region to repay the debts of the oil companies on the profits of oil sales and share the profits between the region and Baghdad" .
He added that all the procedures for the resumption of oil exports have been completed and what remains depends on the final report of the oil committees under the supervision of the Iraqi Oil Marketing Company-SOMO. "We are trying to resume oil exports as soon as possible," he said.
Earlier, Iraqi Oil Minister Hayyan Abdul Ghani told a news conference that the export of oil through the port of Jayhan has been a good understanding and efforts have been made to resolve all issues with the region.
I take the IOCs silence, and especially that screaming Caggins Apikur silence, that negotiations are ongoing. Hopefully there are terms both can live with, and we have exports 2025 and onwards. Anyhow, we should learn in 2-3 months from now (leaks from either Apikur or the IOCs) if Iraq low-balled the new PSCs to a degree that forced the IOCs into international arbitration/stalemate. If that happens, I'm joining the majority of you in the Iraq/Kurdistan conspiracy.
As we've learned, Iraq has improved the terms of their local PSCs the last couple of years - and they only diff with KRG in 5% royalties nowadays. A sum that will be recouped, with a margin, if the IOCs for the first time will get international brent prices. Link: https://www.rudaw.net/sorani/business/140220245
"My take is that the oil pipeline is not a primary concern for ICG or Turkey."
Geo-politics:
Pre-closure Iraq (via the IOCs in KRG) provided Turkey with 24% (twenty-four percent) of its total imports of oil. Iraq (via the IOCs in KRG) was Turkey's number one importer, putting Russia and Iran number two and three respectively. Now, the tables has turned and Russia followed by Iran are the two main suppliers of oil to Turkey. If you believe that's a position Turkey wants to be in, I have some recent history books to sell you.
Economics:
Approx. $20 per barrel of oil exported to Turkey ended "on the Turkey side" i.e. midstream assets, storage assets, loading assets and export margin. Over $1,500m per year, every year.
Iraq is currently neglecting +10 US$ Billion per year (gross numbers, obviously).
I'm not being naive here, I see tons of issues and small conflicts as well - but at the end of the day financial logic will be vindicated. I believe both Iraq (Baghdad) and Erdogan (Ankara) has been way, way to vocal that they want to resume exports, for everybody to make a u-turn now. I might be wrong, but this is my stance and I've positioned myself accordingly.
Hi SenatorM, thank you for the reply, appreciated.
It is aligned ( more informative though) than my thinking. What I am thinking about is forces trying to drive division amongst the Kurds...I.e every one is together if your fighting a common enemy like DAESH. Is it all aimed pipeline and meetings to divide and reduce their strength? But the one artical from Kurdestan24 did state that Erdogan was also going to visit Kurdestan? Artical was a few weeks old, but that sets a very different tone and importantly is inclusive rather than just speaking with the Iraqs (and the kurds) in Baghdad (imo), although could be a tricky trip for his security?
https://www.kurdistan24.net/en/story/34128-Erdogan-to-visit-Iraq-after-Turkish-local-elections
Again thank you for thoughts.
It's all very tricky, especially for a Brit to understand the mindsets of all parties.
But I remain in the camp that we should see a restart of the pipeline within 3month OR its then looking like the Iraqs want to keep it shut for political / deni-finance reasons (imo).
GLA Sft
Great posts Senator! Don't listen to the Lemmings.
FWIW it is exactly because of these sentiments and reactions that I never bothered to post.
I'm not sure why you would think anything I wrote is not valid or some how propaganda...
If I find some news on Telegram or elsewhere which looks interesting I might share it, could be useful, maybe not.
Wishing you all well.
Agreed, which regular poster’s sock puppet account is this I wonder?
For someone who has 'stood in the sidelines' for years you've got an awful lot of exactly the same thing to say, into the sad case filter you go.
My take is that the oil pipeline is not a primary concern for ICG or Turkey. Turkey places greater priority on PKK/threats to the Iraq-Turkey trade route, which is of greater strategic value. Opportunistically, Turkey also sees Iraq as a fertile place for Turkish companies to do business, especially in the context of the Iraq-Turkey trade route. As I see it, ICG (wants) Turkey to stop violations of sovereignty/incursions into its territory and (needs) water. The Kurdistan-Ceyhan pipeline is probably a secondary or tertiary matter for these two stakeholders. Again, just my perception: Turkey is not worried about the pipeline because its restarting/utilisation (on the Turkish side) is inevitable simply, and until then, they are accruing non-usage fees which can be offset against any arbitration fine payable to ICG. On the other hand, ICG has more of a financial imperative to get oil flowing again, but (IMO) the strategic value of denigrating KRG autonomy and utlising this time to capitalise on the political fracturing which results from the economic losses is to politically valuable - more so than any revenues which can be gained from the Turkey-Ceyhan pipeline in the near term. In this context, the Zoom article may have simply been a "shots fired" discourse suggesting that ICG can and will consider circumventing Kurdistan entirely (or by extension, setting the tone for a future scenario where all Kurdish oil must go through ICG-controlled refineries to be considered legitimate - I don't know).
