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Iraq asks foreign companies to raise oil output, exports

Iraq

Iraq Oil Minister Jabar Ali al-Luaibi met in Baghdad with oil companies operating in Iraq not long after he took up his post earlier this month.  Iraqi News photo.

Iraq in talks with foreign companies to link oil development fees to prices

By Maher Chmaytelli

BAGHDAD, Aug 23 (Reuters) – Iraq on Tuesday asked foreign oil companies to increase oil output and exports, as Baghdad joined those spotlighting production potential ahead of a major energy gathering late next month.

Oil Minister Jabar Ali al-Luaibi, who took up his post this month, met in Baghdad with oil companies operating in Iraq.

“The minister reaffirmed support for the operations of international companies in order to increase the production and export rates of crude oil and natural gas,” ministry spokesman Asim Jihad said.

The meeting aims at “opening a new chapter in cooperation” with the foreign companies, he said.

Iraq is OPEC’s second-largest producer after Saudi Arabia and an increase in its output, alongside that of Iran, could aggravate the global oil glut and complicate discussions between OPEC and non-OPEC producers on output limits to prop up prices.

OPEC members will meet on the sidelines of the International Energy Forum (IEF), which groups producers and consumers, in Algeria from Sept. 26-28.

Luaibi on Monday renewed Iraq’s demand to review contracts with the companies to cut the fees that they receive when crude prices fall.

The companies say those fees are already low given the investments and challenges required to raise output at ageing fields in the southern region.

Iraq produces about 4.6 million barrels per day (b/d) of crude and this year started exporting liquefied petroleum gas and natural gas condensates. Total gas exports so far this year reached 12,000 metric tons for LPG and more than 100,000 cubic meters (3.5 million cubic feet) for condensates.

Iraq was in talks with foreign oil companies to link the fees they charge for developing their fields to oil prices and have them share the burden when markets go down, former oil minister Adel Abdul Mahdi told Reuters in January.

Iraq generates 95 percent of its public budget from oil sales. It has service agreements with companies including CNPC, BP, Shell, Eni, Exxon Mobil and Lukoil, which get paid for the extra barrels produced at fields awarded to them through a bidding process.

Current service agreements with oil companies are straining Iraq’s budget as the government pays them a fixed fee for increasing production at ageing fields. Its own revenue dropped as oil prices have more than halved compared to 2014.

(Reporting by Maher Chmaytelli; editing by Jason Neely and William Hardy)

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