Member Info for theoryman

@BB, where have you managed to find that the API of KBT is circa 24?

At best in 2017 without Shaikan it was over 30, there are mentions of 32, even 33. When Shaikan was added for the second time it dropped to around 28, this 24 seems another big drop.

I posted about how I had underestimated the discount to KBT that led to the Sept receipts being even lower than my worst case lower boundary, at API 24 it doesn’t make sense however I look at it.

Brent was $90, so based on total discount of $23 the realised price would previously have been $67.

The realised price based on KBT was $56. (Either 67-11 or 90-34)

KBT was $72, so the total discount using that was $16, quality plus transport.

Using Shaikan at API 18 or even 17, that $16 seems massive if the API of the base comparator KBT is 24.

Serious question, where is the mistake in my Maths, logic or understanding of discounts based on API differences? Could it be that the transport cost had rocketed compared to previous months, if so, why?

@GRH1-returns, you posted wrt BB “ …you posted on ADVFN a few months ago that you think the Iraqi army would invade Kurdistan and take their oilfields by force. LOL”

Any chance of you posting a link to the original or a copy of it in its entirety?

The preceding paragraph has an interesting take on the state of the “temporary” agreement and the possible timespan to get the pipeline open.

“ This is one of the reasons why we have been skeptical about an immediate resumption of crude oil exports from northern Iraq. On April 4, we told readers in the Daily Energy Report that we believed the “temporary” agreement remains very fragile and is contingent on the outcome of the tough talks that need to be held in the next days or weeks over the technical and legal procedures. Based on Kpler’s data, tankers have yet to resume loading of Iraqi crude from the Turkish port of Ceyhan.

As the suspension of around 450,000 b/d from northern Iraq drags on, this will give Baghdad more leverage over oil companies operating in the semi-autonomous Kurdistan Regional Government (KRG). The emergence of M&A activities in the region should not come as a surprise.”

Twitter link is old news referring to an agreement internal to Iraq between the CGI and KRG.

That was needed to then allow the CGI to inform Turkey that EXPORTS of oil that originated in Kurdistan can resume - evidence from takers arriving and departing that that might be happening.

Other sources e.g. one from Morbox below raising what Turkey wants out of it all and how long it could take to get sorted.

No evidence anywhere today that I can find that the pipeline has been opened up.

The pipeline had to be closed because the ruling clarified that the exporting was illegal, not the oil itself and with no exports the tanks would be full etc..

If the exporting resumes that means the parties involved have resolved that issue.

Restarting the pipeline has now become a distinct issue on all four fronts raised by a PEST analysis. ( The PET are obvious and I think Ramadan should be included under the S)

Emptying the tanks first would IMO a reasonable thing to do if possible but it doesn’t mean that reopening the pipeline will happen any time soon - might do, might not but since the market is closed there is no chance to alter our positions wrt GKP.

@carpatthis, are you seriously suggesting that in order to compensate for their own repeated gross incompetence, in not taking full advantage of market behaviour driven by real events, they have to employ people to post on bulletin boards?!

I think not but it got you a lot of Recs :)

Using post consolidation share pricing throughout for ease of comparison, they have managed to AVOID picking enough of them up through the skewed reconstruction allowance at 83p, or under 100p in the market after reconstruction, or below 50p after the COVID hit or below 140p recently.

DANA definitely took them to court and got a settlement, amazing what a bit of leverage provided by Gas and Condensate production can achieve.

Wasn’t this point about GKP lowering production covered in the latest Q&A session?

Reducing output would lead to reduced payments and might lead to them getting even further apart?

Pity raising output won’t guarantee higher payments that get closer together.

If this mess ever gets settled I propose it should be called the “Good Friday - Ramadan - Passover Agreement”.

For some reason the last sentence in the paragraph from which the quote comes didn’t transfer across.

I know it sometimes happens because of phone software and memory limitations but doesn’t seem to happen to positive bits of info :)

…” In addition, actors in Kurdistan Region who may want to disrupt the positive atmosphere that emerged in line with the agreement with Baghdad pose a threat to the future.”

https://www.velaw.com/insights/the-iraqi-federal-supreme-court-in-case-59-federal-2012-rules-that-the-kurdistan-regional-government-krgs-2007-oil-and-gas-law-is-unconstitutional/

Extract of summary of ruling of the FSC Feb ‘22 - in particular the use of “entitled” as opposed to “instructed” in points 2 & 3.

Any final agreement needs to ensure that the entitled bit will never be activated under any future government - the temporary one is looking better and better IMO as details emerge.

