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By John Lee.

Midland Oil Company (MdOC) has successfully restarted a previously idle vertical oil well in the Ahdab field, using horizontal drilling technology.

The operation was carried out in cooperation with Chinese partner Al-Waha Company.

Al Waha describes itself as follows:

"Al-Waha (Al-Waha petroleum company), a holding joint-ventured enterprise jointly capitalized by CNPC (China National Petroleum Corporation) and China North Industries Corporation, was founded On Dec.26,1995, for the execution of Ahdeb [Ahdab] Project in Iraq, and for the new opportunity of further cooperation in Iraq."

MdOC Director General, Mohammed Yassin Hassan, stated that the technical and administrative teams, in collaboration with Al-Waha, were able to restore well ADR3-3ST, achieving substantial crude oil output with minimal associated water content from the reservoir base.

He commended the teams for their efforts and noted that this success opens new prospects for reviving other idle vertical wells using horizontal drilling methods. The approach is expected to enhance production efficiency and reduce operational costs related to water treatment.

The Director General emphasised the importance of continuing to adopt modern technologies in oil extraction to support increased output.

(Source: Ministry of Oil)

By John Lee.

During the opening of the first Iraq Oil Projects Exhibition and Licensing Rounds Conference in Baghdad at the weekend, the Minister of Oil reiterated his claim to have increased Iraq's oil and gas reserves by adding 6 billion barrels of crude oil and 32 billion standard cubic feet of gas. (Oil reserves were previously stated to be 140 billion barrels).

Hayan Abdul Ghani added that accomplishments during the current government's tenure include the development contract for the Ahdab oil field with a capacity of 250,000 barrels per day (bpd) and the opening of the Karbala Strategic Refinery with a capacity of 140,000 bpd.

He also listed the accelerated operation of the Akkas gas field, the first phase of liquid separation for Basra Gas Company (BGC) with a capacity of 200 million standard cubic feet per day, and the operation of the liquid gas warehouse in Samawa.

The signing of the integrated South Iraq Agreement with TotalEnergies was also highlighted; it will include investment in gas from five oil fields, producing 600 million standard cubic feet of gas daily and 210,000 barrels of crude oil daily. Additionally, the project includes the use of seawater for injection and avoiding river water usage, as well as the construction of a 1,000-megawatt solar power station, the largest in Iraq.

(Source: Ministry of Oil)

By Ahmed Mousa Jiyad.

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

The recent appointment of Ammar Al-Anbagi as the new, a twelfth in a row, director general of Iraq's State Oil Marketing Organization (SOMO), might be an opportunity to review the path of leadership of this very important entity in the petroleum sector and, indeed, for the entire economy of Iraq.

I have known most of SOMOs DGs since early seventies of the last century during either our postgraduate studies in the UK with scholarships from the Ministry of Oil financed by agreements with IOCs prior to mid-seventies oil nationalisation, or during my work with Ministry or INOC or the Council of Ministers before leaving the country in July 1988, or during the exile since then.

Ammar is the twelfth DG since my colleague Ramzi Salman assumed the directorship in 1972 and hold it for twenty years.

During these years the service duration of DGs varies between as short as four months and as long as twenty years. Prior to 2003 invasion, SOMOs leadership was characterised with relative stability, while the immediate aftermath of invasion witnessed frequent changes and instability, before returned to another phase of relative stability since mid-2006.

The following chart, compiled from and based on my database, exhibits SOMOs leadership by name and duration of their term, listed from recent appointment down to the first, during the last fifty years of ups and downs with most daring challenges that faced the country.

A few quick remarks are worthy of making at this occasion.

• All DGs, except Falah Al-Amiry, have had many years of experience within the Iraqi petroleum sector before assuming their leadership of SOMO.
• Prior to 2003 invasion, SOMO was the most secretive entity within the petroleum sector and was directly connected to highest political and authority structures through, first Follow-up and Agreement Execution Committee / Revolution Command Council, then through the Republic Presidency Office, though it was within MoO structure.
• Prior to 2003 invasion, there were only five DGs with Ramzi Salman serving terms from 1972 to March 1991 as the longest DG, who had consolidated SOMO's structure and status. The terms of other four DGs ranging from only 4 months (Ali Rajab) to six years and a half (Sadam Zuban).
• SOMO' leadership witnessed frequent changes immediately after 2003 invasion with four DGs within less than three years in total, reflecting the chaos that dominates due to invasion and causing organisation instability.
• In March 2006, Dr. Falah Al-Ameri was appointed and his term, the second longest ever, ended in September 2017. During his term, the petroleum sector and, consequently, Iraq, witnessed many serious challenges and crucial developments: two oil price collapses, in 2008 and 2014; Daesh and its devastating consequences from mid-June 2014 onwards; the unwise decision to nominate SOMO as the "State Partner" in Al-Ahdab and Rumaila oilfields upstream service contracts; the commencement of limited spot offering through Dubai Auction in April 2017; OPEC+ implication for Iraq; unrealistic proposal for transforming SOMO from oil "marketing" to oil "trading" company; opportune expanding towards East Asian markets; forming temporary, but problematic, partnerships with a Russian company, " Litaso" and a Chines company, "ZhenHua", and immaturely considering oil price hedging, among others.
• Alaa Al-Yassiri term lasted six years and a half, characterised with, mostly, business as usual, except ignoring the idea of converting SOMO from "marketing" to "trading" company and oil price hedging.
• Now, SOMO provides more data than before, particularly in contrast to the firm secrecy of pre-2003, but still more transparency and openness are needed on time and regularly. These includes monthly oil lifting, in volume and price, by IOBs, monthly market destinations, monthly or quarterly oil lifting pursuant to upstream development service contracts, and ministerial meetings regarding export oil prices, among others. Also, SOMO needs to be proactive and should state its position on various projects that have direct implications for the country' oil export outlets, such as pipelines, since it is the only entity that have direct and first-hand knowledge and professional expertise with regards to comparative transport cost to various market destination, price differentials and competitive market shares; all such matters impact the economic feasibility of any project to expand oil exports.
• Due to domestic politics, personal vendetta or legal integrity premises, many accusations of corruption and financial irregularity were raised regarding SOMO, as entity, and some directed against both Al-Ameri and Al-Yassiri, with some even requested their removal from SOMO.

A few cases are referred to here: SOMO itself confirmed, in February 2013, that one of its senior staff was leaking, for a long period, information on prices to foreign companies, and request the Ministry to take, a rather mild action, against him! A more serious case worth mentioning related to legal action taken by the Parliamentarian Uday Awad, resulted in Basra Appeal Court issuing an arrest order against Al-Yassiri, in October 2019, but, apparently, the arrest was not made.

• Ironically, the former Minister of Oil Jabbar Luaiabi considered in an official meeting of the Ministry Advisory Commission- Hayaat Al-Ray, in 12 June 2017, SOMO among seven state-owned companies associated with the ministry as "loss making companies", and gave them six month to improve their fiscal balances; by September that year Al-Ameri was removed. A company that generates almost all of Iraq's foreign exchange was accused of making losses; is there any other manifestation of ignorance and absurdity better than this??!!!
• On the legal and ministry structure levels, SOMO is the only legal sovereign entity in charge of oil exports in the country; this monopoly goes back to MoO Law 101 of 1976 and Decision 272 of 1987. SOMO was, and still is, an issue of whether to include or exclude it from INOC Law, as the said law has been in limbo since the Federal High Court revoked many of its main articles since January 2019.

I had previously addressed SOMO' issues in a few articles written in Arabic, English and were circulated widely and accessible, as listed below. Also, I keep watching its affairs closely and have direct line of communication with SOMO and am very keen to maintain and enhance the contact.

