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This news coming out of Turkey is extremely significant and, if fully realised, promises further positive developments in the embattled S-SE of the country through which the Iraq-Ceyhan pipeline runs - as well as a cessation of Turkish attacks on the PKK inside N. Iraq.

An acceleration of the Ovakoy border gate proposal, with new road- and rail links to the Med, will also benefit Iraq-Turkey trade.

The sticking points in negotiations on the oil exports are fees paid to oil producers and appointment of an international consultant....

This is what Shafaq is saying about it:

"Shafaq News/ On Wednesday, the Kurdistan Regional Government (KRG) affirmed it is fully prepared to resume oil exports after removing all internal obstacles, placing RESPONSIBILITY FOR THE DELAY ON THE IRAQI FEDERAL GOVERNMENT AND INTERNATIONAL OIL COMPANIES."

(CAPS are mine)

There is for sure a lot of improvement needed in the management- and government of Iraq, and I'm sure quite a bit of "wet my beak" goes on too - it is after all an oil-based economy in the ME.

But, you cannot ignore the RAMPANT nepotism and corruption that has gone on, and continues, in the Kurdish Region.

Take a quick look at the many articles , written by relatively unbiased observers, on the wealth of the Barzani clan (many articles cite US State Dept and UK Gov sources). The one I've currently got open (barzaniwatch dot org) claims that, as of June-24, Massoud Barzani had personal wealth of $55Bn. His sons Masrour Barzani and President Nechirvan Barzani own Rudaw and Kurdistan 24. Acc to Rudaw, the Barzanis are also thought to own RT Bank, which is responsible for paying the salaries of civil servants.

Some of you may not like Iraqis because "they are Arabs", some of you appear to have elevated the Kurds and their current leaders to some sort of holy status. Many seem completely unable, or unwilling, to accept the two Muslim faith divisions as being the two sides of the same coin, and constantly try to put the Shias down as bad external actors.

The Kurdish Area is part of Iraq and, to me at least, it seems quite clear that the Baghdad gov is distrustful of where the money goes in KRI and what sort of side protocols have been attached to the oil development contracts there. APIKUR's nervousness about potentially having to put all of these contract details on the table for the international consultants charged with determining the true costs of developing the oilfields and producing the crude seems to be one of the last remaining sticking points.

Putup,

don't be too concerned about lucky7 - his first posting on GKP that I can see (21.8.21) said it all:

"do not understand mate".

Never was a truer word said in jest...

Should volume offtake by SOMO of the SH heavy crude be limited (export grade considerations) could trucking of the remaining heavy crude to Dortyol / Ceyhan be back on the cards?

Although trucking costs might be rather high ($12/bbl?), the final export price achieved would still be far greater than the local sales price (currently ca $28/bbl).

For SOMO, any pipeline underutilization due to limited SH volumes could also be beneficial - facilitating higher volumes of higher-grade and higher-priced Kirkuk crudes.

The difference (for SOMO) between the SH heavy grade export, pipeline or truck, and its local sales price achieved would also make it easier to swallow the proposed $16/bbl for ALL SH production to be paid to GKP; giving the company $16/bbl for crude achieving only $28/bbl locally would probably give SOMO severe heartburn.

The same logic could be applied to any KRI producers whose crude volumes are not fully taken for pipeline export by SOMO.

Another off-the-wall idea might be to sell these heavy crudes to TR and let them be blended with Batman heavy crude - the Batman-Dortyol pipeline has plenty of free capacity and it's far closer by truck than Dortyol/ Ceyhan.

Just a thought...

Quite simple really...

Baghdad wants the KRI "back in the fold" and subject to their will.

The agreement ends in September - easy to wait it out.

ANY export attempt by KRI , by pipeline- or trucking, can be easily met by official notification from the Iraq Gov to BOTAS and Turkish authorities that no KRI crude is to be accepted without authorization from SOMO. At same time, shippers and traders are warned not to transit or deal in KRI crude - that only SOMO cargoes are allowed.

Turkey will never disregard such a sovereign instruction from such an important trade partner.

Forget the US stepping in, forget a snap independence vote; the KRI will have its wings clipped good and proper.

Outstanding invoices will have to be settled by Erbil, not Baghdad - LONG amortisation stretch coming up.

The contractors will have to accept the new Revenue Sharing Contracts - pride will be swallowed big style; APIKUR will be dissolved.

Baghdad can hold its breath far longer than can the KRG.

Simple really.

Putup, as you say, the actual costs are well below this ($16/bbl) number and are leveraged by the rate of return (how speedily) the capital investment costs are repaid. The actual cost-per-barrel number ($3.50 or whatever) is neither here nor there.

