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Washington has exempted Baghdad from some of its unilateral sanctions against Tehran, allowing Iraq to continue importing energy from Iran, according to the US envoy to Baghdad.

Baghdad can now buy energy from Iran, US charge d’affaires Joey Hood told reporters on Wednesday, Iran's Press TV reported.

The waiver will allow Iraq to continue buying gas and electricity from Iran.

The administration of US President Donald Trump said in March it was extending a 90-day waiver for the second time to let Iraq continue energy imports from Iran.

The US envoy did not explain whether he was referring to the same waiver Washington gave Baghdad in March or he was declaring the issuance of new exemptions.

Gas imports from Iran generate as much as 45 percent of Iraq's 14,000 megawatts of electricity consumed daily. Iran transmits another 1,000 megawatts directly, making itself an indispensable energy source for its Arab neighbor.

Iraq and Iran share a 1,400-kilometer-long border. For their run-of-the-mill maintenance, Iraqis depend on Iranian companies for many things from food to machinery, electricity, natural gas, fruits and vegetables.

(Source: Tasnim, under Creative Commons licence)

By Amberin Zaman for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

Energy tops agenda of Turkish FM's meetings in Iraq

Turkey’s Foreign Minister Mevlut Cavusoglu met with Iraqi Kurdish leaders recently on the last leg of an ambitious visit to Iraq, in which the Turkish diplomat unveiled plans to reopen consulates in Mosul and Basra and to establish new ones in Kirkuk and Najaf.

Cavusoglu also announced that Turkish President Recep Tayyip Erdogan would pay a formal visit to Iraq before the year's end.

The timing of the two-day tour, which took Cavusoglu from Baghdad to Basra and finally Erbil, prompted speculation that Turkey was turning to its oil-rich neighbor for help after the US administration announced it was ending waivers that allowed a clutch of countries including Turkey to continue buying oil from Iran effective May 2.

Click here to read the full story.

President Hassan Rouhani has called for Iran and neighbouring Iraq to expand their gas and electricity dealings and boost bilateral trade to $20 billion, state TV reported, despite difficulties caused by US sanctions against Tehran.

“The plans to export electricity and gas and hopefully oil continue and we are ready to expand these contacts not only for the two countries but also for other countries in the region,” Rouhani said after a meeting with visiting Iraqi Prime Minister Adel Abdul Mahdi, in remarks carried by state television.

In March, the United States granted Iraq a 90-day waiver exempting it from sanctions to buy energy from Iran, the latest extension allowing Baghdad to keep purchasing electricity from its neighbour.

“We hope that our plans to expand trade volume to $20 billion will be realised within the news few months or years,” Rouhani said. Iranian media reports have put the current level of trade at about $12 billion.

Rouhani expressed hope that work on building a railway linking the two countries, would begin within the next few months.

The railway project was part of deals reached during Rouhani’s March visit to Baghdad, meant to underline that Tehran still plays a dominant role in Iraq despite US efforts to isolate Iran.

Iran and Iraq fought a devastating 1980-88 war but the 2003 US-led invasion of Iraq that ousted Saddam Hussein prompted a long Sunni Islamist insurgency during which Iran’s regional sway rose at the expense of the United States.

Iraq on Saturday closed its Sheeb border crossing with Iran to travellers and trade until further notice, Iraqi security sources said, as flooding continues to submerge villages in southwestern Iran.

US President Donald Trump reimposed sanctions on Iran’s energy exports in November, citing its nuclear programme and meddling in the Middle East, but has granted waivers to several buyers to meet consumer energy needs.

Iraq relies heavily on Iranian gas to feed its power stations, importing roughly 1.5 billion standard cubic feet per day via pipelines in the south and east.

(Source: Middle East Monitor)

(Picture credit: Shana)

Genel Energy has announced that, at the bondholder meeting held today, the Company's proposal was adopted and the waiver of the dividend restriction in 2019 has been confirmed.

With respect to the 2018 financial year, a year in which free cash flow totalled $164 million, the Board has accordingly recommended a final dividend of 10¢ per share, a total distribution of $27.9 million.

As previously stated, given the strong free cash flow forecast of the business even after investment in growth opportunities, the Company intends to pay a minimum dividend of $40 million per annum. This will be split between an interim and final dividend, to be paid one-third/two-thirds. The final dividend reflects this split and will be subject to shareholder approval at the AGM on 16 May 2019.

Genel intends to announce an interim dividend of 5¢ per share as part of the 2019 half-year results, which are scheduled for 6 August 2019.

Bill Higgs, Chief Executive of Genel, said:

"Genel has highly cash generative assets and material growth opportunities in the portfolio. Even after drilling 20 wells in 2019 and progressing the exciting opportunities at Sarta and Qara Dagh, we still expect to generate over $100 million in free cash flow. We will continue to focus on delivering on our strategy as we begin the distribution of a material and sustainable dividend, and aim to provide investors with a compelling mix of growth and returns."

