Newsletter – August 2021

As the leading life support services provider in Basra-Iraq, AMBP hosted a lunch for the IBBC members at our Burjessia business park. The event was successfully held on Monday, August 16th, and was hosted by the management of AMBP and the IBBC delegation in Iraq represented by Mr. Richard Cotton and Mr. Mohanad Al Khattab.

As one of Al Majal’s subsidiaries specialized in offering a wide-range of HR solutions for entities operating in Iraq, AMHR is one of the few companies in Iraq officially licensed to carry out recruitment of foreign workers.

The AMBP management team has revealed the completion of the football pitch renovation at our North Rumaila property, with a new, upgraded cushioned turf for the 450 sqm grass field as well as new kicking cages. The result looks stunning!

Economic revival hinges on the country’s energy sector, where several high-profile developments have taken place in recent weeks. Oil exports in July increased slightly to 3.340 Mb/d, and revenues to US$ 6.514 B, up from US$ 6.163 B in June, with the average price of Iraqi crude rising to US$ 72.00/bbl. The 2021 Budget, first presented in December, was finally approved on March 31, preserving the country’s recent currency devaluation (~23% to the US dollar), and projecting a spending budget of US$ 89.7 B and a dinar-denominated deficit equivalent to US$ 19.5 B. Iraq expects to earn oil revenues of US$ 47.5 B[1] based on an oil price of US$ 45/b and ~3.5 Mb/d of exports, which in dinars should significantly improve state earnings.

Iraq’s Parliament passed the country’s 2021 budget on March 31, after months of political wrangling, while preserving the country’s recent currency devaluation and projecting a new, dinar-denominated record-setting deficit of US$ 19.5 B. It features a new, but unclearly defined framework for Baghdad-Erbil oil and revenue cooperation, based on 250 kb/d of Kurdish oil transferred to the State Oil and Marketing Organisation (SOMO).

On August 8, Ali Allawi, Iraqi Finance Minister, mentioned that despite a relative improvement in Iraq’s finances, the country is seeking a US$ 3-4 B loan from the IMF. Allawi anticipates an agreement with the IMF by end-2021, although October parliamentary elections loom. The latest IMF data shows that the country’s total sovereign debt rose from US$ 108 B in 2019 to US$ 117 B in 2020.

Meanwhile, Lukoil is planning to sell its stake in the 13 billion-barrel West Qurna-2 field, which was confirmed by the Oil Ministry.

In August 24, the Council of Ministers approved BP’s plan to spin off its operations in the country.

Norway’s DNO announced that the Kurdistan Regional Government approved the company’s acquisition of ExxonMobil’s remaining 32% interest in the Baeshiqa license, doubling the Norwegian company’s stake.

Iraq is planning to boost the production capacity of West Qurna-1 by 40% to more than 700 kb/d over the next 5 years at a time when operator ExxonMobil is seeking to exit the field.

Iraq’s July oil production rose to 3.886 Mb/d, up from June’s 3.862 Mb/d according to S&P Global Platts, 130 kb/d below its quota for the month (4.016 Mb/d), with compliance increasing significantly to 104% in July.

Iraq’s Oil Ministry has reviewed a version of a law governing the oil and gas industry and seeks to forward it to the Cabinet for approval.

As Iraq plans to re-establish INOC, the cabinet appointed Thamir Ghadhban, former Oil Minister, as expert advisor to the board of directors, along with three other members.

Federal Iraq and the semi-autonomous KRG have reached a notional agreement to implement a revenue-sharing deal that stalled since the ratification of the 2021 budget on March 31.

Explosives were detonated at the North Oil Company (NOC)-operated Bai Hassan oilfield and on an Erbil-Kirkuk electricity transmission line, in a series of intensifying acts of violence across northern Iraq.

Iraq’s tax authority to halt visas and imports for nearly two dozen international energy companies accused of late tax payments.

