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For me looking at our companies political future this is the way I currently see it.
Erdogen is no fool and Baghdad listed water issues at the top of the meetings agenda. No formal agreement was reached, and notable that unlike last summer we are not seeing a deluge of water being released from Turkish dams "as another act of good faith". /they did that last year and by solving the Iraqi water shortage, it enabled them to then stonewall talks for a year, until the issue appears again as the dry season looms this year.
https://www.rudaw.net/english/middleeast/21042024
However Erdogen then visited Kurdistan, where crude exports were top points of discussion with water reduced to second place. Turkish investments in Kurdish oil companies and export is very heavy and they also want Kurdish crude flowing again to Turkey, as it makes them a lot of money at a time of financial hardship and rampant inflation.
https://www.rudaw.net/english/middleeast/19042024
Now we do have more committees set up I expect as a result of this visits looking at ways to integrate Kurdish exports into Iraqi law to allow the crude to flow again.
https://www.rudaw.net/english/kurdistan/030520244
However I join with fellow investors here in being highly sceptical of any success, and hope to be proved wrong. for the following reasons.
1. they have already carefully covered all this ground before.
2.They know they have to tweak/amend Iraqi laws to enable larger payments.
3. IOC's not being currently included in discussions...Are they actually serious or just playing the normal lip service.
4. Iranian judges control statute, even if the commitee recommend/agree to tweak the law, can easily be delayed by those with Iranian views in power, exactly what they did at the start of this year.
I expect its going to be a very dry year in Baghdad this year.
At least we do have a couple of officials now saying that the export position will be sorted out. I'm also in the sceptical camp on this one and look upon it as a brilliant bonus if it happens but most certainly prepared for a 15 month wait till current pipeline contract expires if nothing but biscuit munching and hot air comes of it. We know its a tactic employed too often by Baghdad when pressure on them builds and in this case from Turkey and Uncle Sam. However we have not had one jot of evidence that they have in any way accepted our contracts, or even going to shift from a paltry $6 per barrel of crude.
Could well see the local crude prices paid rise a lot more as retail diesel and petrol prices have just risen a full 30%.
https://www.thenationalnews.com/news/mena/2024/05/01/iraq-fuel-petrol-prices-cost/
I think we have to follow the money here. We produced the crude oil and it was sold (its not still in Turkish tankage), and the proceeds were taken by the KRG, and although they know they owe us 151M which is our rightful dues, they have wrongfully blown the money elsewhere. What can they now do.
1. GKP to have "free carry", taxes, rates, etc to help against debt.
2.Also the KRG do get a decent percentage of the value of the crude produced, possibility that they forfeit this income going forward until debts repaid. will mean more to gkp.
Does seem like Iraq is moving much more towards fundamentalism, with new laws proclaimed which would by western standards seem an outrage and would cause uproar if introduced here.
https://www.reuters.com/world/middle-east/iraq-criminalises-same-sex-relationships-with-maximum-15-years-prison-2024-04-27/
Bit of a shame as it makes it harder to do business with them. Its been frowned on in many Arab countries for years but fallen short of imprisonment.
Makes sense Mendoza,
Also signals a very important points which are very significant indeed.
That is firstly the KRG recognise a financial obligation to the IOC's. (not theft), secondly its demonstrating a willingness to repay, even though they are being financially squeezed currently.
it also helps us out by reducing ongoing costs.
Dana gas also owed 151M in back payment. Not just those producing crude oil.
The site has been attacked twice before with rockets, once causing no issue and the second time causing a small fire, however having 4 men killed this time is dreadful and does reflect increasing effectiveness of longer range Iranian terror weapons.
Without wanting too, it will probably cause increased demand for heavy oil as many in Kurdistan used to the frequent powercuts often have old diesel type generators as backup. This will keep the local teapots full for sure, churning out rough cut crude, via flash distillation.
https://www.thenationalnews.com/business/energy/2024/02/08/dana-gas-profit-fell-in-2023-on-lower-oil-and-gas-prices/
True bdgm,
I alluded that Iran was more likely responsible and it wants Iraq to become dependant on it and control it. That was without any definitive proof. However just now released actual filmed footage of the attack using an Iranian drone.
https://www.kurdistan24.net/en/story/34708-Exclusive:-Surveillance-footage-reveals-dramatic-drone-attack-on-Khor-Mor-gas-field
No group has yet owned up to the attack on the gas field. Clearly the objective was to hit the electricity generation capabilities.
Which groups are most likely to be able to source attack drones and objective behind it.
Iraq has been importing a lot of electricity from Iran, however Uncle Sam is trying to wean them off importing electricity from Iran, especially when they have an abundance of raw gas to enable them to generate their own power.
Clearly groups operating within Iraq but supplied by Iranian drones and doing their bidding seems to be favourite, however the facts will be revealed in time. Whether this is a one off, or the start of something more significant only time will tell.