Norway

12 March 2023

 

SOMO Reveals More Important Data on its Marketing Activities, posted on IBN, 22 July 2019

https://www.iraq-businessnews.com/2019/07/22/somo-reveals-more-important-data/

 

https://www.akhbaar.org/home/2019/7/260413.html  posted on 23 July 2019

 

SOMO Discloses Data on its Spot Sales, posted on IBN10 July 2019

https://www.iraq-businessnews.com/2019/07/10/somo-discloses-data-on-its-spot-sales/

https://www.akhbaar.org/home/2019/7/259802.html  posted on 6 July 2019

 

SOMO Does Not Work This Way. Posted on 16 August 2018  https://www.iraq-businessnews.com/2018/08/13/somo-does-not-work-this-way/

 

 

http://www.akhbaar.org/home/2018/11/251035.html posted on 11 Nov 2018

 

Reforming and Transforming SOMO- A Follow Up,  posted on IBN on 13 Dec 2017 https://www.iraq-businessnews.com/2017/12/13/reforming-and-transforming-somo/ and on Al-Akhbaar 13 Dec 2017 http://www.akhbaar.org/home/2017/12/238018.html

 

Debating SOMO' Transformation.  The English text posted on IBN and AlKhbaar on 5 Sept 2017 https://www.iraq-businessnews.com/2017/09/05/expert-blog-debating-somo-transformation/  ; http://www.akhbaar.org/home/2017/9/233074.html and the Arabic text on http://www.akhbaar.org/home/2017/9/233297.html  

 

Click here to download the full analysis in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former 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: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

By Ahmed Mousa Jiyad.

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

KRG' Contracts, Laws and Oil Exports are Unconstitutional and Nullified, Federal Supreme Court Decides

Federal Supreme Court-FSC in Iraq issued, after ten years of debate and deliberate procrastination tactics, a long-waited constitutional verdict; a sweeping unprecedented verdict that could surely have very serious long lasting ramifications on the legality of upstream petroleum contracts and agreements concluded by Kurdistan Region Government-KRG and, consequently on the entire upstream petroleum sub-sector in the country.

The nine men judges took a majority, of seven, decision; all signed the verdict without specifying who the dissented are.  The Chief Justice, Chairman of the Court signed every of the 15 page verdict. FSC decisions, according to the 2005 Constitution are final, should be uphold, implemented and adhered to by all parties of the case and all other authorities in the country from now on.

The 15 page document, dated and publically announced on 15 February 2022, elaborated the case at length, which goes back to 2012, though, actually, the root of the case goes much earlier than that. Many, including myself, argued for years that KRG actions, laws, contracts and agreements contravene both the 2005 Constitution and earlier legal governing modalities, and thus, inflicting serious damages to the interests of the Iraqi people.

This is a quick brief intervention from me, as this verdict introduces substantive impacting game-changing rulings that eradicate the fate-a-comply, probably create a new normal in Iraq's upstream petroleum and causing seismic uncertainty for IOCs in Kurdistan; there will be much more attention to and writings about the verdict, its pros and cons, and its ramifications in the weeks rather than months ahead.

What the Verdict Says

The following are my translation, wording and highlights of the specific components of the verdict:

• KRG Oil and Gas Law number 22 of 2007 is unconstitutional and thus nullified for contravening articles 110, 111, 112, 115, 121 and 130 of the 2005 Constitution.
• KRG is obliged to deliver all oil produced from oil fields in KR and other areas where the KRG' Ministry of Natural Resources-KRGMNR had extracted oil from, and deliver all such oil to the federal government represented by the Federal Ministry of Oil-FMO and enabling FMO to exercise its constitutional authorities with regards to exploration, extraction and exporting oil.
• FMO have the right to pursue and follow-up the illegality of oil contracts and agreements concluded by KRGMNR with all external parties, states and companies, regarding exploration, extraction, exporting and selling oil.
• Obligate KRG to enable FMO and the Federal Board of Supreme Audit -FBSA to review all oil contracts concluded by KRG regarding export and sell of oil and gas to audit these contracts and determine the federal financial dues that KRG should re-pay back. And to determine KR share in the state budget to insure the delivery of the rights/ entitlements of KR' citizens and governorates from the federal state budget without delay, after KRG implement all contents of this verdict and inform that to federal government and FBSA.

In addition to the above four basic items of the verdict, FSC made further important assertions throuout the document.

• The federal authorities are constitutionaly mandated regarding soveriegn economic and trade external policy; therefore, it is not permissible that governorates and regions in all of Iraq exercise this exclusive role instead of the federal authorities; as such exercise by governorates and regions contravens the conctitution.
• The Iraqi people have the rights to and should know all about oil and gas revenues and how such revenues are distributed since they are the owner of oil and gas.
• KRG' noncompliance with the federal authorities exclusive mandates regarding oil and gas had caused complications between the federal government and KRG and that in turn prevented the delivery of KR people share in the annual state budgets.
• KRG should comply with and adheer to the constitutional exclusive mandates of the federal authorities including exclusive mandates regrading oil and gas exploration, extraction and export; such compliance enables KR people receiving their due entitlments from the annual state budgets.

And in a follow-up statement, FSC asserts that during the deliberations of a legal case before US courts in September 2015, KRG representative had, after losing the case, requested re-routing the oil shipment from US to delivery in Israel; the US court refused even that request. The rulling of that case was in line with and substantiates current FSC verdict.

What Next

The urgency of the matter and the scope of the FSC decision require taking promptly serious specific steps and actions to comply with and implement the said decision. For this purpose I proposed, on 15 February 2022, to the authorities, particularly the Federal Ministry of Oil forming a special team comprising well qualified experienced staff members and tasked with the following:

1- Receiving copies of all contracts signed by KRG for each oil/gas field and exploration block and all amendments to those contracts;

2- Receiving all documents, accounts, development plans and data relating to the development, production, export, cost and revenues relating to those fields to date;

3- In light of assessing the contracts and documents mentioned in the two paragraphs above, an "alternative model service contract-AMSC" is prepared to replace the current production sharing contracts/agreements- PSCs/As, and any other upstream contracts enforced by KRG; the proposed AMSC is guided by and premised on the experience of Al-Ahdab oilfield contract, which was converted from a production sharing contract to a service contract, and the service contracts signed by the Ministry resulting from the first four licensing rounds only;

4- Preparing alternatives and options to be presented to the IOCs contracted with KRG, including accepting the AMSC and then negotiating to determine the specifics and numerical values of the basic variables in it, such as remuneration fees, capital cost recovery ratio, ... etc., in light of the specificity of the field concerned; or to relinquish IOC participation interest in the contracts signed with KRG; or any other feasible alternatives.

5- Publically announce that the presence of every IOC currently operating in the KR and do not comply with and adhere to the Federal Supreme Court decision is considered illegal and unconstitutional, and thus that company bears the consequences of its illegal presence and operation in Iraq;

6- Assessing how to deal with oil pipelines in the region, including the pipeline invested by the Russian company Rosneft;

7- Rapid, effective and constructive cooperation between the Ministry and the Iraqi Council of Representatives-CoRs, through forming a joint committee comprising members of known professional and legal experience, to approve the AMSC that would be the base for insuring CoRs approval of the final AMSCs upon concluding them with the IOCs operating now in the KR; this provides solid legal premise for any concluded AMSCs, reduces risks and enhances certainty.

8- Preparing a plan of action at the international level, through legal, diplomatic and oil industry means, to publicise FSC decision as widely as possible, its implementation and consequence of non-compliance by IOCs currently working in KR-Iraq;

9- Cooperating with SOMO for notifying international oil buyers, oil tanker companies, and insurance companies of the legal consequences of the Federal Court's decision and consequence of non-compliance;

10 - Coordination with the Ministry of Finance regarding the implementation of FSC decision regarding articles relating to the KR share in the state budget law for the current year.

The federal authorities should act and act quickly, firmly, openly and transparently. This decision by FSC provides strong and timely support to Iraq's case of arbitration that has been before ICC- Parise for years, a resolution of which is anticipated in the coming few months.

Officially so far, the National Security Ministerial Council, chaired by the Prime Minister convened on 16 February and tasked the Ministry of Oil to coordinate with KRG, the states and oil companies regarding the implementation of this verdict.

Views and Reactions

Expectedly, reaction to and views on the verdict were prompt and diverge; most are supportive but some are bewildered and very few are condemning; this is very natural and expected in the Iraqi discourse.

