Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
Re expiry of existing pipeline agreement.
Does anyone really believe that Baghdad would stand idly by and let the KRG sign a pipeline agreement with Turkey - one which utilizes the existing Faysh-Khabur - Ceyhan pipeline, an agreement which would give the KRG enormous leverage over the only pipeline available to export Iraq's oil to the Med?
I do not believe it for one minute.
@nobull,
don't take it personally, it's only business.
The central government is interested only in re-establishing their rights in KRI as sovereign authority, with SOMO in charge of all external sales and marketing of crude oil & derivatives.
IMO it's going to get even messier, with the KRG trying to wriggle out of their payment obligations.
As per the remarks on P18 (Route to market):
"It is expected the Federal Government of Iraq ("FGI") will control the marketing of Kurdistan's crude oil once pipeline exports resume"
Not all KRI produced crude will find its way into the export pipeline.
Shafaq reported this morning:
"Shafaq News/ Iraqi government official indicated that the resumption of oil exports from Kurdistan to Turiye via the closed pipeline, inactive for more than a year, faces extended delays as negotiations persist with the Kurdish government and oil producers.
Basim Al-Awadi, the spokesperson for the Iraqi government, said in a press release that ongoing discussions between companies and the Iraqi Oil Ministry are anticipated to be protracted.
This is because Baghdad aims to establish a direct rapport encompassing production volumes, export procedures, and pricing mechanisms.: Al-Awadi clarified, adding that there is no definite timeline for the conclusion of negotiations with foreign oil entities operating in Iraqi Kurdistan."
I post the following just as a reminder that not everything you read on ME websites can be taken as gospel.
From Shafaq.com (English) on 19/4/24, al-Sudani speaking to Biden:
"ISIS is not a threat now to Iraq and most of its members are now hiding in the mountains in caves in the Sahara Desert..."
As putup tangentially says, the future will be no reflection of the past.
Do not forget that, as SOMO are now in the driving seat and seem determined to reintroduce the Kirkuk Export Blend, only a fraction of Shaikan's output can be accommodated in that blend (it's simply too heavy and pulls down the export blend API). The majority of future revenue therefore will be realised in the local market - with consequences for agreeing the FDP and associated large Capex projects. Note also that SOMO and NOCo will, to a great extent, now determine how that FDP will look, with the MNR relegated to a subsidiary role.
Words are important.
It is disingenuous in the extreme to claim that the PSCs have not been seen or given to the Baghdad authorities.
The MoO took copies of ALL the PSCs that were made available (in the early days) to investors by the KRG/MNR; I know this for a fact.
What the Ministry does NOT have - and nor do investors - is copies of all the side protokols, agreements and understandings that put real meat on the bones of those PSCs put into the public domain.
ALL sides are being economical with the truth...
Do you understand the words "...no direct correlation"?
I don't understand your sentence beginning:
"Secondly, the refiners compete with other local sources of crude; and do you really argue that if that was priced at $120, they would still not pay a single cent more...".
When you say "..if that was priced at $120.." what do you mean by THAT?
I'd like to respond properly to your posting but you're confusing me...
The refinery yields obtained from processing Tawke, Peshkabir, Swara Tika and Atrush crudes are all very different from that of SH crude and cannot be compared using a simple $/bbl metric as you seem determined to attempt. Sorry, but that's how it is.
You say "...they also sell some volume directly to refiners" - where else do you think they are selling it? Do you think they are paying $15/bbl for trucking it to Ceyhan?
Local prices also fluctuate, no question about that but it's wrong to tie these fluctuations to Brent. If some other local fields were diverting their supplies S to Basrah, as has been reported, that would starve the refineries somewhat and help explain the rise?
Graph the internal (Iraq) prices for diesel and petrol for the last 10 years against Brent before you spout off...
There is NO direct correlation between external (i.e. Brent) prices and the Iraq internal sales price for crude oil.