For the political elites in Kurdistan, I think the situation is quite acute. KDP is apparently boycotting the upcoming elections, meaning they might lose any claim they had (rightly or not) to a democratic mandate to rule/govern; PKK are now public enemy number 1; PUK (if I remember rightly) appealed to the Iraq Supreme Court (indicating some acquiescence; in contrast, all Barzarni-KDP media have been reiterating how 'unconstitutional' Iraq Supreme Court rulings have been)... so I really don't know how the politics in Kurdistan will play out or what will happen after the elections.
In the context of GKP, I think this situation has been a long time coming and I am hopeful/expectant of a resolution in my lifetime (lol). The KRG referendum didn't get the international backing necessary to bring it to fruition, so from that point economic and political autonomy of the region has been slowly eroded. For GKP, the main benefit I see is that its contracts (in whatever form they take) will be legal, and with the Iraqi Central Government, ultimately with a pipeline to world markets and a more stable business environment (in the context of the Iraq-Turkey trade corridor, and with internal Iraq-Kurdish jurisprudence being resolved) - in my opinion, a best case scenario. Question then is about the contents/terms of the contracts.
Error below: PKK not KPP
Rgds Sft
Good Artical, thank you.
I have done a search and a selective read on the diplomatic talks in preparation for President Erdogan visit in April the focus seem to be headlined as security (in relation to KPP) and then Energy as most written about, note also 1x artical states pipeline not physically ready to resume ops on the Iraqi side?
What does the bb poster here think on how much the removal (or limitations)of the PKK will play and how could that be implemented I.e. what could Iraq do or what could the governing Kurdish goverment do or be willing to do???
Rgds Sft
Example of articals below:
Artical 1 focuses on security and removal of PKK
https://apnews.com/article/turkey-iraq-foreign-minister-visit-pkk-177d80a962e8861f448fb5d4f0d12df3
Artical 2 (Kurdish) will include the resumption of oil exports through the Turkish port, as well as security, water, and diplomatic relations between Baghdad and Erbil.
https://www.kurdistan24.net/en/story/34128-Erdogan-to-visit-Iraq-after-Turkish-local-elections
Artical 3 (Retuers)
Senior officials from Turkey and Iraq will meet in Baghdad on Thursday to discuss energy cooperation, as well as security and defence matters, the Turkish Foreign Ministry said on Wednesday.
https://www.reuters.com/world/middle-east/turkey-discuss-common-understanding-security-with-iraq-official-2024-03-14/
Pivot point from this excellent article is this comment:
«However, the KRG in particular has blocked the resumption of shipments due to disagreements between Baghdad and Erbil over contracts for international oil companies operating in Iraq«
As always… these contracts are being held up as the disputed point purely due to the need to incorporate a means of pilferring for the tribal leaders to secure their birthright to sponge off their own population.
Hi Seplat,
I'm not taking a side - I'm simply sharing something I saw on Telegram and did not see before.
In my view, KRG have been persistent in taking an autonomous path of development for a long time, culminating in the referendum, and other political actions which diverge from ICG. I think recent Iraqi Supreme Court rulings are indicative of this new wind of ICG seeking more control over KRG direction/policy, and the Paris ruling knocks the economic wind out of KRG's sails. KRG begging the US for help and boycotting elections is symptomatic of this economic deflation and the new political dynamics.
That's just how I see it, but I do not necessarily think any of this is negative for GKP. I am just trying to understand the nuances of it all. I like the varied opinions on this board.
FWIW, I'm a long-term holder, been in since 2009/2010 (I think) when the SP was about 30p in old money. I was in my early 20s then and only had a few hundred quid in here (big money for me back then), but felt like I won the lottery. Topped up considerably from then on. Decided not to sell when it touched £4 in old money when I was at university - we live and learn. I used to watch the iii website boards a lot (I remember people like MikeyAdmin, and BBBSheep and some guy called Chocolate Chip Cookie). I went through the restructuring and got decimated, but didn't sell. Forgot about this share for years until I checked some years later and found that some very nice dividends had been piling up. Since then I have become more observant again... the iii board is gone but I have been passively watching this LSE board for the past year, especially since the pipeline shut down, looking for news. I have topped up since then, bringing my average down from £2.50 last year to £1.13 now.