Reactions of Kurdish Barzani family, KRG and Kurdish Parliament in Erbil were sharp, harsh, hot-tempered and regrettable. Masoud Barzani says the verdict is "purely political and against Kurdistan"; KRG even accused the Supreme Federal Courte of being "unconstitutional" and vowed to "defend" its oil and gas contracts; a statement by the Kurdish Parliament followed similar line of accusations for refusing the verdict. This type of reaction weakens further KRG stand and contravenes its repeated claim for upholding and adhering to the Constitution!!!!!!!!

On the other hand, many other known Kurdish parliamentarians, politicians and parties are cautiously supportive.

But the most interesting socio-political development which could indicates a dramatic shift in the Kurdish public opinion and tendencies is a strong public statement endorsed by a big group of Kurds from inside and outside KR Iraq. The statement begins by welcoming the abrogation of KRG' Oil and Gas Law, which it describes, "a Law through which political families monopolise all basic resources.

; it is a remarkable wakeup call and collective social action.

 

Final Remarks

FSC verdict is final; it inflicts serious blow to upstream petroleum legal foundations in Kurdistan Iraq; IOCs operating there are now put on notice and they are advised to prepare themselves for direct talks with the federal ministry of oil and, also, they should demonstrate that the sooner the better; their shares in the bourses might nosedive sharply and their Kurdistan expedition might be over. Keep watching shares movement on the bourses websites!

Also, the verdict asserts significant pro-transparency legal premise, i. e., the Iraqi people by virtue of their ownership of oil and gas, are constitutionally entitled to know all about upstream petroleum contracts, agreements, exports revenues, and how such revenues are shared and utilised for the best interests of all Iraqi people.

We all, including the members of the new parliament, should capitalise on this assertion when addressing the dubious deals and agreements concluded recently, unconstitutionally, by the care-taking government and the Ministry of Oil, particularly and precisely the agreement with the French IOC- TotalEnergies (which I addressed in three recent articles written in Arabic and circulated widely)

The 2007 proposed federal oil and gas law has been, for years, in a coma, now it is dead and buried; it is futile to revive it and so even to consider it as part of the "political deal" for forming the new "national majority" government, which some have called for!!

But, on the other hand, much is at a stake; we are, therefore, destined to witness many interesting developments and propositions, read and write about them. Stay tuned!

Click here to download the full report in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former 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: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

By Ahmed Mousa Jiyad.

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

Iraq Revenue Forecasting Model -- A Critical Assessment

INTRODUCTION

This review was prepared upon request from known international organization (XXX) regarding two documents prepared by a consultant (CCC) on Iraq Revenue Forecasting Model, and it comprises the following items: Background, which provides brief information on the deadline and the two documents; the Review Objective Criteria, which guides the assessment of the two documents by using six criterion; the Details of the Review comprises two parts corresponding to the two documents and finally the Review Assessment Matrix, which explains and calculate the final score rate for the two documents.

BACKGROUND

After a few email exchanges (XXX) posted two documents on 3 May 2021 and requested the peer review to be delivered by COB on 11 May. The first document entitled "EXPLANATORY NOTE OF IRAQ REVENUE FORECASTING MODEL" is in MS Word; hereinafter referred to as "EXPNOTE", while the other is in MS Excel Sheet; hereinafter referred to as "EXLSHEET".

The "EXLSHEET" comprises 22 Sheets and they differ in contents, length and size; they are referred to by their coded-names that appear in the bottom margin of the "EXLSHEET".

(XXX) email mentions, "The model is currently being reviewed by partners before being shared with the Iraq entity (EEE) and its stakeholders in the Ministry of Oil and international oil companies."

My assessment was delivered before the deadline and I suggested to share it with the consultant for further consideration, and requested permission to publish my assessment. (XXX) promised to share it with the consultant and asked me to wait for a couple of months before publishing it; it is today 14 December or more than seven months.

For ethical norms and considerations the names of the international organization (XXX), the consultant (CCC), the Iraq entity (EEE) and relevant entities (PPPPPPPPP) in Iraq are not disclosed.

Peer Review Objective Criteria

To conduct the peer review for the "EXPNOTE" and all 22 sheets in the "EXLSHEET" I formulated and was guided by the following criteria:

1. The conformity and adherence of the two documents to an acceptable standard for consultancy service regarding topics related to upstream petroleum; such standard relates to style, format, substance and research and consulting service ethics;
2. The qualitative aspects of the consultant methodology, strength of arguments, analysis consistency and coherence; the accuracy, validity, relevance of inputs, particularly used data; quality control of the computation, charts and contents of the "EXLSHEET";
3. The "add-value/ knowledge impact" for the intended client, particularly the usefulness of the entire consulting assignment to relevant entities (PPPPPPPPP) in Iraq;
4. The consultant work is basically relating to 11 oil projects, hence, the work and findings of the consultant was assessed according to the contractual provisions of the related signed contracts; and also since the above mentioned Iraqi entities and IOCs are the direct parties to these contracts.
5. Also the consultant dwelled heavily on export price and revenues, thus the analysis and finding will be assessed comparative to SOMO's price setting mechanisms, markets configuration and marketing modalities. Such comparative assessment complies with verification and evidence-based consulting and research methodology;
6. The test of reality vs. expectation. Experience with modelling and forecasting indicates that reality seldom coincides with expectation. Hence, the consultant' "forecasting the past" will be tested against actual, historical official data regarding oil production, oil export, oil prices and oil export revenues. The outcome of reality vs. expectation test has implications for assessing the usefulness and reliability of forecasting the future by the same proposed model.

DETAILS OF THE PEER REVIEW

Part one:

EXPLANATORY NOTE OF IRAQ REVENUE FORECASTING MODEL- "EXPNOTE"

The Following remarks are made after deep and thorough examination of "EXPNOTE" text:

