Member Info for BroadfordBay

I see SNM reporting local sales net price was $36.49/bbl in Q1.

How much lower will the SH number be?

Article 40. Force Majeure

Most of the textual references in this clause are in respect of the CONTRACTOR, but the final 2 sub-clauses also bear scrutiny.

40.2 For the purpose of this Contract, “Force Majeure” means any event that is unforeseeable, insurmountable and irresistible, not due to any error or omission by the CONTRACTOR but due to circumstances beyond its control, which prevents or impedes execution of all or part of its obligations under this Contract. Such events shall include the following:

(My NB: there follows a list of events that can trigger FM, (a) thru (h))

40.2.(g) except in respect of the GOVERNMENT and/or any Public Company which may be a CONTRACTOR Entity, any acts or orders of the GOVERNMENT, any minister, ministry, department, sub-division, agency, authority, council, committee, or other constituent element thereof, or any corporation owned and/or controlled by any of the foregoing, and

40.2.(h) any acts or orders of any government claiming or asserting jurisdiction over the subject matter of this Contract, any minister, ministry, department, sub-division, agency, authority, council, committee, or other constituent element thereof, or any corporation owned and/or controlled by any of the foregoing.

40.3 The intention of the Parties is that Force Majeure shall receive the interpretation that complies most with prudent international petroleum industry practice. Force Majeure affecting a CONTRACTOR Entity of an Affiliated Company of a CONTRACTOR Entity shall be deemed Force Majeure affecting the CONTRACTOR if the consequences of such Force Majeure prevents the performance of any of the CONTRACTOR’s obligations under this Contract.

Provocative final Q: Is Texas Keystone still an "Associated Company" - or has it been fully absorbed?

Belgrano,

1. Pay BOTAS the increased tariff of $5 - $7/bbl for transporting the re-introduced Kirkuk Grade.

2. Accept a deal with TR to take most of the Kurd Heavy Crude that cannot be accepted into the Ceyhan pipeline (and that cannot be sold to the local refineries) and truck this to a new export tank farm near Ceyhan.

TR gets a nice little earner once again, and SOMO don't have to market that horrible heavy stuff.

Hi TM,

it certainly appears the KRG/MNR made a cross for their own backs when formulating the Art. 43 clauses.

Art 43.5 states: Without prejudice to the generality of the foregoing, the CONTRACTOR shall be entitled to the benefit of any future changes to the petroleum legislation or any other legislation complementing, amending or replacing it.

Baghdad may indeed be saying: you broke it - you fix it!

Without prejudice.

Not being privy to all the discussions going on re settlement of the PSC- and payments issues, I looked again at the contract to see what it says about it all and note that the PSC, signed by GKP, Texas Keystone, MOL and the KRG/MNR on 6th Nov-2007 included the following:

Article 43 – Governing Law, Fiscal Stability and Amendments

Governing Law

43.1 (Confirms contract to be governed by English Law)

Fiscal Stability

43.2 (Contractor obligations shall not be changed by government)

43.3 The GOVERNMENT guarantees to the C0NTRACTOR, for the entire duration of this Contract, that it will maintain the stability of the legal, fiscal and economic conditions of this Contract, as they result from this Contract and as they result from the laws and regulations in force on the date of signature of this Contract. The CONTRACTOR has entered into this Contract on the basis of the legal, fiscal and economic framework prevailing at the Effective Date. If, at any time after the Effective Date, there is any change in the legal, fiscal and/or economic framework under the Kurdistan Region Law or other Law applicable in or to the Kurdistan Region which detrimentally affects the CONTRACTOR, the CONTRACTOR Entities or any other Person entitled to benefits under this Contract, the terms and conditions of the Contract shall be altered so as to restore the CONTRACTOR, the CONTRACTOR Entities and any other Person entitled to benefits under this Contract to the same overall economic position (taking into account home country taxes) as that which such person would have been in, had no such change in the legal, fiscal and/or economic framework occurred.

43.4 (Defines procedures to be adopted should the contractor believe its benefits have been detrimentally affected by any changes)

Not being a Commercial Lawyer, I am unable to determine the weight and watertightness of Article 43.3 and would welcome the thoughts of others.