1. The KRG Oil and Gas Law violates Articles 110, 112, 115, 121 and 130 of the Iraqi Constitution, and is therefore unconstitutional;
2. The KRG is required to hand over to the FGI the totality of the oil production from the present oil fields in Iraqi Kurdistan region (as well as any other areas from which oil has been extracted by the KRG);
3. Going forward, the FGI will be entitled to use its constitutional powers regarding the exploration, production and exportation of crude oil in order to manage the oil production in Iraqi Kurdistan;
4. The Ministry of Oil of the Republic of Iraq is entitled to pursue the nullification of any contracts entered into by the KRG with foreign states and other companies (including IOCs, and oil traders) for the exploration, production, exportation and/or sale of crude oil from the Kurdistan region;
5. The Ministry of Oil and the Federal Board of Supreme Audit are entitled to review all oil contracts entered into by the KRG concerning the export and sale of oil and gas, for the purpose of determining the financial benefits incurred by the KRG on those contracts; and
6. The Ministry of Oil and the Federal Board of Supreme Audit shall determine the Kurdistan region’s share of the national budget in a way as to ensure that the rights of Kurdistan citizens regarding the federal budget are delivered without delay. This will follow the KRG’s implementation of all the provisions of the Iraqi Federal Supreme Court’s decision and the respective notifications to the FGI and the Federal Board of Supreme Audit.

@ValueS, that seems a viable explanation.

Just had a look at what typical IOCs do, some like the ones we are used to in Kurdistan specialise in exploration and production BUT others elsewhere participate in the whole chain from exploration to trading.

In addition the total debt that the KRG owes the IOCs according to some sources is way more than they owe just the producers, so seems reasonable that they are including the Trading Houses in the IOC group.

“The PSCs are English contracts and it is specified in the contract that they are governed by English law and that in the event of a dispute they will be arbitrated by the London Court of International Arbitration.”

Correct if you are referring to disputes that arise due to how the contract is implemented.

Does it apply to a challenge that the whole contract was illegal at creation?

Does that even fall under the remit of the LCIA?

Just checked and first FSC referral was in 2012, not 2014, so not for the first time have given up trying to make sense of these sound bites.

Seemed reasonable to consider that the first referral to the FSC was a watershed date, anything signed before would be difficult to challenge, anything signed after could be challenged under some sort of “ you should have realised there could be problems” argument.

Just been on the site which lists all the PSCs that the KRG have signed.

There isn’t a single one which is from 2014 or after.

https://gov.krd/mnr-en/publications/contracts/

And yet, "In an interview with Al Jazeera aired on Sunday, Sudani said that the Kurdistan Region had no choice but to accept unbalanced deals back in 2014, adding that the IOCs had exploited Erbil at the time."

Misquoted, mistranslated or simple mistake made about a date?

Might be linked to when the FSC were first asked to look at whether the PSCs were illegal or not - they declined the opportunity to make a ruling.

If you had 1 million nil cost options then how many shares would you have to buy to match the two sets of rewards you would get from them at your anticipated sell price?

Now compare the money at risk now with the nil cost options and after you have bought the shares.

In terms of total reward: money at risk, why bother?

“According to Rudaw; The Kurdistan Regional Government (KRG) delegation is scheduled to sign an agreement with the Iraqi Oil Ministry and the central government on Tuesday, 4-4-2“

I thought that with it being oil related they would use Terry Venables “Christmas Tree” formation of 4-3-2-1.

Best case without probabilistic analysis of how likely they are to occur - my work brain is on holiday.

The working of the PSCs remain effectively unchanged - after “clarification” no one fancies a trip to Arbitration under International Contract Laws.

The FSC stay out of it - they gave the CGI the authority to dismantle the contracts but did NOT instruct them to do it! Why will they stay out? Well someone could whisper in their ears that Parliament could always have another go at reconstituting the FSC under the CURRENT Constitution…

Faster payment schedule agreed and stuck to - I’d happily settle for 30 days, even 60 days so long as it was adhered to, the essential component being reliability.

Plan agreed for catching up late payments and stuck to - this time they might want to let me have a look at it, their first attempt last time was mathematically inept! Once I pointed it out they changed it from 50% to 20% of the excess above $50 but gave me no credit :)

In return for being left alone to get on with producing oil and planning expansion, the IOCs agree to KBT based pricing with its in built quality discount to Brent but no others.

“ Rumours are that Iraq could takeover the oil companies if no agreement is drawn up, is this true ?”

Yes it is true that there are rumours.

Anyone able to explains n the imbalance re what’s happening at PF-1 compared to PF-2?

Production imbalance?
Storage imbalance?
Differences in what’s needed to shut down/protect individual wells due to location within the field?

The discount for KBT is not only the quality one you are focussing on.

The moment the CGI has threatened, even mentioned, the fact that it was illegal oil and there would be consequences for any buyer, the buyers demanded an extra risked based discount.

I am surprised you question what I mean by distressed seller discount :)

Every man and his dog knew the KRG was strapped for cash and desperate to raise money. Would you offer someone fair market value for what they wanted to sell? Some of the forward selling deals they struck reflected this.

This was all covered in a very detailed report from a well respected organisation which mysteriously is no longer available. Unfortunately this was from before I used to download or screen shot everything.

So the total discount consists of three components, quality, knocky offy and distressed seller.

One I read seemed to imply switching to SOMO under the same PSC would be better for three reasons I could think of.

Payment on time.
No knocked off oil discount
No distressed seller discount