Category: Oil News

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IBBC Iraq Conference, London, Tuesday 24th May 

The IBBC Iraq conference at the Mansion House – meeting at a most important time for Iraq – Tuesday 24 May 

After a two-year absence, IBBC is back at the Mansion House hosting its Iraq conference on Tuesday May 24th focusing on finance, energy and sustaining economic growth in Iraq.

The country stands at another pivotal moment with a new government still in formation, record high oil and gas prices and a world supply crisis, in recovery mode after the pandemic and a strong desire to diversify the economy, grow the private sector and improve employment prospects, particularly for the young, a possible Iranian / US nuclear settlement, issues over water supply and food production, diversifying into renewable energy  and still much work to be done on repairing and renewing infrastructure, but progress being made on improving governance and hugely enhanced government revenue to provide business opportunities across all the sectors.

International interest in investing in Iraq remains strong with the Chinese (Rumaila) and French (Total) Governments being particularly aggressive and most recently a wish expressed by the Saudi Government to join them.

In each sector we are hosting influential Iraqi ministerial attendees including the Minister of Oil H.E. Ihsan Abdul Jabbar Ismaael and Mr Kareem Hatta Deputy Oil Minister for Upstream Affairs, the Governor of the Central Bank of Iraq, H.E Mr. Mustafa Ghalib Mukheef, the Minister of Youth and Sport H.E. Adnan Darjal Motar Al-Rubaye, as well as Ms Taif Al-Shakarchi, Deputy Minister of Finance , Dr Salem Chalabi, President & Chairman of the Trade Bank of Iraq, a delegation of Iraqi Private banks.

From the UK side Louis Taylor, Chief Executive of UKEF, UK Ambassador Mark Bryson- Richardson, BP President Iraq Zaid Elyaseri, and Richard Wilkins from JP Morgan will address the audience with latest developments and opportunities and Professor Frank Gunter will present his latest views on the political economy.

Principal panel subjects include developing the banking sector, project finance, energy transition and how to boost short term production, education and skills, insurance, in addition to an online Tech panel addressing the benefits of crypto currency.

For companies interested in Iraq, this is a prime opportunity to hear what some of the most important players, both government and private sector are saying and thinking, and an excellent place for networking with potential partners and customers from both national and international organisations.

For further information and to register – please follow the link below:

IBBC Spring Conference at the Mansion House, London – IBBC (iraqbritainbusiness.org)

A reminder to overseas attendees, to arrange for visas to UK within the next few days as is relevant for your country.

(Source: Iraq Britain Business Council)

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Iraq Oil Revenues hit 50-Year High

By John Lee.

Iraq’s Ministry of Oil has announced preliminary oil exports for February of 100,563,999 barrels, giving an average for the month of 3.244 million barrels per day (bpd), down slightly from the 3.314 million bpd exported in February.

The exports from the oilfields in central and southern Iraq amounted to approximately 99,115,064 barrels, while exports from the Kirkuk fields through the port of Ceyhan amounted to 1,488,935 barrels.

Revenues for the month were $11.07 billion, at an average price of $110.090 per barrel. This is the highest monthly oil revenue in Iraq since 1972.

February’s export figures can be found here.

(Source: Ministry of Oil)

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Deloitte report on Oil and Gas in Iraqi Kurdistan

As part of the KRG’s drive to promote transparency, Deloitte have been commissioned to produce an audited report detailing oil and gas exports, production costs, and revenues for the second half of 2021.

The report, which analyzes the oil and gas industry on a quarterly basis, is now available as a PDF in English, Kurdish and Arabic on the KRG website.

Click here to download the reports.

(Source: KRG)

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BHEL to supply Compressor to Baiji Refinery

By John Lee.

New Delhi-based Bharat Heavy Electricals Limited (BHEL) has won an order to supply a news compressor to Baiji Refinery in Iraq.

The order, placed by the North Refineries Company (NRC), envisages design, engineering, manufacturing and supply of electric motor driven Recycle Gas Centrifugal compressor and will be executed by BHEL’s International Operations Division along with its manufacturing units at Hyderabad and Bhopal.

The new compressor will replace the existing compressor, also supplied by BHEL in the year 2000, which was damaged due to the war in Iraq.

