Ben Richardson, CEO at SulNOx, confident they can cost-effectively decarbonise commercial shipping. Watch the video here.
There are other - and non-IOCs operating in the region - who were selling their crudes before the pipline was closed; they think, correctly, why should I suffer?
Dog eats dog, offered prices reflect that.
There is just not the local refinery capacity and demand to satisfy all actors.
Dog eats dog.
$30/bbl was yesterday...
As reported in Energyvoice:
"...Investors should stay away from E&P companies working in Kurdistan, Panmure Gordon research analyst Ashley Kelty has said.Commenting on Genel Energy’s results this morning, Kelty warned that progress in resuming exports would be slow.
Some production has restarted and is being sold locally, he noted, but at prices “well discounted” to Brent.
“This state of stasis is likely to carry on for some time, with no obvious resolution to the dispute over the export pipeline, despite several false dawns after talks between officials. This means that investors would be well advised to avoid the KRG centric E&Ps for the time being.”
Rider75,
you are correct in that the Capex so far has resulted in a field output of XMbopd (ca 50,000?) and a processing capability of YMbopd (ca 75,000?). Of the cumulative Capex so far, we have probably recovered ca 90% ?. via the Cost Oil recovery, so not an awfuld lot left to claw back unless additional, and substantial , Capex is on the cards.
Coasting along, as you appear to infer, (forgive me if I misunderstand your meaning) is not realy an option as such producing formations deteriorate without preventive maintenance and ongoing TLC.
As the Cash Cow effect of yet unrecovered Capex heads towards zero, your positive cash flow can only then come from the Profit Oil component (you will of course never have a Zero Capex scenario as there is always something that needs to be done, but $5 - $10M per month Care-and-Maintenance Capex is not going to do much for you).
Putup, as you say, it's not even close.
I was lambasted many years ago for daring to point out that the Cost Oil recovery "revenues" should be looked at very critically - as basically it's just your own shareholder's funds (perhaps even borrowed money) being returned to you, albeit with delays.
The Profit Oil element should be what drives the perception of your business model.
All of this $20 - $30/bbl stuff being bandied around is misrepresentation of the facts. The Iraq Revenue Sharing Contracts (the Exploration, Development and Production Service Contracts (DPSCs) currently being fine-tuned by Iraq for the Fifth(+) and 6th Round Contracts ALL recognize the difference between money to be returned to the contractor group for field development capital expenditure and $/bbl earned for your efforts. The Rate of Return of incurred Capex can & will be modified, the $/bbl "earned revenue" eelement will be a far lower number than what is being spouted here.
Apropos Capex, dare I question how quickly the company will be able to fill its coffers fast enough to be able to initiate a major Capex project ...and on the back of that question, should the company have to return to capital markets to replenish the war chest, what the cost of that capital might be?
Hi Cookie,
I am well, thank you - trust you are also in good health?
Re GRH posting elsewhere, I would be very careful about assuming this is the real GRH and try to ascertain his bona fides, as much as you are able, before puting too much trust in what he says.
The mention of "Rob" intrigues me - would this be Robert aka bobobob Waterhouse...?
I'm not following the Predator story at the moment.
Taqa has been trying to offload its Atrush stake for several years - see Gulf Times May-2016, "...According to TAQA’s 2015 annual report, the company has an agreement with a “related party” under which, at the request of TAQA, that party would buy all its oil and gas assets in North America and Atrush in Iraqi Kurdistan, plus most of its assets in Europe, at an agreed price."
The news that Taqa is not very happy with its Kurd investment has been repeated at various times since then.
Until the price is made known, it's best to assume no great added value effect here - just a tidying up excercise.
MOL, as minority partner along with Texas Keystone in the Shaikan operation, could be considering a similar stake sale.
Keep your eyes on Todd, possibly getting out of US jail early - an angry man who feels hard done by...
Annoying LSE correcting software, I'll try again:
"the apikur member companies' current commercial terms and economic model must be maintained."
Good luck with that. this is very difficult for somo to swallow - the various KRG/MNR PSCs are not identical - the "local contribution/tax" varies, the % that can be reclaimed via Cost Oil formula varies, the % and kick-in points (R-formula) for the Profit Oil varies.
And of course the quality of crudes produced by the members varies greatly.
Could HKN think they are in the driving seat?
