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By Semih Idiz for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

With hundred of thousands of barrels of its oil stuck in the Turkish Mediterranean port of Ceyhan, unable to be sold on the world market because of its continuing row with Baghdad, the Kurdistan Regional Government (KRG) is discovering just how landlocked and boxed in it is in terms of utilizing the vast oil reserves under its control.

Baghdad also has support from Washington, where administration officials fear the energy cooperation between Turkey and the KRG will increase the risk of splitting up Iraq — already in the throes of sectarian strife — and are consequently putting pressure on Ankara over its energy dealings with the Iraqi Kurds.

Iraq's constitution says oil revenues, regardless of where the reserves are located in the country, have to go through Baghdad and allocates the autonomous Kurdish region 17% of total revenues.

Nouri al-Maliki's government argues that the KRG can only export its oil after an agreement is reached between Erbil and Baghdad on how to proceed in this matter.

Baghdad has also threatened to cut the KRG out of its share of Iraq’s vast oil revenues, should it go ahead and sell its oil unilaterally.

Iraqi Oil Minister Abdul Kareem Luaibi told Reuters in January that the government would take legal action against Turkey and consider canceling all contracts with Turkish firms if Ankara enabled the exporting of KRG oil before an agreement between Erbil and Baghdad is reached.

Such an agreement, though, has been elusive because of Kurdish claims of sole ownership over oil reserves discovered in northern Iraq after the region gained political autonomy from Baghdad following the US invasion in 2003.

KRG officials are disappointed that a comprehensive package of agreements they signed with Turkey in November 2013 has not become fully operational yet.

By Ahmed Mousa Jiyad.

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

Many countries impose capital gain tax on individuals, companies and corporations when a profit realized from the sale of assets. National and state legislation often has a large array of fiscal obligations and regulations regarding capital gains, however, these fiscal obligations may vary from jurisdiction to jurisdiction.

In other words capital gain tax is a normal component of taxation systems on both national and international levels, and thus has a significant contribution to the state revenues and fiscal policies. Iraq is no different and should consider doing the same.

In Iraq the signed service contracts provide the IOCs with a possibility to assign (sell) wholly or partly their participating interests as specified by a common clause in the signed contract, “any Company shall have the right to assign any of its Participating Interest, shares, rights, privileges, duties or obligations under this Contract to an Affiliate.” Such right for assignment is subject to and governed by a set of provisions outlined in the signed contract.

Due to the long duration of the contracts (the Term) that extend beyond 20 years, and due to the usual practice of Merger and Acquisition (M&A) in the international petroleum business it is highly probable that IOCs might “farm in” and “farm out” by acquiring, selling or exchange participation interests in the related petroleum field.

The transfer of participation interests between IOCs involves financial transactions or transfer of “asset” ownership between the concerned parties: the buyer and the seller.  This assignment deal may (though highly likely) results in significant realized gain (profit) for the selling party compared to the actual cost (investment) it made as a consequence to its participation in the related upstream petroleum development project.

 This realized gain is known to be “capital gain” and in most countries it is taxable. The “Capital Gain Tax” is imposed on individuals, companies and corporations and in many countries it is imposed in addition to other direct taxes such as “Property/Wealth Tax” and “Income Tax” among others. The percentage of Capital Gain Tax differs according to the taxation systems and fiscal policies across the world. 

By John Lee.

Turkish Energy Minister Taner Yildiz (pictured) said today that Kurdish oil has started flowing to the Turkish port of Ceyhan via the new pipeline, but it will not be shipped to world markets without agreement from Baghdad.

According to Reuters, the Minister said he hopes a deal allowing exports to begin can be reached this month, adding that initial flow rates of 300,000 bpd should rise to 400,000 bpd.

Turkey recently signed a multi-billion-dollar deal with the Kurdistan Regional Government under which the KRG plans independent energy exports via Turkey.

Kurdistan could eventually export 2 million bpd of oil to world markets and at least 10 billion cubic metres per year of gas to Turkey.

Ankara has set up the Turkish Energy Company (TEC), a state-backed entity which has struck partnership deals with Exxon and will represent Turkey in dealings with Kurdistan.

(Source: Reuters)

By John Lee.

Energy Global reports that the Turkish construction firm EID Insaat is to build a 120-km pipeline for ExxonMobil in Iraq.

The $90-million project is expected to take approximately one year to complete.

The company Chairman said that this was in addition to an 85-km long pipeline project currently under construction.

The Iraqi marker accounts for 70% of the business volume of EID Insaat, which has operations in the energy and construction sectors in the Middle East and Russia.

(Source: Energy Global)

By Andrew Scarre.

Iraq’s oil exports have increased in October to 2.25 million barrels per day, an increase of 0.18 million barrels per day in comparison to September’s figures. Over the course of October, Iraq exported 69.8 million barrels of oil over the course of October, creating US$7.160 of revenue. The ministry confirmed that the price of oil per barrel over the course of the month was US$102.579.

Exports Increase Despite Sabotage

This increase in exports came in spite of the ongoing maintenance work in the southern terminals. In addition to this, a statement released by the ministry confirmed that at separate points during the month, pumping of oil in the Kirkuk-Ceyhan had to be ceased due to sabotage. From where this sabotage stemmed is currently unclear. However, on 2nd November, the pipeline was attacked once more by insurgents who bombed the pipeline and disabled it.

