Thanks, that is an awesome work and interesting perspective. One question: Do you have an estimate, how much the IOCs would earn per bbl with the federal contract? Is it significantly less than the current $28?
Lovely work. The 'local sales' have grown so quickly that someone, somewhere, is pocketing a lot of cash. Those vested interests could keep the situation fixed for a while. You paint a picture where GKP et al can keep selling to tankers at $30 for another 12 months.
You can find there the structure of the profit sharing contracts, but the only fixed fee is the royalty of 15% (other news mention a 25% royalty though)
There seems to be some movement. The Iraqi Government wants to raise the entitlement to the IOCs from $6 to $16:
"The Iraqi Ministry of Finance will compensate the KRG for the production and transportation costs of the oil produced in northern Iraq and delivered to SOMO, or the Oil Ministry, according to a statement issued by the Prime Minister’s Office (PMO).
Before a final settlement takes place, the federal government’s Finance Ministry will pay $16 per barrel until a specialized technical consulting committee has finished calculating fair expenses."
In their Q4/23 results call in February the DNO management commented on the pipeline situation as follows:
"We do know that the pipeline will open within the next two years sometime, because the contract between Turkey and Iraq for the use of that pipeline ends at that point, Turkey can do with the pipeline what it wants without any further exposure on the legal side, that may be a factor in their thinking. So it won't be shut in forever. Once the existing arrangements end, and they will end, the pipeline will reopen. So you can sort of, I think it's about two years is sort of arguments whether it's a little less or a little more, but you can count on that. And two years may sound like a long time, but it really will come pretty quickly."
The contract expires next year. However, it is renewed by 5 years unless one party officially informs the other this September. Currently, SOMO is the only entity in Iraq with the authority to sale oil, as APIKUR has recognised in its latest 'offers'. If DNO wants to export oil again, it has to be through SOMO and under a new contract signed with the Iraqi Ministry of Oli.
Curious what your latest take on this is. Been reading about this for the last two days and about gkp the last two days. It seems like the new proposal on operating costs would cover them fine but its unclear to me if they will just rip up their existing contracts with krg and start over. Its hard to handicap that in terms of making an investment. The company appears to be making money in "local market" whatever that is😂 part of me thinks its a good time to invest given there is a compromise being made but i think the big points haven't been addressed.
It is the same as then, they are benefiting from the current window of opportunity. If the federal government curbs KRG's ‘domestic sales’, their sales will plummet.
Very impressed with the breadth and depth of details you have synthesized and coherently laid out.
Thanks, that is an awesome work and interesting perspective. One question: Do you have an estimate, how much the IOCs would earn per bbl with the federal contract? Is it significantly less than the current $28?
I don't know, to be honest. Reports only mention the $6-6.9/bbl for the oil cost
This is great work. Thanks for sharing.
My pleasure, Dean
Lovely work. The 'local sales' have grown so quickly that someone, somewhere, is pocketing a lot of cash. Those vested interests could keep the situation fixed for a while. You paint a picture where GKP et al can keep selling to tankers at $30 for another 12 months.
Yeah, I don't know how long it can go TBH but there is more than they have been telling about the local sales
You can find there the structure of the profit sharing contracts, but the only fixed fee is the royalty of 15% (other news mention a 25% royalty though)
https://iraq-pcld.com/initial-tender-protocol/
Great work as always, thanks 🙏
Thanks, Vlad
There seems to be some movement. The Iraqi Government wants to raise the entitlement to the IOCs from $6 to $16:
"The Iraqi Ministry of Finance will compensate the KRG for the production and transportation costs of the oil produced in northern Iraq and delivered to SOMO, or the Oil Ministry, according to a statement issued by the Prime Minister’s Office (PMO).
Before a final settlement takes place, the federal government’s Finance Ministry will pay $16 per barrel until a specialized technical consulting committee has finished calculating fair expenses."
https://www.iraqinews.com/iraq/iraqi-officials-discuss-resumption-of-oil-exports-from-northern-iraq/
In their Q4/23 results call in February the DNO management commented on the pipeline situation as follows:
"We do know that the pipeline will open within the next two years sometime, because the contract between Turkey and Iraq for the use of that pipeline ends at that point, Turkey can do with the pipeline what it wants without any further exposure on the legal side, that may be a factor in their thinking. So it won't be shut in forever. Once the existing arrangements end, and they will end, the pipeline will reopen. So you can sort of, I think it's about two years is sort of arguments whether it's a little less or a little more, but you can count on that. And two years may sound like a long time, but it really will come pretty quickly."
The contract expires next year. However, it is renewed by 5 years unless one party officially informs the other this September. Currently, SOMO is the only entity in Iraq with the authority to sale oil, as APIKUR has recognised in its latest 'offers'. If DNO wants to export oil again, it has to be through SOMO and under a new contract signed with the Iraqi Ministry of Oli.
Curious what your latest take on this is. Been reading about this for the last two days and about gkp the last two days. It seems like the new proposal on operating costs would cover them fine but its unclear to me if they will just rip up their existing contracts with krg and start over. Its hard to handicap that in terms of making an investment. The company appears to be making money in "local market" whatever that is😂 part of me thinks its a good time to invest given there is a compromise being made but i think the big points haven't been addressed.
what is the current situation with the IOCs?
It is the same as then, they are benefiting from the current window of opportunity. If the federal government curbs KRG's ‘domestic sales’, their sales will plummet.