"the apikur member companies' current commercial terms and economic model must be maintained."
good luck with that. this is very difficult for somo to swallow - the various krg/mnr pscs are not ****geneous - the "local contribution/tax" varies, the % that can be reclaimed via co formula varies, the % and kick-in points (r-formula) for the po varies.
and of course the quality of crudes produced by the members varies greatly.
could hkn think they are in the driving seat?
Shares are not an asset - they can (should?) be considered an IOU.
@TM, enjoy your posts.
The return of invested capital, whether via a CO formula or whatever, is not in dispute (even the Southern operators receive back their invested sums... eventually), only the rate of return.
The main thorn-in-the-flesh is the PO part of the Kurd contracts; at $60/bbl crude, PO looks sort of ok, at $100/bbl crude (or God forbid $150/bbl) it looks far too generous - when seen thru Bahgdad and Basrah eyes.
For some time now the concept of an indexed $/bbl revenue (PO), linked in some transparent and "fair" manner to crude price of the day has been under consideration by ICG. Problem is, it's a mammoth task and cannot be seen to be driven by Kurdish demands.
As you say, we are nowhere near the endgame.
Phlegmatically you might even say (SOMO might): well, you appear to be making good money with local sales, what's the beef?
The laws of unintended consequences might soon kick in anyway.
@putup,
Production Facilities PF1 and -2 were installed at different times and, while certainly part of the overall "Assets" you wish to recognize in your books, can also be considered as 2 completely separate assets.
When ownership of these assets was transferred, or will be transferred, to the MNR/KRG is still unclear.
As you say, at some point the value of assets as stated in the published accounts will have to be significantly modified / corrected. At that time, the "Assets" will increasingly look like a PSC contract (with all of the potential future production entitlements therein implied) but with very little associated "hardware". Would that be a good thing?
The Shaikan PSC includes the following:
Article 20 (Title to Assets)
Clause 20.2
During the Development Period, subject to Article 21, all Assets acquired by the CONTRACTOR for the Petroleum Operations shall become the property of the GOVERNMENT upon the completion of the recovery of their costs of all such assets by the CONTRACTOR, or at the end of the Contract, whichever is the earlier.
Bearing in mind that "the Assets" are now a mismash of flowlines, wellhead gear, pipelines, pumps, storage vessels, site offices and process plant, you could, if you were so minded, probably claim that certain parts of the Process Faciilities have already been paid-off and are therefore owned by the MNR/KRG? This could be rather a delicate issue in any ongoing power plays.
(Article 21 states: Each CONTRACTOR Entity shall have the exclsive right to use, free of charge, all Assets described in Article 20, both before and after recovery of the cost of the same, for the Petroleum Operations, as well as for any petroleum operations under other agreements in the Kurdistan region to which it or any of its Affiliates is a party, provided that the Petroleum Operations take priority. The GOVERNMENT agrees not to transfer or otherwise dispose of any of the Assets without the CONTRACTOR's prior written approval)
After all these years the 5% Texas Keystone holding has still not been officially transferred to GKP.
Peart said it was but a small formality.
I don't think so.
I see that MV Altai (aka Neverland Star) and MV Aegean Power are now anchored at the mouth of the Iskenderun bay.
Old friends, both of them.
Meaningless or meaningfull?
Hopeful traders taking a punt?
Stop salivating over this possibility - it just won't happen.
What might well happen is the re-start of pipeline operation exporting crude only from the 2 Baghdad-controlled Kirkuk domes plus the Erbil-controlled Khurmala dome (with reduced initial volumes of less than the much-trumpeted 400Mbopd); a return to the historic Kirkuk Export Grade, with all the implications that might imply for the heavier crude producers?
This would of course necessitate using the Erbil-financed pipeline from the Khumala CPF to the Faysh Khabur export terminal, so some sweeteners necessary perhaps for KRG, BarZ and his crowd.
This provocative start of operations would do 3 things:
1. It might concentrate the APIKUR mindset beautifully - "look what we're missing!"
2. It would help Erbil in their painful negotiations with the local producers in respect of modified contract terms and outstanding payments.
3. It would show up the APIKUR mindset as being part of the problem, not part of the solution.
Fait accompli.
Just a mull...?
Which brings us to the question, how does SOMO intend to market their new Kurdish export grade?