1. This document is by definition an explanatory note, but where is the main report for this assignment? Usually, consulting assignment of quantitative nature comprises a main report, annexes, explanatory note and references. Hence, something was missing and neither the explanatory note nor annexes, in this case the "EXLSHEET", replaces the main report!!. The consultant seems to apply "trust me" this is a model for forecasting Iraq's revenue even without specifying, at the outset, what type of revenue!!
2. "EXPNOTE" says, "The model is built according to the FAST standard of financial modelling". But what FAST stand for, what are its standard of financial modelling and are the standard peculiar to upstream petroleum or for general purpose!! Does FAST has mathematical, statistical specific format or it is just a computation process using Excel facilities? Is there any reference to FAST and evidence supportive to its usefulness for upstream petroleum projects? Hence, the Model is not provided and FAST modelling is unknown; this is methodological flaw.
3. One of the model two purposes is to "forecast the past"!!! This is both surprising and erroneous since detailed data on oil production, oil exports and oil production is available on monthly bases since mid-2007! so what is the need to forecast the past??; this not only manifests lack of information on the part of the consultant, but also seems the consultant had committed serious error of judgement, as might be interpreted to reflects arrogance, pompousness mentality thinking, "we know it better than you"!!!!!Further discussion on the validity, reliability and test of "forecast the past" is provided in Part Two below.
4. "EXPNOTE" states, "although SOMO publishes export sales, these figures are before the recovery of costs and payment of fees to the operating companies". There are many flaws in such invalid statement: first; SOMO is oil marketing company while cost recovery and payment of fees to IOCs are the responsibility of other entities within the Ministry of Oil-MoO and they are paid in accordance with the related service contracts; second, SOMO export reports are monthly, while payment to IOCs are on quarterly base after auditing and verification of invoices presented in the previous quarter; third, most payment to IOCs are made in kind as per contract provision and oil lifting protocol that is elaborated in each oilfield related service contract (in Addendums two and four). It appears the consultant is not familiar with the technicalities and contractual provisions relating to SOMO' export reporting and MoO payment to IOCs;
5. The consultant uses long and tedious calculations to "estimate production which is not exported." On this I have the following remarks: first, data on oil production and allocation between export and domestic demand has been available for years and they are published on monthly bases. Therefore, there is absolutely no need to estimate what is already available. Second, the approach of "factor the field-level synthesised estimates of production against recorded exports" is conceptually and methodologically incorrect and third, as we shall see and prove that the consultant computation and estimate of production not exported was totally wrong and based on inaccurate understanding (see item 11 in Part Two below). Hence, the consultant argument for "estimate production which is not exported" is not valid and misleading and the computation model is wrong. For example the consultant model estimates 32% of production in February 2021 was for domestic consumption, while actual formal data shows only 12.21% during same month, indicating a margin of error in the consultant model of 148.32%; unusual high error margin in testing the model estimation against actual reality. Therefore, all what is written in "Estimating Production: synthesised field-level production estimates" fail the test of accuracy, validity and relevance.
6. In "Estimating Price", the consultant refers to "discounts for Iraqi crudes". Data and SOMO monthly price setting mechanism disapprove such assertion. SOMO uses different «price formulas" each has its own qualitative variables API, Sulphur content, destination and Marker crude; discounts and premiums are dependent on marketing conditions, in addition to special formula for Jordan, and almost two shipment a month, 2mb each, sold on spot platform that gives "extra price" compared to the usual "term contract" for that particular month. It appears the consultant knows very little about SOMOs oil price setting modalities. Further remarks will be provided later when comparing consultant price estimation to SOMO's export price (See items 3, 5, 9 and 10 in Part Two below)
7. The model estimation reported under, "Current Results", are all wrong because the estimated export sales for 2020 were much higher than actual official export revenues (see further details on the Dashboard Sheet in in Part Two below). Again, the model estimation fails under the test of comparison with actual data: i.e., reality.
8. The consultant argument regarding "Basra-Ceyhan differentials" is weak, vague. irrelevant and not convincing for the following reasons: first it is not specific whether the consultant argument is related to volume or value of export; second, due to pipeline problem Iraq export through Ceyhan have been very limited (according to final official export data for the first quarter this year 96.239% of Iraqi oil was exported from Basra, generating 96.341% of total oil export revenues); third, State Budget Law 2021 obliges KRG to deliver, at SOMO export price, 250000 per day. Hence the consultant is apparently unaware of these facts!!!
9. The information and argument presented by the consultant regarding the "R-factor" are also inconsistent, misleading and inaccurate; first, the consultant says "details of the terms of the R-factor are not available": this is not true as articles addressing this issue and computation of its impact were available on the public domain since 2010!!. Second, disregarding R-factor reduces government take and thus, increases the disparity between actual government take and "net to the government" as called by the consultant; third, the reference to "Faihaa field" is misleading and disingenuous since the field was offered under BR4 (exploration blocks) and it is at very early stage of development and, thus, its contribution to total oil production is very insignificant to have an impact: in the meantime the consultant ignores other important sources of revenues (see next items 10, 11 and 12). Finally, the claim that the analysis "shows a potential margin of error of a maximum of 1.63%" is baseless and deceptive (see item 8 regarding "Analysis Sheet" in Part Two below)
10. The assignment did not attempt to estimate government revenues from domestically consumed oil!! No reason was provided!! Why, then, the consultant used time and efforts to "synthesized production" when related data are already available on the public domain?? Finally why and in what way domestic revenues impact "Margins of Uncertainty" in the model computation??
11. Both documents exclude oil production from field managed by National Effort, especially those not contracted to IOCs under the four bid rounds. Also they did not cover two oilfields offered under BR2. It is not clear why the consultant excludes these oilfields and did not say a word about them?? Ignoring oilfields managed by national efforts has significant role in underestimating government revenues and thus, such exclusion is serious flaw.
12. Also both documents do not include production and export revenues for LPG, NGL, Naphtha and Fuel oil. Why these are out of the consultant scope is unclear, though data on these items is available on the public domain. Again, ignoring them is additional shortcoming of the two documents.
13. Throughout the two documents data selection and referencing them raises further concerns. Professionally and methodologically it is vital to differentiate between convenient "selectivity" and "thoroughness". Briefly, when data are available on the public domain but are not used or referred to by the consultant that reflects serious professional weakness, unethical, and manifest lake of thoroughness; i.e., the consultant should have searched thoroughly for the related and relevant data. When data are available on the public domain but are not used by the consultant, instead the consultant "synthesised" or "forecast the past" based on wrong premises and inaccurate understanding of the basic issues, that resembles serious infringement of methodological, professional and research ethics. When the consultant present limited selective referencing to data (mostly in the "EXLSHEET" document) that only reflect convenience for the consultant. Moreover, when that selective referencing is not related to the computed item (e.g. WQ1 "EXLSHEET": Row 35 vs. Row 59) causes confusion for the intended client or user!!
14. "EXPNOTE" asserts,"The model is designed to be updated". But all hundreds, if not thousands, cells in the "EXLSHEET" that contains computable values are codified pursuant to MS Excel program, e.g. all cells in WQ1 "EXLSHEET": Row 66 to Row 72. To update the model these cells should be changed and, thus, the intended client and user must have good and professional experience with MS Excel; this is highly unlikely. If the clients (e.g., PPPPPPPPP) have good and professional specialists with MS Excel, they could use their model, since there is nothing intrinsic about "EXPNOTE" and "EXLSHEET". For example the clients specialists can use the "Formulas" offered by MS Excel program and the good data they do have already; they could, then, arrive at more valuable, consistent, tested and acceptable results, much better than "EXPNOTE" and "EXLSHEET" offer!.
15. All above mentioned remarks, shed serious doubt on the entire work of this consultant, and, hence, limits its value or add knowledge to the intended clients. This view is further enhanced by more remarks on the "EXLSHEET" as summarised in the following part two.

Part Two: Reviewing "EXLSHEET"

"EXLSHEET" comprises 22 Sheets and they differ in contents, length and size; they are  referred to by their coded-names that appear in the bottom margin of the "EXLSHEET" document.

By going through all of them prompted me to register large number of notes, remarks and questions; the more I read and check, the more I became concerned about the contents of the spreadsheets. Thorough and complete review and checking is daunting task and requires much longer time than (XXX) deadline permits. Hence, the following is very condensed peer review of "EXLSHEET".

1- Excel Sheet "SynthProd" provide a chart titled "Iraq: synthesized field production profile". The following remarks are made on this sheet: A- there is no "Missan" field; what is there (according to first bid round- BR1) three oilfields in Missan province that were contracted under one contract while they have different profiles and locations (the consultant provides no note on this and thus gives the impression as if it is one field); B- it ignores oilfields developed and managed by National Efforts"; C- it excludes two fields offered under BR2!!! D- as shall be discovered later (see item 11 in part two below) all such synthesized field production profiles were based on wrong premised computations, and this raises serious research and consulting ethical questions and standard.

2- Excel Sheet "RP- Brent". Many observations are register on this sheet: A- chart titles are missing; B- "Y & X" axis titles and their unites of measurement are missing; C- one chart hast two trend lines and equations without specifying which is which; D- R² values for the two equations are very low, indicating weak statistical significance. E- Moreover, the table has no title, no unit of measurement and what "Y" and the other two columns represent???? F- These are simple trend-line equations that are computed instantly/automatically by Excel sheet, but the consultant provides absolutely no explanation or notes on the usefulness of these equations and used them regardless; G- the intended client and user have to wonder what these charts and table are about!! Hence, this is serious professional flaw and the sheet has zero value for the client!!

3- Excel Sheet "Brent vs. realised ". Questions on this sheet are: A- which "Brent" was it: dated, futures or spot ( such as the monthly EIA' STOE or S&P Platts or Argus etc.)?; B- what is the source for the data?; C- for "SOMO weighted realized price" what is/ are the used "weights", why and what is the source for the used "weights"?; D- how the "SOMO weighted realized price" is different from "SOMO published export prices"?; E- finally what about "Brent" was it also weighted, by what weight or no and why!!!

4- Excel Sheet "Production". Remarks on this sheet are: A- unit of measurement is missing; B- what is the consultant explanation of an illogical contradiction that SOMO exports were higher than the "Synthesized Production" prior to 01.01.2012, as this shed serious doubt on the consultant calculation??; C- what is the consultant explanation of the odd event as per 01.01.2015 when SOMO Export up while EIA production down compared with previous year??; D- also the consultant fails to explain why  the "Synthesized Production" was higher than EIA production during 2014!!

All that reflect the mechanical manner in preparing the synthesized production without considering well-known major events that impacted Iraq' production and export!!

