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Article 2 hours ago
Paywall
https://www.iraqoilreport.com/news/august-production-surges-as-krg-fields-partially-revive-46054/
August production surges as KRG fields partially revive
Fields in Kurdistan are raising production and selling into the local market, as output increases despite the ongoing northern pipeline closure. August production surges as KRG fields partially revive
Fields in Kurdistan are raising production and selling into the local market, as output increases despite the ongoing northern pipeline closure.
Looks like they are now producing above their OPEC+ quota.
The PoO went up circa $5 a barrel during the time the pipeline was closed for what was thought to be the short term but then remained closed...
So if the pipeline did reopen, how about the following side effects.
The PoO would drop AND Iraq would have to curtail production from its own fields as the Kurdistan production picked back up again - otherwise it would be way above its quota.
I still don’t think that Iraq is under any significant financial pressure to reopen the pipeline. It is doing OK as things are, maybe a marginal gainer/loser but it’s not in a death spiral :)
@theoryman
If you look back at the past, Bagdad never really cared for the quotas.
Also the increased production should allow Kurdistan to receive a larger share from the federal budget, in my opinion they should be around 300k bpd.
Also Bagdad does not really make money with local sales and even the 120k bpd for the refineris won't make difference. They need to pay monthly 4-700 million dollars for Kurds while having almost no revenue from the Region while they also loose export around 80k bpd from Kirkuk. Also the USD 150 billion federal budget is financed by USD 50 billion deficit... I think Bagdad has every financial (!) reason to reopen the pipeline.
@Anfil, what sort of figure would the FGI have been sending to the KRG as cash per month in real time, if the exports were as normal and how does it compare to the value of the delayed random payments and these loans (humanitarian?) they have just graciously agreed with the pipeline being closed?
I ran the figures two months ago and the gains and losses were self cancelling to within a reasonable degree of certainty. I cannot rerun it with the latest figures because I am away from my base long term, mixture of research and holiday.
Maybe time to ask what would they give to the Turks if they were desperate and why haven’t they done it?
Drop the second arbitration case?
Agree that the Kurds benefitted from the illegal export, set up a system where the KRG “pays” the fine to Iraq to satisfy the arbitration ruling and it gets added to all their other international debts? (Recovered through withholding % of budget payment over as long as possible.)
If that combination doesn’t shift the Turks then what will?
theoryman. fine in theory but when it comes to common sense and logic middle eastern politicians become mired in a sea of self interest, religious lunacy and ****** / tribal agendas. that said at the end of the day money rules the world and it does seem that a pragmatic face saving solution is close. in the meantime, and as most sensible people on this forum seem to believe, gkp can survive and even return to small profits.
patience still required
@theoryman
If I know correctly, KRG revieved around $ 400 millions per month in the last 3 month. On the top of that - with US involvement - Bagdad agreed to give $ 1.5-1.6 billion to fully cover the saleries. This will be distrubuted in 3 portion and the federal governmnent backs the loan agreements.
According to the budget law, the KRG should get around 1 billion just for oil revenues (and they should have other 3-4 million (?) for other revenues).
Regarding the production around Kirkuk, idk whether they can effectively redirect that but if not then you can calculate that 80k bpd * 60 (USD/barrel because of quality discount) * 30 (days per month) * 5 (months)=$ 720 million. But again idk wheter they can redirect it or not. But for sure Bagdad paid for the KRG so far $ 1.2 billion and granted 1.5 billion in loans while recieved 3 times 80k bpd into refineries (worth around 4-500 million USD). So in financial terms if it continues, it is sure that it wont be financially sane for Bagdad because as local sales rump up, they wil be FORCED to pay more than 400 millions/month anyway. The higher the official Kurd production, the more they will have to pay, because - correct me if I am wrong - but the Budget Law requires the them (KRI) to export or if not possibly sell the oil in domestic markets, at least 500k bpd. I think they KRI should be easily over 300k bpd for now.
@Anfil, thanks for taking the time to go into so much detail, looks like things have moved on since I did that last look.
When it comes to the export versus can’t export wrt to the Budget Law i cannot remember seeing any differentiation.
The budget is balanced at a nominal figure for the exported PoO. If the oil is exported through SOMO then the volume is all that drives the budget share of the nominal cash. So if the KRG hits its target when the PoO is below the nominal value they still get paid as if if were at that value - aka Iraq would be running a deficit budget.
If the oil can’t be exported for any reason e.g. pipeline closed then it has to redirected to the internal market. None of these deals have mentioned SOMO, all are cash up front to whoever turns up and wants the oil. Given the volumes being sold and the price the buyers are paying, the local economy will be getting a very nice unexpected boost.
So given your point about the KRG’s share of this revenue, and how some of it might not be being past on by the companies, how can this production also lead to cash coming from Baghdad under the Budget Law?
The post from CCC just below this one references the two blockers I mentioned and adds in an another couple that Turkey also want sorting.
“Turkey has staked out an aggressive opening position, demanding the nullification of the $1.5 billion fine, the abandonment of the second leg of the case, an increase in transit fees, and Baghdad’s approval of the long-term energy agreement it signed with Erbil. Despite Ankara’s tough opening position, Baghdad has the leverage, with two legal opinions supporting its view.”
So what’s the probability that this is a slam dunk, no chance of the pipeline not opening soon, when you then read, “The Turkish demands are nonstarters for Iraqi Prime Minister Mohammed al-Sudani. His authority and space for maneuver are constrained by the factions that helped put him in power. These factions generally oppose Turkish interests in Iraq.”
The company is in survival mode, the FGI are sending money to keep Kurdistan from falling apart.
#1 Anyone who thinks the pipeline will open tomorrow, next week, next month really IMO needs to reconsider how realistic they are being.
#2 At some stage, Iraq must consider that the Turkish demands cross too many red lines and there is zero point in talking to them. Time for them to survive until they construct an alternative export route.