Service Contracts Vs Production Sharing Contracts Revisited

By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Service Contracts Vs Production Sharing Contracts Revisited

Debating the performance of the service contracts and viability of production sharing contracts as alternative seems to reenergizes lately among Iraqi professionals; this is prompted by few reports in international media sources coupled with reported domestic hints and a complete silence of the Ministry of Oil.

Personally, I received requests from Iraqi parliamentarians, from members of local councils/governments in significant oil producing provinces, and from professional colleagues. These requests focused on three main issues:

  • The performance of the Long Term Service Contracts-LTSC concluded by the federal Ministry of Oil-MoO; The incurred cost of upstream development under these LTSC;
  • The comparison of “service cost” under these LTSC against the corresponding cost under Production Sharing Contracts-PSCs;
  • The Constitutionality and legality of both modalities: LTSC and PSCs.

The purpose of this intervention is to address the above issues, which I have shared already with the requesting colleagues. Also, I had, in many previous occasions, dealt at length with matters pertaining to these issues. Thus, I will attempt here to provide an update and further insights.

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Mr Jiyad is an independent development consultant, scholar and Associate with Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: [email protected], Skype ID: Ahmed Mousa Jiyad).

9 Responses to Service Contracts Vs Production Sharing Contracts Revisited

  1. Ahmed Mousa Jiyad December 10, 2015 at 1:23 pm #

    I received the following direct feedback from the DG of PCLD at the Ministry of Oil, who kindly agrees to post it as a comment on my article on this (IBN) website.
    Ahmed Mousa Jiyad,
    Iraq/ Development Consultancy & Research,
    10 Dec 2015

    Sent: Wednesday, December 09, 2015 7:24 PM
    To: Ahmed Mousa Jiyad
    Subject: Re: Service Contracts Vs Production Sharing Contracts Revisited عقود الخدمة و عقود المشاركة في الأنتاج

    Dear Mr. Ahmed,

    I hope all is well with you, wishing you all the best.
    First of all, I would like to express my sincere regards and respect to you for your Iraqi spirit and loyalty and professionalism in responding to the fallacious, erroneous and unfair campaign against the Service Contacts signed by the affiliated companies of the Ministry of Oil, especially the your clarification of the Parliamentary Financial Committee letter and the recent comparison between the LTSCs of the Ministry of Oil and Kurdistan PSCs.
    Secondly, I would like to state, despite the severe unfair campaign against the LTSCs, that:-
    1. The policy of the Ministry of Oil is not to talk to the media regarding everything or detail related to its national missions, tasks and jobs, although it’s important.
    2. To do so, it needs, the Ministry, experienced stuff or cadre familiar with and fully aware of the Service Contracts’ terms and conditions, which is very limited and completely busy with the daily ongoing business.
    3. Nevertheless,
    a. the Ministry of Oil through its arm, the Petroleum Contracts & Licensing Directorate “PCLD” , has responded to the Parliamentary Financial Committee letter in such detail and clarification ( in six pages ) that there shouldn’t be any doubt about the production from the oilfields under the LTSCs and generated revenues to the State. The Ministry letter was sent to the Parliamentary Financial Committee on 24 Nov, 2015 and a copy handed over in person on 8 Dec. (I hope that I could get the consent to send you a copy).
    b. the PCLD (the undersigned) will deliver on Sunday 13 Dec. 2015 to both, the Parliamentary Oil and Energy Committee and the Financial Committee a comprehensive session about the LTSCs of the Ministry of Oil and a comparison between them and Kurdistan PSCs, in addition to the investments or costs incurred to develop and produce the ten oilfields (Rumaila, Zubair, WQ/1, WQ/2, Majnoon, Garraf, Halfaya, Missan”3 fields”, Badra and Ahdeb), Rem. Fee paid, unit cost, incremental production …ets.
    Therefore, the Ministry of Oil is not silent, but works in silence, and we will strongly defend our LTSCs, which are our honor, and Dear Ahmed rest assure that they will not be converted to PSCs.

    My best regards.

    Abdul Mahdy Al-Ameedi
    Director General
    Petroleum Contracts & Licensing Directorate
    Ministry of Oil