Overall, during the course of the month, Iraq exported 63.8 million barrels through the southern port of Basra, and 621,000 barrels via Turkey's port of Ceyhan on the Mediterranean Sea.

The news of increasing oil exports will come as a welcome boost to the Iraqi economy due to its dependence on oil exports. At present, oil exports account for nearly 95 percent of its budget and a fall in such revenues would have a drastic impact on the economy as a whole.

Increasing Productivity

This, however, is not the only good news for Iraq of late and, after 2010’s announcement that oil reserves in the country were actually almost 30 billion barrels greater than original estimates; oil production has continued to thrive.

By Ahmed Mousa Jiyad.

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

China and CNPC are Consolidating Further their Positions in Iraq Petroleum Sector

Four years after the first bid round took place, some international oil companes (IOCs) are consolidating their positions. while others are descending after good start, and some were even unable to make an entry. CNPC stands among the first group, while ExxonMobil exemplifies the second group, and companies such as Chevron, Repsol and Conoco Phillips fall into the third group.

In a previous paper I addressed how Russia has entrenched and solidified its role in the Iraqi petroleum sector. This paper is mainly about CNPC's path to consolidating its presence in this sector.

Please click here to read Ahmed Mousa Jiyad’s report.

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).

By John Lee.

ExxonMobil signed agreements on Thursday with PetroChina for a 25 percent participating interest in the West Qurna I project in Iraq, and with Indonesia's Pertamina for a 10 percent participating interest in West Qurna I.

ExxonMobil retains 25 percent interest and remains lead contractor.

The transfer has been approved by the South Oil Company, Oil Exploration Company of the Iraqi Ministry of Oil and Shell West Qurna B.V., as members of the West Qurna I contractor consortium.

China is already the top foreign player in Iraq's oilfields.

(Source: ExxonMobil)

(Picture: Rex Tillerson, chairman, president, and CEO of Exxon )

By Semih Idiz for Al-Monitor . Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

It is no secret, thanks to frequent leaks to the media, that energy cooperation between Turkey and the Kurdistan Regional Government (KRG) is continuing apace. This, however, has not broken the determination by both sides to maintain a low-key position on the subject. The sensitivity is due to strained ties between Baghdad, Ankara and Erbil over a number of issues, including the exploitation of northern Iraqi oil and gas.

The KRG has been demanding an independent say over the gas and oil in its region, arguing that Baghdad has not honored its pledge to give the Iraqi Kurds their rightful share of Iraq’s oil revenues. Baghdad denies this and has declared the KRG’s stance illegal and dangerous in terms of Iraq’s territorial integrity.

Baghdad has also accused Turkey of endangering Iraq’s territorial integrity through separate energy deals with the KRG, and has US support on this point. This, however, has not prevented energy cooperation between Turkey and the KRG. Turkish officials say if the United States is concerned, it should first convince the American oil giants Exxon and Chevron, who have also signed deals with the KRG.

An exclusive Reuters report this week, citing unidentified official sources, also showed that Turkey and the KRG are pushing ahead with “a comprehensive package of deals” in the energy field. This package, reportedly agreed on during last week’s visit to Istanbul by KRG Prime Minister Nechirvan Barzani, includes multibillion-dollar oil and gas pipelines between Turkey and northern Iraq.

According to the Reuters report, these will enable the KRG to export some 2 million barrels per day of oil to world markets, and at least 10 billion cubic meters of gas to Turkey annually when completed. The first pipeline is almost ready and should be pumping oil by the end of December. The next stage will be to pump northern Iraqi gas by pipeline as of December 2016. The technical details for a pipeline that will carry heavy oil between northern Iraq and Turkey are also said to have been mapped.

By John Lee.

The Governor of Nineveh province, Atheel al Nujaifi (pictured), has told Reuters that Baghdad has focused on the giant southern oilfields and has paid little attention to developing resources in his province.

The province has started talks with oil companies, including Exxon Mobil, and is drafting terms to attract investment. Nujaifi added:

"We are not ready to wait for decades until the crude runs out from the south to start energy investment in Nineveh province ... We listened to [oil companies'] proposals about how to best invest in Nineveh, but we did not sign deals."

"We will start oil investments in the province with a priority to the downstream industry, and that could be followed by broader investments in the upstream sector ... When we have oil majors working, then definitely there will be social benefits, job opportunities and economic gains. Huge investments could create a better, stable environment."

Last month the provincial council of the predominantly Sunni Muslim governorate granted him the power to sign deals with foreign oil firms independently of Baghdad, which immediately rejected the move.

The governor has drafted regulations that could allow foreign investors to bid for an integrated project to build a 150,000 barrels per day (bpd) refinery and develop an oilfield to feed it.

Nujaifi said the province holds around 20 discovered but untapped oilfields and has the potential for huge resources that have yet to be discovered.

(Source: Reuters)

By John Lee.

Oil minister Abdul Kareem Luaibi [Elaibi] has confirmed that BP is interested in getting involved in the redevelopment of the giant Kirkuk oil field, which is suffering from falling output.

According to a report from the Wall Street Journal, production at the field has declined to 260,000 barrels a day from 900,000 bpd in the early 2000s, after years of injecting water and the dumping of unwanted crude and other oil products into the field's reservoir.

Mr. Luaibi also denied reports that Russian oil major LUKoil was interested in the field.

Separately, he said the government likely will approve the sale of ExxonMobil's stake in West Qurna-1.

(Source: WSJ)