5- Excel Sheet "Revenues" calls for the following remarks and questions: A- chart title is ambiguous: does it refer to "total" or "oil export" or "oil sector" revenues; B- the details of IMF and EITI references are missing; C-  was it IEITI or EITI ????; D- the consultant did not explain the pattern of all three data sets: why "EITI" data are higher than both IMF and SOMO during 2010-13, then it turns lower than both during 2014-16, then goes above both after 2016, when IEITI revenue data are provided by SOMO!! Can this be explained by the mixing up, by the consultant, of the usual differences between the "preliminary" and "final" SOMO's monthly data??!!

6- Excel Sheet "Time-Esc": this seems to be a templet Sheet for calculations. But comments and clarifications are missing, no definition of terms and acronyms are provided and some components such as discount rate, discount type, inflation rate and index are not used or referred to in other excel sheets; so what is the justification for having and computing them in abstract!! Ironically, some of these rates were computed up to 1 November 2025 (e.g., Rows: 61 and 62 on "inflation index" without specifying whether this applies to "cost recovery" or "oil price" or both; Rows: 71 and 72 on "Discounting rate" without specifying to which cash flow this applies)

The "Timing" rows (from day one of the month to last day) is repeated many times in this sheet and also in all other sheets: this format is totally unnecessary (it could be replaced easily by the name of the month) and, together with other components in this "Time-Esc" could overwhelm the user or the intended client with too many inputs, too much computations and extremely large number of codified cells.

This templet sheet manifests and could also explain the mechanical application of MS Excel by the consultant!!

7- Oilfield Excel Sheets. Most of the remarks mentioned above are generated from the Excel Sheets for the 11 covered oilfields. A comprehensive peer review of each of these sheets takes much longer time. But a quick checking reveals many flaws and shortcomings that shed serious doubt on the accuracy of the entire work.

For example Excel Sheet for Zubair' Row 136 it was written ""Rumaila daily production"; what Rumaila has to do with Zubair oil production!!!!???? Moreover, "daily production" and "incremental production" Rows: 136, 137 and 139 were assumed to be constant for two years: from 01.01.2020 to 31.12.2022; this is totally against a declared policy by the Ministry of Oil-MoO. The inserted data in Row 148 relates to "IOC Remuneration fee"; it is totally wrong; the consultant was not informed about the changes in the Zubair consortium composition!! Moreover, why the values change when both, "daily production" and "incremental production" were assumed constant!!?? Also what is the difference between "SOC payment to Treasury" (Row 162 which has "45%" of what? but no values inserted in the row) and "SOC Transfer to Treasury" (Row 163, which shows fluctuating values during the entire period despite constant "daily production" and "incremental production"!!! Finally, the consultant provides no further notes on the fiscal system for Zubair oilfields that reflects the situation as on 2020.

The case for Majnoon oilfield is even more disturbing. In addition to all remarks I made above regarding Zubair oilfield are also valid here, the consultant seems unaware that Majnoon oilfield has been relinquished since 2018 and is now developed under the national efforts. This means no cost recovery and remuneration fee to IOC and thus all calculations are invalid and have absolutely zero value. This manifests the mechanical use of MS Excel by the consultant without full, updated and correct understanding of the fiscal system of the upstream petroleum under Iraq' long term service contracts.

8- Excel Sheet "Analysis". This is the core sheet for the entire calculations, and it is the largest sheet with column number reaches (FJ) and 554 rows. Thus it deserves careful attention and requires much more time to go through it thoroughly, but based on the below remarks, this sheet causes much concern and raises too many questions and remarks.

The sheet begins with confusion: in Row 1 written "RUMAILA", but the remaining rows are not confined to Rumaila oilfield!!!.

All data for rows 10 to 20 are or could be wrong; they cannot be in "mbpd"!!!!!!????;

All oilfields offered under first bid round- BR1 were producing on 1.01.2010; therefore the data for 2010 for those oilfields are wrong because each of those fields has "baseline production", which the consultant excluded them;

Data for rows 10 to 20 are labeled "Historical production", while data for rows 38 to 49 are labeled "Synthesised production", but the data are exactly the same to the last digit!! So what is the difference between the two sets of data??? As this causes confusion and also generates and replication consequences on the entire work, calculation and the chart in the consultant Excel spreadsheet;

All data in row 62 are or could be wrong; they cannot be in "mbpd", and most likely the individual who prepared this Excel spreadsheet is not careful in selecting the "unit of measurement" or inconsistent in using defined acronyms and in using number format for Excel spreadsheet (i.e., a difference between "1066 and 1,066 since 1.066 is not permitted).

A major problem with this Excel Sheet "Analysis" is that it replicates or recycles all type of flaws that are identified in all the 22 Excel Sheets, particularly those related to specific oilfields, oil prices and oil production.

The magnitude of flaws, ambiguities, inaccuracies and absence of explanations in this core spread sheet manifest alarming poor quality control of the entire work under review!!

9- Oil price in Oilfield Excel Sheet. For example "Missan" data on oil "Price" of the related oilfield: rows 103, 104 and 105 and on "Fiscal Regime" (a misconception of revenues!!!! in row 110 (another confused data unit of measurement).

All oilfields covered by their related Excel Sheet have exactly the same oil prices; this "all fields same price" is absolutely not possible, and thus seriously wrong, since these oil fields produce crudes that are qualitatively different  in terms of gravity (API), Sulphur contents and other particulars. The implications of this wrong price estimation should cause serious concerns because the contractual deemed revenues-DR depends largely on the quality of the crude and DR decides the cost recovery. Moreover, DR is, again contractually, is measured at the "delivery point" on the boarder of the oilfield not at the export terminal. Hence, the consultant approach to use unified set of oil price for all oilfields and for the covered period was not only wrong but also leads to higher amount of cost recovery; this is very serious flaw with damaging implications.

10- Another flaw is related to Basra oil price: in Excel Sheet "Mth Inputs" Row 15 the consultant uses "Basra oil price" and in Row 27 uses "Basra light"; but both price sets are identical. From oil marketing this is also wrong and not possible. In reality Iraq markets three qualitatively different crudes from the southern exports outlet: Basra Light, Basra Medium and Basra Heavy, and each have different prices whether that through the usual "Term Contract" or through the monthly limited direct/spot sales.

Finally, the differentials between "Basra light" prices and "all fields same price" was very thin and in five months it was even negative, i.e., "Basra light" prices was lower than "all fields same price"; this almost impossible oil marketing scenario adds more doubt on the professional competence and quality of the consulting work.

11- All calculations relating to the "Incremental production", (Row 137) in the Excel Sheets for Halfaya, for Gharraf, WQ2, Badra and Majnoon (under BR2), Faihaa (BR4) and Ahdab (converted contract prior to BR1), are wrong since they contravene the related contracts, which has no incremental production. Moreover, the computation equations for the cells in the said row are wrong technically and geologically since it assumes a lasting initial production, i.e. no natural decline!!! As for Rumaila, WQ1, Zubair and the 3 Missan fields (under BR1) all are also wrong since they contravene the related contractual provisions; which has annual natural decline rate of the base-line (initial) production!!!

These wrong calculations lead, logically and practically, to underestimation of fields development efforts and their production, to wrong estimation of cost recovery and remuneration fee for all covered oilfields; what was premised on wrong understanding produces wrong results and, thus, should be disregarded.

12- The "Dashboard" Sheet contains selected charts from other sheets; thus all remarks made on these sheets are valid here. In other words, this "Dashboard" Sheet replicates all flaws, wrong calculations, misconceptions and inaccuracies (The reader is highly advised to see the comments made on Excel Sheets that are reproduced in this "Dashboard" Sheet).

In addition, the following remarks are made on this "Dashboard" Sheet: the "table" referred to in G6 was not provided!!; "Brent Futures Price Scenario" was not explained; the table (on Rows18 to 34) has no unit of measurement; the estimated export sales for 2020 is much higher than actual export oil revenues officially announced by SOMO/MoO by 22.4%. When estimation against actual (historical) data results in such margin of error, that margin of error could be even higher in forecasting the future!!!

Moreover, the cells in Rows 51 to 55 look mysterious with absolutely no explanation or clarifications:

Finally, as was the case with "Analysis" sheet, "Dashboard" sheet replicates or recycles all type of flaws that are identified on the reproduced charts.