If completely watertight, does the company have a problem with the KRG’s willingness or ability to pay its dues?

If so, does this problem take precedence over the CGI issue of commercial returns (CO + PO) from the contract?

In a nutshell, Is Erbil the main problem or is it Baghdad?

IMO it would be foolish to commit to any cash return at the moment.

We don't know what the final situation will be re implementation of the next phase of SH devlopment (we cannot just assume it will be as per the previously advised development as there is now a new top dog runnibg the show), nor do we know what development pressure will be exerted re the Gas Management Plan, nor do we know just what volumes of SH crude will be allowed into the export pipeline and thus gaining a much better $/bbl, nor do we know the outcome of the revised CO and PO determinations.

I would say that every penny should be retained to help cover these issues.

Surely the last thing we would want is another Share- or Bond Issue to cover urgently needed Capex requirements forced upon us by SOMO?

Give us your reasons for not believing.

If you do not believe that the contract ends in 2037 as stated in the published PSC (with, as I have detailed in my posting, the possibility of requesting an additional 5-year extension), why on earth should anyone even attempt to start an informed debate with you?

The missing "r" was purely a typing mistake.

If you do have the PSC, are you then saying you don't believe what it says?

As far as I can see there is no current debate about the "Board's position in the context of current issues".

Stracat,

I don't mean to obfuscate, but it seems important to define one of the main contract parameters.

The other main contract parameters (CO and PO determinations) are being jiggled as we speak.

I will post up my thoughts on these matters quite soon.

Why don't you have the PSC? - I downloaded it from the MNR website as soon as it was posted there (had to screen capture every single page due to the manner in which it was presented at the time).

Straycat,

GKP's PSC expires in 13 years (2012 + 20 + 5 - 24)

To obtain another 5-year extension, to 2042, the company has to put in a REQUEST six months before end of period.

There is absolutely NO guarantee that said request will be granted - it might not even be wanted, who knows?

Your "28 year expiration date" remark is disingenuous...

C+++*eye,

PSC was signed & dated 6th Nov 2007. Shaikan was declared a Commercial Discovery on 1st Aug-2012

As taken from the published PSC in front of me:

Development Period

6.10 If the CONTRACTOR considers that a Discovery of Crude Oil and any Associated Natural Gas is a Commercial Discovery, the CONTRACTOR shall have the exclusive rights to develop and produce such Commercial Discovery, pursuant to the terms of this Contract. The Development Period for a Commercial Discovery of Crude Oil and any Associated Natural Gas shall be twenty (20) years commencing on the declaration of such Commercial Discovery by CONTRACTOR, in accordance with Article 12.6(a), with an automatic right to a five (5) year extension.

6.11 (Refers to discovery of Non-Associated Natural Gas )

6.12 If Commercial Production from a Production Area is still possible at the end of its Development Period as defined in Article 6.10 or 6.11 then upon request, the CONTRACTOR shall be entitled to an extension of such Development Period under the same terms as those provided in this Contract. Such request shall be made in writing by the CONTRACTOR at least six (6) Months before the end of the said Development Period.

The terms of such extension of the Development Period shall be:

(a) Five (5) years for Crude Oil and any Associated Natural Gas, and/or

(b) Five (5) years for Non-Associated Natural Gas

For FY2022 the equivalent figure was $25.009M – so the 2023 figure of $7.522M is a reduction, reflecting the company's ability to pay in the good year ‘22 and the inability (unwillingness?) to do so in the bad year of '23 (and at least reflects the willingness of the KRG to put the payment to one side for the moment).

As stated, the “owing” of this $7.522M sum has yet to be reflected in the financial statements, but it will be offset against the outstanding sums due to be paid by the KRG.

So, at this moment, $152M - $7.522 (give or take), indicates Co is still owed ca $144M (end-Dec-23). Depending on when things return to normal and revenues increase as hoped, this sum could increase and continue to be carried forward or it could be whittled down to zero inside a year.

As I see it.

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...