Oil giants departure from Iraq: blessing or curse?

2021-07-06 04:23

Shafaq News / Iraqi Oil Minister Ihsan Abdul Jabbar stated that British Petroleum (BP) and Lukoil want to pull out of Iraqi energy projects because of the current investment environment, as OPEC's second-largest producer faces a mass exodus of global oil companies that want to exit unappealing contracts.

"Investing in oil licensing rounds is useless for international companies because the profits they make are very low compared to the services they provide," said Hamza al-Jawahiri, an oil expert, "the campaign against licensing rounds by some politicians is just a media hype intended to blackmail the ministry of oil."

"Companies operating in the oil fields do not get lucrative profits as they get an overall rate of 1 dollar and 8 cents for every barrel extracted. Thus, these international companies are not convinced of these figures because they want higher revenues," al-Jawahiri added.

The oil expert continued, "the companies were charging for production, development, and some expenses. However, now that charges are fixed, they can not manipulate them anymore. Therefore, their profits became less. That's why licensing contracts are 90% fair for Iraq and 10% for the companies."

"These companies' departure is better for Iraq because we now have the personnel that can replace the foreign workforce, and acquired the technology, training, and the work systems. So we are in a very good position now."

"The investment environment depends on many elements such as security, legislative stability, and the economic and banking ground, most of which are not available," said Mohammed Saleh al-Jawad, a professor of Petroleum Engineering at the Baghdad University.

"Foreign companies want to achieve a semi-peak production. However, given Iraq's unwillingness to raise the production to the point sought by foreign investors, what these companies obtain does not meet their ambitions."

"National companies can replace international companies for they have the capacity and technology to manage large oil fields, similar to what happened in the Majnoon oil field after Shell Oil Company left," al-Jawad said.

BP and Lukoil will join ExxonMobil, which is seeking to sell its stake in the southern oil field West Qurna/1.

BP is the main contractor in the Rumaila oil field, holding 38% of the shares along with CNPC's 37% stake. The rest is jointly owned between the state-owned Basra Oil Company, the General Petroleum Marketing Corporation, and its partners in a technical services contract ending in 2034.

The Rumaila Oil Field is the largest in the country, with about 1.5 million bpd of the country's production capacity of 5 million bpd and an estimated 17 billion barrels of remaining extractable oil.

Lukoil owns 75% of the shares of the huge West Qurna/2 field in the South. The remaining is owned by the state-owned North Oil Company.

In Iraq, international oil companies operate some of the largest fields in the country, for a fee per barrel pegged to production.

https://shafaq.com/en/Report/Oil-giants-departure-from-Iraq-blessing-or-curse