Leaving aside the ca. $4-$5/bbl "Profit Oil" number (just to put a discussion number on it), the rapid rate at which contractor's costs are to be returned was ALWAYS the main attraction of the KRI contracts and has always been a major bone of contention with the Baghdad government.

THAT is what is causing such a ruckus - and it is being made worse by the APIKUR trade association's refusal to "spill the beans" and provide full details of their various contracts, something they have resisted since Day#1.

Over the years I have posted my opinion re the Side Protocols / Agreements associated with these KRI contracts (normal in this part of the world) and have remarked that not only do these endanger relations with Baghdad authorities but they have the potential of opening up a wasp's nest of litigation with the London Listing Authority should they be kept from public (shareholder) scrutiny.

What is it about bulletin boards that seems to bring out the worst in people?

Why all the stupid, obnoxious, childish, playground hurty stuff?

Yes, we’re all adults and it’s water off a duck’s back and all that, but…WTF?

Putup,

the self-financing bit begins to look a bit iffy with low numbers. Given a long period of low numbers, what becomes of the Field Development Plan and associated issues like Sour Gas- and Water Handling, commitments to Triassic development, not to mention Poking the Permian?

MoF : SOMO internal dynamics / disagreements are famous.

A return to external financing (bonds) could well be on the cards; what coupon then with such a payments & contract background?

Putup,

The $16/bbl to which I refer includes ALL Capex recovery (CO) and so-called Profit Oil. Down in Baghdad, from what I am hearing, they expect this number to decrease and end up closer to $12/bbl after the initial evaluation period.

Payments form Baghdad are currently running, acc to my info, up to 90 days.

SOMO doesn't pay - all payments are made by MoF.

There is severe disagreement (contractor group) at the moment re the consultants currently nominated .

A bit more than that Putup!

Issues, technical and commercial:

Arrears

Terms of proposed new contract (incl. but not limited to the initial $16/bbl proposal)

Payment terms (End-of-Month, 7-days after delivery, etc)

Payment by KRG/MNR or by Iraq Gov (MoO)

International Consulting Company proposed by Iraq Gov. to evaluate Capex and Opex for current KRG fields.

Constituent crudes and -volumes of KRI crudes for proposed export blend

Both Arbil and Baghdad are agreed on the interim sums to be paid - the $16/bbl revenue (covering both capital repayment via the CO recovery and the so-called Profit Oil revenues.

The only disagreements are between the KRG/MNR and the contractor trade association.

Seeing as how some are still hyperventilating about how legality of the GKP PSC will solve all problems, I thought it might help if the relevant clause(s) were looked at once again.

Starting with P5/122 which clearly states: "The Kurdistan Regional Government of Iraq (Hereafter referred to as "THE GOVERNMENT")

And, followed on P11/122 which states: Government of Iraq means the Federal Government of the Republic of Iraq.

(My comment: clearly identifying which government is being referred to at any time)

Moving on to P88/122 - GOVERNING LAW, FISCAL STABILITY AND AMENDMENTS

43.1 (Governing Law): This Contract, including any dispute arising therefrom, thereunder or in relation thereto, and the agreement to arbitrate in Article 42, shall be governed by English Law…..

43.3 (Fiscal Stability) states:

The GOVERNMENT guarantees to the CONTRACTOR, 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 regulation in force at 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 any 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 Entities and any other Person entitled to benefits under this Contract to the same economic position (taking into account home country taxes) as which such Person would have been in, had no such change in the legal, fiscal and/or economic framework occurred.

My opinion:

Clause 43.3 appears to be a very important guarantee that the KRG, in the event of a substantive change in the legal, fiscal or economic framework, shall ensure that the contractor’s benefits are secured / restored. Plainly stated is “…under the Kurdistan Region Law or any other Law applicable in or to the Kurdistan Region…”.

Worth a ponder...

Are you able to say with certainty that Harris is a tax-paying resident of either the UK or the USA?

I believe his is a director of the Bermuda-based company - how does that work out for him, tax-wise?

Having spent most of his life working for foreign companies, a lot of the time abroad, he would have been most foolish not to arrange his tax residency to ensure zero or minimal tax exposure.

It's what you do...

I think you must mean self-funding a $300M - $500M bond issue at 10%?

It's not their oil - it's Iraq's oil.

KRG is just a sub-contractor, working on behalf of central government.

CEO of DNO can say what he likes, as did the Genel chap - echoes of Todd Kozel?

They, KRG, don't want to swallow that bitter pill, however, so there is probably only one way this pipeline is going to go.

Al-Sudani saying that the 39% tariff not applicable to Iraq oil exports.

Iraq exports to US hit with 39% tariff.

Iran with only 10%.

Putup,

as you say, this has been known about for donkeys...just like the 5% Texas Keystone.

I makes you wonder...