Unable to see the wood17 May 2023 10:36
...for the trees.
The re-opening of the pipeline will come, when IR and TR agree on the new fee structure - annual guaranteed throughput MMstb p.a. and $/bbl fees. It's already more-or-less agreed, just awaiting the signatures.
Apart from these 2 issues, however, there are others (even more important?) that are being ignored by most retail investors.
I speak of course of the PSC Contract Revisions. It is completely illusory to expect the IR government to agree a revenue-sharing structure for Kurdish contractors which is double or three times more generous (oil price dependedent) than accepted by IOCs working the Southern fields. It doesn't matter if the PSCs have been reviewed by top western law firms and found to be kosher - if the IR supreme gov decides they won't wash then they're toast IMO. To me that means the 30%PO is severely at risk, as is the 40%CO formula. It has to be said, even if these 2 factors are severely trimmed / slashed, the attractiveness of working the N. Iraq oilfields is still there - just not as lucrative as it was. The fact that a sovereign entity can come in and change things will, however, reflect in how the area is viewed by investors.
The fact that SOMO should be able to stabilise the KBT export price at a higher level than previously was the case is not in dispute, but what does that actually imply? For SH heavy sour crude at 16API and S5.2% the heavy discount will still be applied. Other contractors have their 36API-grade, others have 30API, some have their 25API and SH has its current 16API (recent report on my desk). That's not to say that SH crude is worthless, but is is worth less and that will become painfully evident as the KBT terms just agreed with 2 customers are released.
Iraq and SOMO would like a return to the Ceyhan Reference Grade of previous years; that will not be possible with greatly increased production from the heavy Kurdish area fields. In the same vein, SOMO does not want another competitor, a 4th Iraq crude grade, to compete with Basrah Light, Medium or Heavy; too many headaches there already. That is yet another issue which will be addressed.
Yet another issue is the long-term O&G development of the Kurdish area fields; North Oil Company is now in charge of all O&G development. That the MNR has a certain depth of knowledge and experience of local fields is understood and it may take some time for NOCo's specialists to get to grips with things but, for better or worse, NOCo now calls the shots so expect some surprises.
Similarly, empty threats regarding stopping flaring are not NOCo's style so more than hard words can be expected here too.
I interpret Mr Soden's appointment as part of the ongoing realignment broached above.
You should not ignore any of these issues.
Sign In
Follow the stocks
