Dialogue on Contentious Oil Issues in Iraq

3- As for the LTSC of the federal government the IOCs has no claim on the reserves, do not share the increases in oil prices, and all their entitlements (Capex, Opex and remuneration fees) are donated in dollars not barrels. So all the economic rent associated with higher oil prices belong to the Iraqi people. What the IOCs get is their actual investment and remuneration fee- adjusted by deducing the share of the state partner and taxes.

My calculation for all LTSC of the involved oilfields gives a weighted average remuneration fee of $1.9/barrel, and Iraq retains 51.25% of this amount. In other words the maximum remuneration fee the IOCs would get is $0.974 a barrel, leaving the effect of R-factor, the performance factor and other possible deductions. This is by far much lower than the lowest “profit oil in barrel” of what the IOCs get under the KRG’PSCs. In conclusion, the IOCs get much higher profits under the KRG’ PSCs compared with what they earn in remuneration fee under the LTSC of the federal government.

7: Some experts claim that Kurdistan has given more concessions than what is necessary to oil companies that is why they heading to Kurdistan, what is your view?

AMJ answer on Q7:

Yes. Most available studies, opinions and reports in the professional and industry sources would support such assertion. As I mentioned in my previous answers the KRG’ PSCs offers very lucrative and tempting concessions to the IOCs, and naturally the IOCs grab such opportunities.

IOCs, like any market driven/affected company, are usually guided by the Internal Rate of Return-IRR to make investment decisions. The KRG’ PSCs offer the IOCs conditions that could lead to exceptionally high IRR.

8: How do you see the membership of Iraq in the Extractive Industry Transparency Initiative (EITI), is Iraq capable of meeting this organizations’ conditions?

AMJ answer on Q8:

I have been and am following this subject constantly. My assessments of the IEITI Reports are published and I participated in providing capacity development and training activities in this regard.

Though IEITI Report 2010 (released in December 2012 and officially launched in April 2013) is good step in the right direction, nevertheless it suffers from many serious flows and weaknesses.

In December 2012 Iraq was declared “Compliant” member of the EITI, and this was celebrated officially in April 2013, and I think Iraq is keen to remain compliant, but much needs to be done properly and timely.