BHEL has previously supplied several Gas Turbine based Power Plants, including 4×157 MW Gas Turbine Generator (GTG) units for Baiji Power Station and 2×125 MW GTG units for Rumailla Power Station. BHEL has also executed a turnkey order for construction of 4×125 MW Gas Turbine based Sulaymaniyah Power Project in Iraq.

(Source: BHEL)

(Picture: a compressor previously installed by BHEL in Iraq)

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Russian Invasion of Ukraine, and Iraq’s Economy

By Salam Zidane for Al Monitor. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

Russian invasion of Ukraine has sharp impact on Iraq’s economy

Russia’s invasion of Ukraine has caused shortages of food in Iraq and forced the government to pay more in gasoline subsidies, but the high price of crude oil plus sanctions on Russia has opened new opportunities for Iraq.

Click here to read the full article.

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Genel Energy outlines Payments to Govts for 2021

By John Lee.

Genel Energy has just published details of its payments to governments for the year 2021:

Introduction and basis for preparation

This report sets out details of the payments made to governments by Genel Energy plc and its subsidiary undertakings (‘Genel’) for the year ended 31 December 2021 as required under the Disclosure and Transparency Rules of the UK Financial Conduct Authority (the ‘DTRs’) and in accordance with our interpretation of the Industry Guidance issued for the UK’s Report on Payments to Governments Regulations 2014, as amended in December 2015 (‘the Regulations’). The DTRs require companies in the UK and operating in the extractives sector to publically disclose payments made to governments in the countries where they undertake exploration, prospection, development and extraction of oil and natural gas deposits or other materials.

Governments

All of the payments made in relation to licences in the Kurdistan Region of Iraq (‘KRI’) have been made to the Ministry of Natural Resources of the Kurdistan Regional Government (‘KRG’).

Production entitlements

Production entitlements are the host government’s share of production during the reporting period from projects operated by Genel. Production entitlements from projects that are not operated by Genel are not covered by this report. The figures reported have been produced on an entitlement basis rather than on a liftings basis. Production entitlements are paid in-kind and the monetary value disclosed is derived from management’s calculation of revenue from the field.

Royalties

Royalties represent royalties paid in-kind to governments during the year for the extraction of oil. The terms of the Royalties are described within our Production Sharing Contracts and can vary from project to project. Royalties have been calculated on the same barrels of oil equivalent basis as production entitlements.

Materiality threshold

Total payments below £86,000 made to a government are excluded from this report as permitted under the Regulations.

Payments to governments – 2021

Country/Licence KRI Total (1) Taq Taq (2)
Production entitlement (bbls) 1,234,564.87 1,234,564.87
Royalties in kind (bbls) 216,930.95 216,930.95
Total (bbls) 1,451,495.82 1,451,495.82
Value of production entitlements ($ million) 78.52 78.52
Value of royalties ($ million) 13.74 13.74
Capacity building payments ($ million) (3) 1.25 1.25
Total ($ million) 93.51 93.51
  1. Under the lifting arrangements implemented by the KRG, the KRG takes title to crude at the wellhead and then transports it to Ceyhan in Turkey by pipeline. The crude is then sold by the KRG into the international market. All proceeds of sale are received by or on behalf of the KRG, out of which the KRG then makes payment for cost and profit oil in accordance with the PSC to Genel, in exchange for the crude delivered to the KRG. Under these arrangements, payments are in fact made by or on behalf of the KRG to Genel, rather than by Genel to the KRG. For the purposes of the reporting requirements under the Regulations however, we are required to characterise the value of the KRG’s entitlement under the PSC (for which they receive payment directly from the market) as a payment made to the KRG. Therefore, estimated value in $millions is not paid to the KRG, and is calculated to meeting the reporting requirements under the regulations
  2. The amount reported for Taq Taq, is the gross payment made to the KRI by the operating company (TTOPCO), Genel’s share of these payments is equal to 55% (with the exception of capacity building payments)
  3. Capacity building payments reported are payments made by Genel directly to the KRI in cash as required by the PSC.

(Source: Genel Energy)

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GKP Revenues Triple

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) closed up nearly 13 percent on Wednesday after the company announced that revenue for 2021 had almost tripled.