Scottish-based Wood announced that it has been awarded a 5-year contract to deliver specialist engineering solutions

Iraq’s Oil Ministry is in discussion with unnamed US companies to take over ExxonMobil’s 31.7% stake in the 490 kb/d West Qurna-1

Iraq is seeking to spend US$ 15 B to boost its gas production as it works on reducing reliance on Iranian energy imports. Along with other partners,

The Kurdistan Regional Government (KRG) terminated Genel Energy’s Production Sharing Contracts (PSCs) in Bina Bawi and Miran fields.

The International Finance Corp. signed a 5-year loan agreement with Basrah Gas Co. (BGC) – a JV between South Gas Co. (51%) Shell (44%) and Mitsubishi Corp. (5%) – to help the company reduce its gas flaring, hence, boost its current capacity to treat and process associated gas by 40% (400 MMscf/d).

In July 25, Iraq’s Cabinet approved TotalEnergies’ Gas Growth Integrated Project (GGIP) multi-billion-dollar investment deal following the signing of a preliminary agreement in March 2021, covering four projects: oilfield development, gas capture and treatment, building energy infrastructure and generating solar energy.

Over the past few months, the Islamic State extremist group has been suspected of the sabotage of up to 70 electricity pylons. The deteriorating security situation of Iraq’s electricity infrastructure has been exacerbated by scorching temperatures reaching over 50°C (122°F).

Among the other projects discussed by Total in its preliminary deal with Iraq is the potential development of 1,000 MW of solar power in Iraq’s central and southern provinces, although no details have been made public

The Iraqi Cabinet approved to change the name of the Ministry of Electricity into the Ministry of Electricity and Renewable Energy. The draft law enacting the change will be referred for parliamentary approval.

Approval is sought from the Iraqi Council of Ministers for a 17 kb/d reformer and 31 kb/d naphtha hydrotreater at the Basra refinery, in line with the facility’s current upgrade plans.

In a meeting between Japan’s Minister for Foreign Affairs, Motegi Toshimitsu, Iraq’s Foreign Minister Fuad Hussein, PM Mustafa Al-Kadhimi

The Ministry of Oil has announced the inauguration of a new project to upgrade the existing gas separation plant in the Abu Ghirab field south of Missan province

On August 10, Iraq’s acting Minister of Electricity had a meeting with a delegation from Norway’s Scatec along with Egyptian partner Orascom where he promised to facilitate the companies’ needs to secure financing for the 300 MW Karbaka and 225 MW Iskandarya solar plants. Yet, Kareem mentioned that the ministry is conducting a price re-assessment, casting a doubt on this promise.

Iraq’s government signed an initial agreement with PowerChina to build 2 GW of solar power plants. In the first phase of the project, PowerChina will develop 750 MW, which will increase gradually to reach full planned capacity. The government hasn’t disclosed more details about the agreement.

On June 24, Abu Dhabi’s Masdar signed a preliminary agreement to develop 2 GW of solar capacity in southern and central Iraq. Earlier in February, Baghdad announced an ambitious target of 10 GW of solar capacity by 2030, as part of announcing the site selection for seven solar projects in the country’s south totalling 750 MW.

Outgoing President Hassan Rouhani inaugurated the Islamic Republic’s first oil export terminal on the Indian Ocean.

Oman announced a new upstream licensing round offering three blocks starting August 2021.

Middle East oil drilling has still not recovered from the sharp drop induced by the pandemic and the related OPEC+ production cuts. However, it is likely to start expanding as quotas increase and production growth plans in the UAE and Iraq get underway.

Gas drilling is starting to show a moderate recovery, supported by the beginning of Qatar’s LNG expansion projects.

Note: Iraqi gas rigs are not reported by Baker Hughes, likely because Iraq reports gas rig figures clubbed with oil rigs and/or lack of response from contractors (drilling for non-associated gas is at minimal levels compared to oil, although it should pick up as Sinopec’s development of Mansuriyah and the Pearl Petroleum consortium’s expansion of Khor Mor move forward).