13- Operating cost was not mentioned in the two documents "EXPNOTE" and "EXLSHEET". Not a single row in any of the field' related sheets mentions the operating cost for oil produced in the related field. The consultant provides no explanation for excluding this significant cost item from estimating government revenues.

Ignoring operating cost is a major and additional flaw that reduces further the soundness and usefulness of "EXPNOTE" and "EXLSHEET".

14- All Excel sheets and their components could overwhelm (intimidate) the user or the intended client with too many inputs, too much repetition, too much computations and extremely large number of codified cells. One cannot speculate whether that was intentional or due to professional deficiency on the part of the consultant; but, it is highly likely that the current version of "EXPNOTE" and "EXLSHEET" has very limited value, if any, to the user or the intended clients in Iraq.

The Review Assessment Matrix

This final part intends to summarise the result of assessing both documents, "EXPNOTE" and "EXLSHEET" that were presented by the consultant. The following matrix was premised on the six objective criteria mentioned earlier and the evaluation score for each criterion.

The score ranges from (1), which means "bad", through (3), which means "acceptable but not satisfactory" to (5), which means "very good".

The six criteria have equall values, and each score was decided in the light of the above details in this peer review:

Total score under the six criteria ranges from total minimum 6 to total maximum 30 and final score rate (%) is the total gained score to maximum score:

Score rate under 50% means unfavourable assessment of the two documents, which means rejecting the consultant work and should not share it with the user or the intended clients;

Score rate at 50% means the work is acceptable but should be revised to address satisfactorily all what the peer review says before sharing it with the user or the intended clients;

Finally, score over 50% means accepting consultant work and recommends sharing it with the intended user or the intended clients.

Criteria/ Score Matrix

 

Peer Review Objective Criteria/ Score	1	2	3	4	5
Conformity with acceptable standard for consultancy service		2
The qualitative aspects of the consultant methodology		2
The "add-value/ knowledge impact" for the intended client		2
The contractual provisions relating to the 11 projects	1
SOMO's price setting mechanisms and marketing modalities.	1
The test of reality vs. expectation	1
Total Score	3	6	0	0	0
Final Score Rate	((3+6)/30)=30%

The final score rate is 30%, which corresponds to 1.5 on the scale from 1 to 5.

Regretfully, this overall low score indicates that the standard, quality and usefulness of the consultant work are much less than acceptable level.

In an extensive communication with well-respected oil professional and two times oil minister, I learned that the Ministry of Oil has good Ashtar program, which seems to be by far more superior and well-functioning than this "EXLSHEET"; with the presence of Ashtar, the consultancy and its two documents, "EXPNOTE" and "EXLSHEET", become redundant for the clients in Iraq.

 

Mr Jiyad is an independent development consultant, scholar and Associate with the former 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: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

By Ahmed Mousa Jiyad.

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

The Iraqi economy structure is lopsided with heavy dependency on export of natural raw material, i.e., crude oil. The modest unbalanced growth that was accumulated by the end of 1970s began eroding and all economic accomplishments had washed-away, gradually, since then. Four decades of wars, severe sanctions, political tyranny and America-led occupation pushed the country into the brinks of a failed state.

The post occupation sectarian political sharing system, known in Iraq al-muhasasa, brought the most devastating manifestation of "resource curse" in the form of formalized legalized high level corruption, or Kleptocracy. When upstream petroleum became, once again but more urgently, the only sector capable for funding annual state budget for social welfare, reconstruction and development, it became the target for the corruptors, the Kleptocrats and domestic politics abuse.

Also, under the then prevailed political order, upstream petroleum redevelopment and development were sought through active and substantive participation of the international oil companies- IOCs; this brings to the fore of debate the complex issues of the political economy of such participation.

The essence of the international political economy of petroleum relationship between the IOCs and a developing economy, e.g., Iraq, is the relative comparative strength of both parties to maximize their interest through any formalized relationship; this is premised on two basic issues: sovereignty and petroleum rent.

Sovereignty relates to ownership of petroleum (both reserves and production) or claim of title on them on one side and the decision making structure and mechanism of that relationship on the other.

Distribution of petroleum (resource) rent is decided formally through the type and terms of the contracting modality on one side and, empirically, through actual management of such contracting modality on the other. "Government take" is the clearest manifestation of rent distribution; the higher is the government take the better it is for the host country, but what matters, in the final analysis, is the actual distribution more than the formal and contractual. This highlights the importance of the effective and efficient contract management, at all levels, during the entire life-cycle of the related contract.

Needless to say that host government and IOCs petroleum relationship are not, always, exclusive to them only, as the subject matter has other geopolitical and geostrategic considerations that go beyond the two parties; this implies the comparative strength of the host government on one side and the IOCs together with the geopolitics of their home-country government on the other has a lot to impact the petroleum relationship and their contractual modalities. More often than not geopolitical pressure and leverage are used to promote, enhance or even guarantee the interest of the IOCs through different ways and means and, when competition is transparent and tense the intervention becomes more intrusive an coercive. Those who failed winning in competitive bidding say that outcome reflects the dark side of transparency!!

One year after the invasion, Iraq pursued in 2004, what seems analytically and proven factually, a Grand Opining Big Push Policy in its petroleum sector by offering IOCs and foreign investors unprecedented opportunities to having access to and expansion in, particularly, upstream petroleum sub-sector.

Between 2004 to end 2008, the Ministry of Oil- MoO concluded over 40 memoranda of understanding/cooperation (MoU/Cs) with IOCs from 23 countries, with overwhelming dominance of the US (9); Japan and Norway (4 each); China, UAE, UK and Canada (2 each) and one company from each of other 16 countries.

For IOCs, MoU/Cs represent invaluable direct contact with Iraqi staff and professionals at all layers of responsibility and provide them access to most archives and database relating to upstream petroleum; that helped IOCs exploring where and what they could do to chart their way towards business in Iraq's upstream petroleum and beyond.

These MoU/Cs contributed in formulating and development of a model contract, and by the time they were terminated MoO succeeded, through direct government-to-government talks (with China), in converting Al-ahdab oilfield from production sharing to service contract.

The first bid round, for producing (brown) oilfields, was held end June 2009, followed by the second bid round for discovered but not commercially developed (green) fields on December 2009 and a third one for free-gas fields in October 2010.

120 IOCs participated in the qualification process for the bid rounds, 55 from 27 countries were qualified: Japan (9); USA (7); Russia (5); China and UK (4 each); Australia, India and Italy (2 each), and 19 other countries with one company each.

The outcome of the three bid rounds and Al-ahdab are: 14 oilfields contracted to 15 IOCs from 12 countries; total contracted/ targeted plateau production was 12.3mbd and their total proven reserves ca. 67 billion barrels (58% of the country's proven reserves at that time). Three gas fields were contracted to 3 IOCs from 3 countries with total plateau production of 820 mcfd and proven reserves of 11.2tcf.

Moreover, the period prior to end 2010 witnessed developments relating to other important issues particularly the proposed federal oil and gas law-FOGL and INOC Law; promulgated private investment in refinery law and proposing many new modern refineries for foreign investors; conclude HoA that led, latter, to establishing Basra Gas Company joint venture with Royal Shell and Mitsubishi among others

Also during those years, the upstream petroleum in the country was a magnet of attention by the occupying countries, the IOCs, international legal and consulting firms and business and  media sources and alike; the number, frequency and substance of what was published internationally on Iraq is a manifestation of that attention. That could be explained by or attributed to a "Newness factor" as the country was reopened for the outside world after almost half a century of restricted access; to the "Invasion factor" that made accessing the country easy after 2003 occupation since the invasion was "all about oil"; to the "Business factor" for IOCs and petroleum service companies to have a share in exploiting the vastness of petroleum in the country; the last frontiers for least cost petroleum. Much of the attention and preference of the occupying forces, IOCs and pro-IOCs entities was for Production Sharing Agreements/Contracts-PSA/C.