In its results for the full year ended 31 December 2021, Jon Harris, Gulf Keystone’s Chief Executive Officer, said:

“I am pleased to report a year of strong operational and financial delivery in 2021. With a 19% increase in gross average production to 43,440 bopd, our leverage to the recovery in oil prices and continued cost and capital discipline, we generated substantial revenue and free cash flow.

“We continued to deliver on our strategy of balancing investment in sustainable growth and shareholder returns, as we resumed drilling activities and submitted a draft Field Development Plan to the Ministry of Natural Resources while also returning $100 million of dividends to our shareholders in 2021. Following the $50 million dividend that we paid in February 2022, we are pleased to announce today the declaration of an additional $90 million of dividends. This brings aggregate shareholder distributions declared since 2019 to $340 million.

“Looking ahead to the remainder of 2022, we remain focused on delivering gross annual production of 44,000-50,000 bopd by bringing SH-15 online in Q2 2022 and optimising production with well interventions and workovers. While constructive engagement continues with the MNR on the FDP, timing of approval remains uncertain and further progress is required before we fully execute FDP activity.

“Following my first year as GKP’s CEO, I would like to personally thank the Company’s teams in Kurdistan and the UK for all of their efforts. We are in a strong position and I am excited about safely delivering the significant growth potential of the Shaikan Field to drive sustainable value for all of our stakeholders.“

Highlights to 31 December 2021 and post reporting period

Operational

  • Continued strong focus on safety in 2021 despite one previously reported lost time incident (“LTI”); currently no LTIs recorded for  over 160 days  
  • Third consecutive year of production growth with 2021 gross average production of 43,440 bopd, towards the upper end of our tightened guidance range of 42,000-44,000 bopd and a 19% increase versus 2020
  • 2022 YTD gross average production of c.45,500 bopd, following milestone achievement in February 2022 of 100 MMstb cumulative production since inception
  • Successfully restarted drilling activities in June, resulting in two new wells, SH-13 and SH-14, coming online towards the end of the year
  • After acid stimulations, current SH-13 production in line with expectations while we continue to explore options to further increase SH-14 production
  • Following the early appearance of trace quantities of water, SH-12 is currently shut-in while we investigate near-term production options ahead of installation of planned water handling facilities  
  • Spudded SH-15, which is currently being hooked up ahead of targeted start-up in Q2 2022

Draft Shaikan Field Development Plan (“FDP”)

  • Submitted draft FDP to Ministry of Natural Resources in November 2021 comprising plan to increase Phase 1 gross production plateau to between 85,000-95,000 bopd while eliminating routine flaring and significantly reducing carbon intensity
  • While final timing of approval remains uncertain due to the complexity of the project, we are providing today an interim update on progress to date on Phase 1 of the draft FDP. As we continue to review opportunities to further optimise the project, final details and cost estimates may vary and we expect to provide an update upon FDP approval
  • Expected components of Phase 1 of draft FDP:
    • Expand Jurassic gross production plateau up to 85,000 bopd
    • Test Triassic reservoir, targeting gross production plateau of up to 10,000 bopd
    • Concurrently, execute Gas Management Plan to eliminate routine flaring through gas reinjection, underpinning target of more than halving scope 1 and 2 emissions per barrel by 2025
  • From FDP approval, expected duration of Phase 1 Jurassic and Triassic projects is 36 to 42 months and the Gas Management Plan is 18 to 24 months
  • Total Phase 1 gross Capex currently estimated to be $800-$925 million, up c.$160 million from previous FDP with the objective of increasing production towards 95,000 bopd through project optimisations