Although its not exports starting, these actual words from the report are highly encouraging for us investors. please read below.
Local sales volumes have rebounded since the beginning of 2024, with year to date gross average sales of c.33,300 bopd and March to date sales of c.43,000 bopd. We are more than covering our monthly expenditures and have significantly reduced accounts payable, with all invoices now current. Free cash flow from current robust local sales demand is being used to further improve our liquidity position. Looking ahead, we remain resilient with upside potential from the restart of exports and normalisation of payments. While there is no defined timeline, we continue to actively engage with government stakeholders to secure a solution to unlock significant value for all stakeholders.”
21 March 2024
Its double standards that although Bagdad pays small amounts for every barrel produced they do in some locations pay more than what the IOC's are asking for.
This is clearly due to having some "special arrangements in place". The Iraqi oil ministers and politicians are getting obscene backhanders for doing nothing. So talk about an upper $6 per barrel limit is pure rubbish.
The actions of Baghdad in deliberate delay for the past year and for the foreseeable must result in international trucking operations resuming to Turkey. They give them no other choice and by withholding budget cements that resolve.
I do believe tensions in the middle east are cooling somewhat, with Iran privately pretty shocked at how easily Israel stopped a very large attack, and then followed it up with a small counter punch which Iran failed to stop. realisation dawns that they are a long way behind Israel in military capabilities so will need to improve.
Hopefully things will now settle down, although Iran will come back for sure in the future.
Last year we had firm messages that Iraq was going to tweak its laws to allow something near contractual payments to the IOC's to go ahead. That timeline moved into this year, and now nothing, just firstly trying to shift blame to the IOC's, then the KRG.
However its Baghdad thats culled the changes and we do not know why or what factions within Iraq put on pressure to Iraqi parliament do it.
Quite a strong rebuttal from the Kurdistan gov, pointing out that the rules the Iraq gov are trying to enforce have been constructed from non international recognised standards, antiquated from the Saddam regime.
This is due to the fact that Baghdad don't want to tweak their laws, and don't intend to. Every meeting over the last year has clearly been a waste of time. Seems Turkey backs Erbil in this and Iraq is desperate for Turkish water, so its why they are trying to get another export pipeline commissioned . However Turkey has serious investments in the Kurdish IOC's, so in effect gets a double bite of the cherry. It wants Kurdish crude.
Its also a neat way of delaying the whole issue, which is to stagnate the more western backed Kurdish economy. This will be fully supported by Iranian factions and militant groups within Iraq.
Glad we said it was a glimmer of hope, that was spot on.
I think its important to put a worst case timeline in it TSSZ, for investment /reward purposes. For me that timeline stands at about 16 months, when the current export pipeline to Turkey expires. Then the KRG/ TURKEY and the IOC's can make another and start exporting.
As the company has got its head above water with steady income, its pretty safe in the foreseeable, so I look upon things as a locked in 18month bond/investment with returns at that time much better than I can get elsewhere. That's without any agreement in the meantime. THE IOC's and KRG both know this and I believe its one reason why they are playing hardball.
Turkey tried the goodwill gesture last summer, by opening up the water flows so Iraq could have plenty of water, costing Turkey electricity production and expecting the return of that "goodwill", in crude oil flows.
Iraq gave them nothing, so gesture wont be repeated.
Yes the ministry of oil is saying they are ready for export.
They will most certainly allow free export, whereas the oil companies will not get paid anything at all. The IOC's took all the exploration risk with no infrastructure unlike the known easy oil in Iraq, where in many cases it was already producing and access was good. And Iraq thinks it can pay them exactly the same.???, and rip up existing solid contracts.
I also would like your house and car, but I wont give you anything for them?
This stock does surprise, so I would not do for a huge retrace.
In Europe out means out, in Iraq no agreement means no agreement yesterday.
Also the Arab culture is completely different to ours. For example we saw the same old delaying tactics used yesterday, but pointedly no agreement for more water either. They could be totally at loggerheads one day and about to have a military conflict, the next following a brief small slipping in of a "arrangement envelope", best of friends and saying he wants you to to marry his daughter.
The future for Iraq is very bleak indeed and will almost certainly become a puppet for Iran, and Iranian militant groups will continue to grow in power. Western companies will continue to pull out, leaving Russian and Chinese ones who have less morals. However they are only after money, so the mass population will continue to starve, and highly likely to become a wasteland rather than a successful metropolis it could become, but ruined by themselves.
I do believe we will carry on like this for another 15 months until the export oil pipeline ends. then its back as previous.
I find it almost unbelievable that Iraqi ministers and some Kurdish ones are actively looking for western investment by western businesses while clearly demonstrating by their own actions and bickering that they are a place you wouldn't touch with a barge pole.
Clearly only companies that will do some sort of investment participation only do so when they hope for very generous returns and not those normally seen.
This is due to corruption on an eye watering scale, and backsliding on cast iron contracts.