On the other side, most Iraqi oil professionals and experts inside the country, particularly from the South Oil Company, and those residing outside the country demonstrated vibrant engagement and strong keenness by calling, individually or collectively, for protecting the country petroleum wealth through sovereign national efforts and opposing any form of PSA/C; they premised their stand on still valid important laws and the 2005 Constitution.

Obviously, the course of events prior to end 2010 highlights different pathways for upstream petroleum contracting modalities; long term service contract emerged as the preferable choice.

One of the International Compact with Iraq-ICI offspring's was the formalization, for the first time in modern Iraq, of transparency principles and working modalities in Iraq petroleum sector. On 10 February 2010, Extractive Industries Transparency Initiative (EITI) Board accepted Iraq as an EITI Candidate country; a new component in the governance of national upstream petroleum began in earnest with continuity and promising expectations, but time will tell!

Not surprisingly therefore that the period ended by December 2010 witnessed the most concerted efforts and vigorous debate among Iraqis relating to what could have been very significant milestones in the development of Iraq petroleum sector. Hence, the choice of end-2010 is the appropriate demarcation time-frame for this volume.

Over the last twenty years I have been compiling various, but related and relevant, documents, reports, studies, data and statistics and, accordingly, I have now very large, well organised, structured thematically and updated regularly, at least weekly, Database. Moreover, I developed and maintained relatively large network of contacts comprising senior government officials at different levels, parliamentarians, professionals, scholars, research institutions, academics, civil society organisation and media among others; such networking proved to be invaluable source of relevant insights, confidential materials and views from "inside the box".

My Database includes separate annual reports, exclusively, on the oil sector the first covers 2010 and earlier years and the latest is for 2021; these annual reports are the core of the archival efforts comprising well referenced, accurate, and verifiable data and sources. While archiving each annual report I read, commented and make different remarks on each item included in each annual report. Contents of parts two and three of this book are extracted from the annual report for 2010 and earlier years, but without incorporating my comments and remarks made on them then; I do not want to influence the readers' understanding of these items with my own views.

Also, my Database comprises significant statistical data and time-series on different aspects of petroleum sector, which I compile, regularly, from formal and credible sources, both Iraqi and non-Iraqi.

In the same way I followed closely the related development in the country and had my own contributions through various research work, analyses, publications, presentations, consulting assignments and commentaries among others.

I found it opportune to launch major research and publication project aiming at documenting, professionally and objectively, the development of the petroleum sector in the country by presenting different informed thoughts, views and insights that impacted the debate, policies and course of events.

The project comprises many volumes and begins with this recently published book, the details of which are summarized as follows:

Book title: Iraq Petroleum Sector Chronicle

Book Sub-title: Grand Opening for Big Push Strategy, Volume 1, 2010 & earlier

Author: Ahmed Mousa Jiyad

Publisher: Lambert Scientific Publication

ISBN-13: 978-620-4-20851-0; ISBN-10:6204208519; EAN:9786204208510

Pages: 434

Price: 98.90 € (Euro)

My prime purpose for preparing this book is to make it convenient reference for those interested in Iraqi petroleum sector, to understand the complexity of related issues and the discourse that prevailed in 2010 and positions taken by different parties; what, when by whom and, probably, why!!

This book is "Volume 1" and I intend, hopefully, to publishing further volumes covering years 2011 onward, since I have done already the basic research and have the needed documents and statistics in my Database. 

The book provides different perspectives on Iraqi petroleum issues that prevailed during the period covered by the book: my own, other Iraqis, international views and statistics; it was structured according to these perspectives respectively in its four parts. Hence, the book is premised on "evidence-based research" that was thoroughly done, mostly during 2010 but also covers a couple of earlier years.

For those years prior to 2011, as was the case since then and as mentioned above, I compiled and documented my own Database, the oil annual reports and numerous thematic, i.e., issue specific, folders.

Part one of the book comprises a selection of my own essays and research work.

Each of my "Essays.." has its own methodology, structure, assumptions, analysis, discussion and consulted references; information on each essay was provide, when and where it was published and the web-link to access it, if that is permissible by the related websites.

Part two of the book comprises views of and positions taken by some selected well-known Iraqi oil professionals, senior government officials and others aiming at presenting a balance of wide spectrum of different, and sometimes opposing, views positions and affiliations; these are presented in a form of own articles, interviews and collective statements. They reflect the richness and diversity of opinion that shaped the discourse among Iraqis at that time and, consequently, enriched the value of this book. Official views, expressed, through detailed interviews and statements, by senior government officials and decision makers reflect the political vision and economic aspiration of the dominant political parties, groups, religious/ politicized individuals and different associations and gatherings of professionals, notably oil experts and professionals inside and outside the country.

Part three comprises outside foreign and international standpoints and contributions to the debate about Iraq's petroleum and its prospect; a large number of items compiled from many and different external sources includes reports, studies, articles and media reporting among others, most if not  all, were written by non-Iraqis.

This part adds the third perspective of the book; how the outside world looked to Iraqi petroleum matters, what was their preoccupation, how did they understand or failed to understand, analyse, debate the issues and foresee the implications. It is really amazing to revisit the then prevailed insights and wisdom!!

Part four provides the statistical perspective through many annexes which are extracted from my Database; these include the most important statistical data (without further statistical analysis) pertaining to petroleum sector for 2010. The purpose is to supplement the expressed views with the "material evidence" in the form of data and statistics.

I would like to make the following remarks and caveats

Methodologically, the book is chronicle/archival of some of what was written, debated and published in 2010 and, a few belongs to, earlier years. Hence all items included in parts one, two and three are reproduced "as is/was", i.e., exactly as they were published in 2010, except the necessary editing to unify the text of the book to comply with publisher guidelines and requirements.

Therefore, it is vital to emphasise that the book is NOT about 2010 written from 2021 perspectives or in retrospective; rather it is on 2010 as was written in 2010 or earlier.

Each and every item included in parts two and three of the book has its source, the web-link, date of publication and the date I accessed it and compiled it in my Database. Sources, for the tables of part four of the book, are also provided. This is vital for verification, acknowledgement of copy right and helpful for further research on Iraqi petroleum.

A note of caution is due regarding websites availability; some websites do not exists anymore, some are changed to other identification, others are not accessible, for whatever reason, and some require subscription or fee for access.

Intentionally and for logistical reasons, I excluded items written in Arabic.

The book is a fruition of almost two decades of constant follow-up, research, direct involvement, networking and archiving. I encountered too many challenges during the course of those years, but with patient and determination I managed to overcome them; this book is the testimony for perseverance!

I would like to sincerely and wholeheartedly thank Tariq Shafiq for his kind "Preface" of the book; much appreciated Akhi Abu Ehsan.

Mr Jiyad is an independent development consultant, scholar and Associate with the former 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: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

By Ahmed Mousa Jiyad.

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

IOC's Strategic Positioning in Iraq Upstream Petroleum

Much talk have been circulating recently on "Big Oil" abandoning Iraq upstream petroleum projects after they rushed into the country many years ago. How much truth is in this; who is leaving, remaining and planning a comeback; why and what material evidences are available to provide verifiable realistic explanation are some of the topics this brief intervention attempts to address.

IOCs positioning in Iraq upstream petroleum have seen a dramatic shift since a Grand Opining Big Push Policy- GOBPP was pursued in 2004; offering IOCs opportunities to achieving unprecedented expansion in the petroleum production capacity during short period.

Their involvement and strategic positioning went through three phases: the first, 2004 to end 2008, comprises many memoranda of understanding/cooperation (MoU/Cs ) in search for foothold and as springboard for further opportunities; transparent competitive bidding phase, June 2009 to May 2012, includes four bid rounds and, third phase covers contracts implementation that began from January 2010 up to date.

Ministry of Oil- MoO concluded some 40 MoU/Cs with IOCs from 23 countries, with overwhelming dominance of the US (9); Japan and Norway (4 each); China, UAE, UK and Canada (2 each) and one company from 16 countries.

For IOCs, MoU/Cs represent invaluable direct contact with Iraqi staff and professionals at all layers of responsibility and access to most archives and database relating to upstream petroleum; that helped IOCs exploring where and what they could do to chart their way towards business in Iraq's upstream petroleum and beyond, i.e., to plan their strategic positioning in the sector. Some IOCs had their MoU/C terminated and were blacklisted from further involvement in upstream petroleum projects, due to their agreements with KRG in violation of the government declared policy.