Financial

  • Strong free cash flow generation of $122.2 million (2020: $(22.9) million)
  • Total dividends of $100 million paid in 2021, including a 2020 annual dividend of $25 million, a special dividend of $25 million and an interim dividend for 2021 of $50 million. An additional $50 million interim dividend was paid to shareholders in February 2022
  • Revenue almost tripled to $301.4 million (2020: $108.4 million), contributing to a return to profit after tax of $164.6 million (2020: $47.3 million loss)
  • Adjusted EBITDA increased by almost four times to $222.7 million (2020: $56.7 million) driven by higher gross production, leverage to the recovery in oil prices and the Company’s continued strict control of costs:
    • Gross average production increased 19% to 43,440 bopd (2020: 36,625 bopd)
    • Realised price more than doubled to $49.7/bbl (2020: $20.9/bbl)
    • Gross Opex per barrel of $2.7/bbl (2020: $2.6/bbl), in line with 2021 guidance of $2.5-$2.9/bbl
  • Revenue receipts of $221.7 million in 2021 from the KRG for crude oil sales related to the December 2020 to August 2021 invoices and partial repayment of arrears related to the outstanding November 2019 to February 2020 invoices
  • Since the beginning of 2022, the Company has received a further $106.4 million net to GKP for crude oil sales and arrears related to the September 2021 to November 2021 invoices. As at 29 March 2022, the outstanding arrears balance is $21.9 million net to GKP
  • Net Capex of $50.8 million (2020: $45.9 million), primarily related to the completion of the SH-13 and SH-14 wells and debottlenecking of PF-2
  • Robust cash balance of $182.7 million at 29 March 2022

Outlook

  • Remain focused on delivering 2022 gross average production of 44,000-50,000 bopd reflecting the anticipated production contribution from SH-15 and the benefits of well intervention and workover activities
  • 2022 net capital expenditure guidance of $85-$95 million:
    • Includes completion of SH-15 drilling, well interventions and workovers, and activity that enables us to expedite the FDP following approval 
    • With progress on the FDP, the Company expects to resume drilling and increase 2022 capital guidance
  • Gross Opex guidance of $2.9-$3.3/bbl, driven by increased operational activity and the continued catch up of previously scheduled work programmes deferred due to COVID-19
  • Today declaring $90 million of dividends, representing further delivery against GKP’s strategic commitment of balancing investment in sustainable growth with shareholder returns:
    • $25 million final 2021 ordinary dividend subject to approval at AGM on 24 June 2022
    • $65 million interim dividend, expected to be paid on 13 May 2022, based on a record date of 29 April 2022 and ex-dividend date of 28 April 2022
    • The Company will disclose the US dollar and pounds sterling rate per share for both dividends prior to their ex-dividend dates
  • Assuming timely payment of invoices and continuing strong oil prices, we are expecting strong cash flow generation in 2022. This would provide flexibility to fund a potential increase in capital expenditure, with progress on the FDP, and the opportunity for further distributions to shareholders, while preserving adequate liquidity and maintaining a robust balance sheet

More here.

(Source: GKP)

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Iraqi Drilling Company signs Partnership Contract with SOCAR

By John Lee.

The Iraqi Drilling Company (IDC) has signed a partnership contract with SOCAR, the the state-owned oil and gas company of Azerbaijan, for drilling and oil-field services.

The Director General of the company, Bassim Abdul Karim, said that the contract involves collaboration in the field of drilling and reclamation of oil wells, noting that the term of the contract is three years, and may be extended.

The agreement follows a visit by Iraq’s Oil Minister, Ihsan Abdul-Jabbar Ismail, to Azerbaijan in September, and a visit by the General Director of Iraqi Drilling Company (IDC), Basim Abdulkareem, to SOCAR’s headquarters in January.

(Source: Ministry of Oil)

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KRG “Remains Committed” to Oil and Gas Contracts

By John Lee.

The Prime Minister of the Kurdistan Regional Government (KRG) has assured the region’s partners in the oil and gas sector that the KRG “remains committed” to the contracts that have been signed with energy companies.

Masrour Barzani told the Global Energy Forum 2022 that the contracts are “in line with our oil and gas law and the Iraqi Constitution and they are a bedrock of our shared future“.

He added:

“The sanctity of the contracts are just as important to my government as they are to you …

“Investors in Kurdistan have the right to receive regular payments. Ensuring this happens is a core focus of my cabinet, which will clearly help secure future investment. We value the investment and partnership of all the energy companies who are in Kurdistan – I know you have maintained commitment through the challenges …

“We in Kurdistan have long sought mechanisms for the federal distribution of oil and gas revenues across all of Iraq. That’s what the Constitution calls for, and the only practical way forward for both Baghdad and us.“

His comments follow the recent Federal Supreme Court ruling that sales of oil and gas law by the KRG, independently of the central government in Baghdad, are unconstitutional.

Barzani described the ruling as “unconstitutional and blatantly political.“

(Source: KRG)

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