Local selling prices for Diesel, Petrol and Heating Oils are determined by Government pressure / guidance, not by any international criteria.
GKP's achieved $/bbl price will be determined by local supply & refinery demand criteria, nothing else.
Stick with the $25/bbl for the moment...
Captain,
thank you for posting that Rudaw inteview with KRG Cabinet Sec. Rahim.
The following section caught my eye and, if a true representation of what was said, needs some serious thought by investors:
"There was one point of disagreement on the oil issue: the wages of the companies. Has any agreement been reached on this issue?
First of all, the Kurdistan Region does not have a national oil company to force its companies to agree to the money determined by the Iraqi oil ministry, SO THIS PROBLEM IS MORE BETWEEN THE OIL COMPANIES AND THE IRAQI OIL MINISTRY, not between the KRG and the federal government. In the latest step, we took representatives of all companies to Baghdad and met with the oil ministry under the supervision of the finance committee, and provided any documents they requested. THEREFORE THE PROBLEM IS NOW BETWEEN THE COMPANIES AND THE IRAQI OIL MINISTRY, although unfortunately the suspension of oil exports from the Kurdistan Region has caused more than $500 million monthly loss to the Iraqi treasury."
(CAPS are mine)
That reads rather like "It's not my problem lads, it's up to you to sort it out".
IF the old pipeline (Kirkuk-Baiji-Mosul-FK-Ceyhan) has been repaired (I believe most of the damage by DAESH was to the 2 pumping stations) then Baghdad will still have to use the FK Export Pumping and Metering Station as it’s the only one available to my knowledge.
As KRG claims the FK station is within their territory, how then will that use by SOMO be achieved - by force or by agreement?
Using force cannot be ruled out and is what is wanted by some hardliners in Baghdad, but may not be necessary at the end of the day.
Agreement will involve compromise by both sides.
The 2 Issues that I see both impinge on the APIKUR / PSC discussions and -arguments:
Grade/Blend Quality
Partly for reasons of national pride, SOMO wish to reinstate as closely as possible the old Kirkuk Blend (ca 32-33API, S=2.5%) and they will want to differentiate between their current 3 Basrah grades (Heavy, Medium, Light) and the reinstated K grade. SOMO will determine which grades and what volumes of each will make up that export blend.
Flow Volume
The main SOMO inputs will be from the Avanna, Bai Hassan and Kirkuk formations and, assuming that a proportion (one third?) of that output will be earmarked for the Baiji refining complex for local refined product sale, we could be talking about flowing volumes from the South in that pipeline of ca 300 - 350Mbopd.
As the Ceyhan pipeline capacity is currently probably no more than 450-500Mbopd, full capacity utilization is therefore one of the factors that could be discussed by SOMO & KRG.
However, 500 – 350 only equals 150Mbopd (contribution by KRG) and that would be a big blow for the KRG/MNR – and for the local KRG producers hoping for unfettered export access.
Don’t get too excited…
Invstrat,
one of the arguments against the creation of an independent Kurdistan must surely be the hugely destablising effect this would then have on N. Syria and (mostly Southern) Turkey (leaving aside the Kurdish minority in NW Iran). Both areas have large numbers of "Kurdish" people - many of whom actively support the creation of a new Kurdish state in the ME.
The resulting euphoria that at least one part of their diaspora had finally managed it would, IMO, set the whole area aflame with unforeseeable consequences.
I don't think the USA would welcome that in the near future.
@senator,
As I see it, there are at least our issues, not one, that are all interrelated and require resolving:
1. Approval by Baghdad Parliament to allow TR troops to be based permanently inside Iraq in order to deal with the PKK problem once and for all; the TIMZ (Turkey-Iraq Military Zone) in the Quandil Mountain Area. Although there have been Turkish ouposts in N. Iraq for years, these have all been small and mostly tied in to specific operations. The proposed and initially agreed (at minister level but without approval of parliament) Military Zone will be a major and permanent facility - a very different kettle of fish and one that will be bitterly contested in Baghdad.