MoU/Cs contributed in formulating and development of a model contract, and by the time they were terminated MoO succeeded, through direct government-to-government talks (with China), in converting Alahdab oilfield from production sharing to service contract. That conversion presents the model for what MoO offers: a long term service contract not a production sharing contract; an outcome many IOCs had not hoped for and probably impacted their decision for further undertaking.

The first bid round, for brown oilfields, was held end June 2009, followed by three bid rounds for green fields, gas fields and exploration blocks respectively; the last was convened end May 2012.

120 IOCs participated in the qualification process for the bid rounds, 55 from 27 countries were qualified: Japan (9); USA (7); Russia (5); China and UK (4 each); Australia, India and Italy (2 each), and 19 other countries with one company each; a different profile from phase one with obvious strategic positioning implications.

The outcome of the four bid rounds and Alahdab are: 14 oilfields contracted to 15 IOCs from 12 countries; a consolidation of strategic positioning. Total contracted plateau production was 12.3mbd and their total proven reserves ca. 67 billion barrels (58% of the country's proven reserves at that time). Three gas fields were contracted to 3 IOCs from 3 countries with total plateau production of 820mcfd and proven reserves of 11.2tcf. Finally, four exploration blocks were contracts with 7 IOCs from 5 countries resulting in discovery of Fayha and Eridu oilfields.

The contracted plateau production of 12.3mbd was IOCs making that proven to be unrealistic and unattainable, thus, consequently revised downward repeatedly!!

During the second phase many meaningful signs for significant shift in IOCs strategic positioning began to emerge, the most apparent consolidation was Russia.

The third phase, i.e., contracts implementation period, witnessed the most dramatic effective and lasting shifts in IOCs strategic positioning.

A complexity of combined reasons had contributed to such an outcome; some are related to IOCs themselves, others related to the Iraqi side (entities, policies and circumstances), while the rest are related to a variety of international factors and geopolitical considerations. Space limitation prevents from indulging in the details of relevant data, facts and documents, but it is useful to mention the most impacting among them: Fracking revolution in the US; ISIS and oil price collapse in mid-June 2014 that inflicted serious blow to Iraq fiscal, security and developmental efforts; OPEC+ impact on Iraq production; Covid-19 and finally energy/green transition and climate change debate.

However, it is vital to highlight briefly the IOCs that strengthened or weakened their positions during this phase.

In the context of Iraqi GOBPP, strategic positioning is taken here to mean IOCs persistent, competitive, enhanced and long-term underrating in Iraq upstream petroleum. Three dimensions manifest IOC involvement and its strategic positioning: horizontal (in multi-fields), vertical (the participating interest-PI in the fields) and volumetric (in terms of proven reserves and production due to field development).

From November 2013 China began enhancing its presence in the country through consolidating CNPC , CNOOC, ZhenHua , Sinopec , UEG and probably CPECC, which   invests in utilizing all associated gas produced in Missan Province . In addition to the above, there are many Chines service companies that are involved in upstream petroleum activities such as drilling, supply and construct surface installations, pipelines, field management among others.

Russian Lukoil enhanced its position vertically horizontally and volumetric in West Qurna 2-WQ2 oilfield and in exploration Block 10 that led to Eridu oilfield discovery; Lukoil found other reservoirs beyond the field's current borders and thus requested to expand Eridu field. Surprisingly, the Oil Minister reportedly said recently Lukoil intends to sell its PI in WQ2 to a Chines company!

Other Russian IOCs with bid round contracts include Gazprom (operator of Badra oilfield) and Bashneft/ Rosneft (for Exploration Block 12), KRG not included here.

In addition to Chines and Russian IOCs Japanese companies increased their presence as well: Japex (Gharraf oilfield); INPEX (Exploration Block 10/Eridu oilfield) and Itochu bought entire Shell' PI (20%) in WQ1.

Against the consolidation of the Chines, Russian and Japanese companies, other IOCs lost or weakened their presence in upstream petroleum; these include Big Oil- as ExxonMobil, Shell and Oxy and medium-small size companies such as Petronas, Kogas, Kuwait Energy, TPAO.

Occidental Petroleum relinquished, in 2016, its PI in Zubair oilfield to South Oil Company (now Basra Oil Company), due to its decision pulling out from projects in the Middle East for financial reasons.

ExxonMobil demise began almost ten years ago soon after it had attained significant consolidation; a demise of its own making!! Apart from the contribution of the Iraqi factors ExxonMobil faced and facing many other challenges that exacerbate its decision to abandon Iraq. These include restructuring its international profile; energy transition (away from fossil-based to renewable-energy) environmentally-conscious; shareholder revolts, expulsion of ExxonMobil representative from EITI'MSG due to position regarding Dobb-Franck issue and the forthcoming SEC environmental compliance rules.

Royal Shell story is not very different from that of ExxonMobil. Shell launched initially a powerful strategic positioning, resisted the temptation of engaging with KRG petroleum and diversified its portfolio in oil, gas and petrochemical projects. Now it has much weakened role; withdrew from Majnoon oilfield, sold its PI in WQ1, rumors that it contemplate leaving Basra Gas Compan- BGC , whose  HoA was signed in 2008 but it did not deliver the contracted target, and Nibras petrochemical project, with MIM & MoO, draggeed for too many years without any prospect.

Again, Shell decision to leave WQ1 and Majnoon oilfields and possibly BGC was not entirely due to contractual and working conditions in Iraq; one possible explanation relates to Shell' overall plan to restructure its global business, following its takeover of British Gas Group- BGG. Also Shell faces legal action; A Dutch court ruled, recently, that Shell will have to reduce its carbon emissions by 45 percent from 2019 levels by 2030.

BP has only one engagement- Rumaila oilfield, with almost equal PI with CNPC (while during the June 2009 bidding round BP' PI was double that of CNPC). Recently, BP decided to spin off its involvement in Rumaila into a stand-alone company, a "ring fencing practice", for reasons relating to diverting its global assets and investment plans.  Though this move is more structural and organizational in nature that has, contractually, no effect on Iraq, it, nevertheless, could indicate possible departure from Rumaila sooner or later.

Total, rebranded TotalEnergies, have very modest PI in only one oilfield- Halfaya, is trying a comeback to Iraq through concluding HoA comprising four major projects, three of which are part of SIIP that Iraq wasted too many years discussing with ExxonMobil!!

Surely, IOCs strategic positioning has significant implications for petroleum sector and the prospect of the entire economy. There has been a tendency for some to be highly selective by focusing only on one Iraqi based, real reason, such as harsh contractual terms; type of contracts; corruption, resource mismanagement and security conditions among others. While all these are real and effective, they are absolutely not the only factors behind IOCs shift and change of priorities as there is a complex wed that one should be aware of; 20 IOCs have recently warned for tax violation and IOCs that lost their strategic positioning inside Iraqi petroleum had themselves contributed to that outcome.

Moreover, global energy/green transition and international geopolitics have powerful ramifications though the debate is, as usual, not conclusive. While IEA recent report could have effective impact, REN21 new report raises doubt; and such wide divergence suggests oil remains needed much longer than some thinks.

Click here to download the full report in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former 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: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

By John Lee.

Iraq's oil ministry has denied a report from Bloomberg that it plans to shut down the al-Ahdab oil field in Wasit due to protests.

In a statement the Ministry said the protests near the field are not related to the oil industry, but to the administration of the province.

(Source: Ministry of Oil)

By John Lee.

The Al-Ahdab oil field has reportedly resumed production, having been off-line for about a week due to protests by security guards.

The 70,000-bpd field is developed by China’s CNPC.

(Source: Bloomberg)

By John Lee.

Oil production is reported to have stopped at the 70,000-bpd Al Ahdab field on Sunday, as security guards seeking permanent employment blocked access to the site.

According to Bloomberg, the 50,000-bpd Badra field is also at risk of closure from Monday.

Al Ahdab is developed by China’s CNPC, while Badra is run by a consortium of Gazprom (30%), KOGAS (22.5%), Petronas (15%), TPAO (7.5%).

(Source: Bloomberg)