I am happy to hold until the politics resolve themselves. Wishing all long term holders all the best, this share has been a hobby (or a bad habit) for me for over a decade now lol
BroadBB,
Fair points allround. I read the ICC verdict were Iraq was forced to pay US$ 590 million to Turkey because of far to low throughput than agreed upon (both in the 76' and 10' agreements). For years and years. If Baghdad this easily could scoop up 500k - 1.5m barrels per day in production to export through Ceyhan, one could ask why it wasn't done earlier.
I envision what we're seeing right now (domestic pipe refurbishment, Iraq's new improved PSCs to lure international investors, KRG/IOCs discussions, etc.) is Iraq's long term ambition to become a major exporter. If (or when) they're able to produce 1.5m barrel per day at and adjacent to the Kirkuk area, I'm sure it also will make financial sense to repair the second Ceyhan pipeline.
Balanced article from Turkey today, highlighting reopening is top of the agenda for Erdogan.
https://www.ankasam.org/iraq-turkey-crude-oil-pipeline-strategic-importance-and-impact-on-energy-geopolitics/?lang=en
Seplatwinner,
I follow the Botas Tenders very closely and I have seen nothing to indicate that the 2nd pipeline has been repaired. As the maintenance costs (borne by Botas) have greatly exceeded transportation fees for many years, I don't believe that the 2nd line has been refurbished. For the moment IMO we should consider ca 500Mbopd - Max 600Mbopd to be export pipeline capacity.
Re that available capacity, SOMO - as the sales and marketing authority - has the last word on what grades will be taken and what final export grade will be offered. For understandable reasons of national pride, SOMO aims to reinstate as near as possible the old Kirkuk Grade and, for that to be achieved, quite a portion of the Khurmala/Avanah/Bai Hassan/ Khabbaz and poss even Jambur output could be diverted North. THAT has important implications for the continued export of currently producing KRG fields, incl Shaikan.
C***eye,
to yr Q1: absolutely.
to yr implied Q2: that tiny, NW corner of Iraq - whose border is formed by the Tigris River, has been a smuggler's paradise for hundreds of years. Crossings of Semalka, Faysh Khabur and down to the old pipeline river crossing (trenched) location near Bajid have been lucrative fee earners for tribal powers - and today of course for the KRG. The whole area , right up to the Ovakoy Crossing (planned for many years to be the next main road crossing from Iraq into Turkey, is a hotly disputed corner that Baghdad will have back under its control.
The Syrian lands to the West leading to the Med may look appealing but they are still Badlands - just as bad as the S Diyarbakir corridor where much of the pipeline attacks previously took place.
Moving further South, towards the Rabia crossing is a possibility but suffers from the same Badlands issues - on both the Syrian and Iraq sides.
Nothing is impossible, but it's challenging to say the least, very challenging - and costly, and time-consuming.
We welcome this new account from last week, Mr Mendoza, who is from day one putting out the old conspiracy theories that ICG wants to put its own state (which it holds financial obligations to) into "a fold".
Do you recognize that KRG officials have agreed to the idea oil exports vill go via SOMO (Baghdad's goal), something which forum-pundits for long argued "KRG will fight to their death" that it'll never happen?
Secondly, that in this setup the Iraq state will earn more than KRG (according to the resource allocation state wise) - so the financial incentives are clearly there for a reopening.
There seems to be a quite large misunderstanding on this forum on the notion that, if the exports were to restart KRG will pocket 100% of the revenue and there will be only one winner. Again, KRG already folded on that point and that's in part why Baghdad started to send and allocate budget funds the other month. It's literally one country.
On the pipeline. Total capacity on the Ceyhan pipeline is approx 1.5m barell per day now (assuming the news that the second pipe has been repaired.) January 2023 we saw close to max throughput (on one pipe) when KRG exported approx. 392k and ICG (Kirkuk oil) approx. 86k. I see no immediate ability for Kirkuk to up production another million (!) barrels per day and squeeze out the IOCs. I see the pipe repair aligned with Iraq's long term ambitions to be a major local producer, not an elaborate scheme to put their state in bankruptcy.
I sincerely home GKP comes good and these operational and contractual issues settle down so we can get back to expanding production and paying dividends.
However from ICG point of view, this is a golden opportunity to finally subdue/corral into the fold the KRG/Kurdistan. A key element of doing that is undermining economic autonomy. The alternative pipeline that circumvents Kurdish territory and which still connects to the Turkish side of the pipeline would seem to be an excellent option for ICG.
I found this on twitter (using the word "discontinued").
https://twitter.com/vvanwilgenburg/status/1769807385990685179
Does anyone have access to a detailed map of pipelines in this area they could link to? Just for reference?
Question: the source cites someone in North Oil Company, but I can't find any other news about it on other sites/any other verification. Assuming this scenario is the case (pipeline out of action), what are thoughts on implications for GKP? Obviously it can continue as a going concern (no debt and profitable), but I'm thinking in terms of revenue/profit generation potential (and dividends) if this is the new reality.