2 The acceptance by the various contractors (HKN, GKP, SMN, etc) of the modified Iraq oilfield development contracts based on a form of revenue sharing. This modified payement scheme will alter (decrease) the rate of Capex return to the contractors and make it less attractive (for some) to operate there.
3. The acceptance by KRG of subordination to Iraq state marketing organization SOMO in respect of all Iraq crude oil exports to the Med via the Kirkuk-Ceyhan pipeline. Such subordination to include blend parameters (how much of which crude will make up the blend) and will change the payback parameters, reducing the attractiveness (for some) of the Kurdish plays. Control of the export meters at both the FK station and the loading- and tank storage points at Ceyhan port will also be ceded.
4. The final amount of compensation to by paid by Iraq to Turkey in respect of the non-fulfillment of pipeline agreement contract terms from 2018 to present day (ICC ruling).
In view of the complexity of the issues, and how interwoven they are, there are for sure possibilities for compromise. If history has taught us anything, however (see the mess of IR Constitution implementation), it is that simple (to understand) and straightforward (to implement) is better in this part of the world.
@senator,
the PSC refers only to a "delivery point", to which the produced crude oil is to be delivered - no mention of a pipeline (Clause 27.2).
In the event the current pipeline agreement (between Turkey and Iraq) is not extended or renewed, the focus then switches to the Crude Oil Export Pumping & Metering Station at Faysh Khabur - just South of the IR-TR border at Ovakoy, which pumps Iraq crude into the Ceyhan pipeline.
Do you really believe that the Baghdad authorities would allow a subordinate authority (the KRG) to utilize this important piece of infrastructure for their Kurdish benefit and to block its use by the federal government of Iraq?
Putup,
I wouldn't disagree with any of that....BUT, at the end of the day, the sovereign entity determines the oilfield development plan (in agreement and after deep consultation with the contractors).
In the event that agreement is not forthcoming then a parting of the ways (in extereme case) could be on the cards - in GKP's case I consider that unlikely as the company has been both successful and cooperative (so far) in it's government dealings (as far as we are aware). But, the argument of "if you cant't do it there are others who can" is a powerful one.
The huge dividends paid out so far can be seen as a red rag to a bull - should you be that way inclined, as some in Baghdad and Erbil are.
I would argue for a nominal 3.5p per share max.
Hanging over the company is the prospect of a new/revised FDP - which is now no longer the sole remit of the MNR in Erbil. SOMO and NOC now call the shots re how the Iraq oil industry should be developed and that will be felt also in the KRI fields. It's also not a given that all of GKP's output will be accepted into the Kurdish blend - again, SOMO will decide upon the export blend parameters and a fair proportion of the heavier SH crude may be permanently directed towards local customers who will pay much less than the international value.
Until that new FDP has been presented / agreed / forced upon GKP, and others, the company would be well advised to hoard cash or keep ANY dividend to an absolute minimum.
The cessation of flaring for example will be expensive, whatever form is decided upon. In a similar vein, forced (as in their timescale, not GKP's) exploration of the deeper formations will also eat cash.
Today's report states that Licence Expiry is 2043 (Shaikan Field Estimated Reserves section) - this is incorrect.
A. Shaikan was declared a Commercial Discovery on 1st Aug-2012 and the Contract Term is for 20 years from commercial discovery; that means end-of-term is End-July-2032 (PSC Clause 6.10 refers).
B. There is an “automatic right”, however, to a 5-year extension which would then take it to End-July-2037 (it’s my presumption that this “right” will still have to be requested or demanded).
C. There is another possible extension, of an additional 5 years, which can be requested at the end of the 20+5 year period (1st Aug-2037) and, IF requested and granted, the contract would then finally end End-July-2042. Note that this particular request has to be made at least six (6) months before end of the development period.
March-2024 Aug-2032 Aug-2037 How time flies...
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.