Shaikan quality/gravity is rather heavy (API14 – 17 depending on producing formations) and large volumes will significantly pull down the gravity of any new grade – there are simply not enough lighter crudes available in N.Iraq to offset that. TaqTaq volumes (the Champagne Crude) are now so low as to be insignificant. Swara Tika crudes are light and sweet but production is still stuck at less than 50Mbop. Khurmala (and adjacent smaller fields still under KRG control) and Tawke/Peshkabir/Baeshiqa are the 2 big ones. Khurmala, with gravity API31-33 and S%2.4 and reported output potential of ca 200Mbopd. True output numbers are not available but other reports indicate closer to 170Mbopd with gas output being given more attention recently. Tawke/Peshkabir/Baeshiqa, API24? and S%4?, are well known and potential output of 100Mbopd is on the cards if and when when things return to normal.
There are tools available that allow you to calculate with reasonable accuracy the final blend quality for such a mixed bag of crudes. Try using them, you will be amazed at the implications they highlight.
It seems to us that, no matter how you cut it, SOMO will determine the constituents of their new Northern Export Grade and, should they really wish to market a Kirkuk Analogue once again, limits will have to be placed on volumes / proportions of heavier crudes put into the export pipeline.
Don’t forget also that there are other high-output fields (Kirkuk domes - Avanah, Bai Hassan) that produce lighter crudes available to SOMO which could easily bring grade numbers back to near Kirkuk levels -with further consequences for the lower grade producers.
Some appear unable to see the wood for the trees…
There are 3 major issues to be settled, not one:
1. Agreement on modified production contracts.
2. Agreement on new field-specific volumetric parameters required for new Kurdish export grade.
3. Re-opening of pipeline, including agreement on new fee structure.
Leaving aside #3 pipeline issues, #1 is close to potential agreement – albeit with new a Revenue Sharing concept being introduced, one that will not please most Northern producers.
#2 is the most problematic for the current APIKUR group, as it introduces what has already been described as a “discriminatory factor”, whereby SOMO determines the constituent crudes and their proportions for the new Kurdish grade to be marketed. As things stand at present, if your low added-value crude is not wanted in the quantities you are able to produce then you have no choice but to sell to the local market – at prices they more or less dictate.
Make no mistake, SOMO is the supreme marketing authority for ALL Iraq crude (MNR is now reduced to Junior Partner in any discussion re the Northern crudes; SOMO cracks the whip re sales & marketing, NOCo cracks the whip re development plans for exploitation of Kurdish oil- and gas fields).
At the moment, excluding the KBT grade, there are 3 crude grades sold by Iraq:
Basrah Heavy API24 and S%4
Basrah Medium API29-30 and S%2
Basrah Light at API31.4 and S%2.75
(ALL of these grade qualities are subject to fine-tuning by SOMO at any time)
The quality of the (new defunct?) KBT grade has never been made public, having been talked about as though it were still the old “Kirkuk grade” of ca API32 and S%2.5-3. This is most certainly incorrect with respect to Kurd exports in recent years – you just have to look at the constituent grades and their last volume numbers to realise that.
Which brings us to the question, how does SOMO intend to market their new Kurdish export grade?
@itsaponzi, wise words...
There may well be a "gasp of relief" rise, but that will be soon followed by the cold light of day.
Argus reporting thet re-opening is not imminent...
There is a high probability IMO that the marketing authority SOMO will want to "test the market" to try to establish a benchmark for a new/revised/modified Kurdish / KBT grade.
A significant traditionalist block down in Baghdad - perhaps for no other reason than historical pride, would like a return to the historical Kirkuk grade (ca 33API, 2.25%S).
Pragmatists on the other hand recognize that things have changed, seem prepared to "play around with the ingredients" and offer a completely new blend - perhaps after consultation with the trading houses and Med refiners.
Part of that re-jigging of ingredients could involve limiting (not excluding) the inclusion of the really heavy grades, such as SH. It's quite likely that trial batches, sent by truck to the assay labs at Kirkuk, have already been tested, distilled, and offered.
We might well be looking at a permanent marketing split for SH crude - X% going South to the low-value basic refineries of Iraq, Y% going North into the Ceyhan pipeline. IMO It is not realistic to think of very high volumes of SH crude at 17API (perhaps even heavier, down to 14API) with >S5% forming a significant proportion of the future KBT blend.