FINAL DIVIDEND PAYMENT TIMETABLE

• Annual General Meeting: 16 May 2019
• Ex-dividend date: 23 May 2019
• Record Date: 24 May 2019
• Payment Date: 24 June 2019

(Source: Genel Energy)

Iraqi Parliament Speaker Mohammed al-Halbusi said he hopes the United States will keep waiving sanctions on energy imports from neighboring Iran, noting that the Arab country will need to purchase electricity from the Islamic Republic for three years.

In November last year, Washington granted a 45-day waiver on electricity to the Arab country and extended it by 90 days in December after US President Donald Trump’s administration reimposed sanctions on Iran in May, following walking out of the 2015 Iran nuclear deal.

Earlier this month, the US State Department extended the 90-day waiver for the second time to let Iraq continue energy imports from Iran. The original exemption granted in December expired on March 19.

“Hopefully this waiver will be extended until Iraq can stand on its feet economically,” said Halbusi at the US Institute of Peace on a visit to Washington, where he met senior officials, including Vice President Mike Pence.

Iraq is the biggest importer of electricity from Iran. It needs more than 23,000 megawatts of electricity to meet its domestic demand but years of war following the 2003 US invasion have left its power infrastructure in tatters and a deficit of some 7,000 megawatts.

“After these three years, maybe we can see Iraq as economically independent and we won't need to import power or electricity from a foreign country. Maybe we can address this issue after three years," he added, Press TV reported.

At a press conference held after his speech, Halbusi warned Washington of the negative effect of “any hasty, uncalculated step to adopt policies and procedures against countries in this region.”

The electricity shortfall in the war-torn country is especially acute in the sweltering summers, which led to violent protests in Basra in September and turned into a national crisis.

Iraq’s electricity demand is expected to increase again this summer and any cuts in Iranian supplies are set to trigger more protests and reignite unrest, destabilizing the Arab country.

In addition to natural gas and electricity, Iraq imports a wide range of goods from Iran including food, agricultural products, home appliances, and air conditioners.

(Source: Tasnim, under Creative Commons licence)

By John Lee.

Shares in Genel Energy were trading down four percent on Wednesday morning after the company announced its audited results for the year ended 31 December 2018, in which it wrote down its Miran asset by $424 million.

Despite this, Genel says it can now initiate "a material and sustainable dividend policy", with payments starting in 2020.

The company's shares are up 17 percent since the start of the year.

Murat Özgül, Chief Executive of Genel, said:

"Genel's strategy at the start of 2018 was clear - generate material free cash flow from producing assets, build and invest in a rich funnel of transformational development opportunities, and return capital to shareholders at the appropriate time. We are delivering on this strategy.

"2018 was another year of material free cash flow generation, we continued to transform our balance sheet and the addition of assets with the potential of Sarta and Qara Dagh led to a very successful delivery on the first two parts of our strategy. We will continue to develop opportunities and invest ingrowth. As we do so, a robust cash flow outlook and our confidence in Genel's future prospects underpins our initiation of a material and sustainable dividend policy."

Results summary ($ million unless stated)

1. EBITDAX is operating profit / (loss) adjusted for the add back of depreciation and amortisation ($136.2 million), exploration credit ($1.5 million) and impairment of intangible assets ($424.0 million)
2. Free cash flow is net cash generated from operating activities less cash outflow due to purchase of intangible assets ($39.7 million), purchase of property, plant and equipment ($65.3 million) and interest paid ($30.0 million)
3. Cash reported at 31 December 2018 excludes $10.0 million of restricted cash
4. Reported cash less ($334.3 million) less reported balance sheet debt ($297.3 million)
5. EBITDAX less net gain arising from the Receivable Settlement Agreement ('RSA') divided by the weighted average number of ordinary shares

Highlights

• $335 million of cash proceeds were received in 2018 (2017: $263 million)
• Strong cash flow generation, with free cash flow totalling $164 million in 2018 (2017: $99 million), an increase of 66%
• Financial strength continues to increase,with unrestricted cash balances at 28 February 2019 of $378 million, andnet cash at $81 million

• Addition of Sarta and Qara Dagh to the portfolio in 2019 brings further near-term production and material growth potential
• Increase in 1P and 2P reserves as of 31 December 2018 to 99 MMbbls (31 December 2017: 97 MMbbls) and 155 MMbbls (31 December 2017: 150 MMbbls) respectively, including Sarta
• As disclosed in our trading statement, the carrying value of the Miran licence has been under review. Due to the focus on the development of Bina Bawi, while Genel continues to see significant opportunity in the licence, this has resulted in an accounting impairment to the carrying value

Outlook

• Production guidance maintained - net production during 2019 is expected to be close to Q4 2018 levels of 36,900 bopd, an increase of c.10% year-on-year
• Capital expenditure guidance updated to include spend on Sarta and Qara Dagh, with net capital expenditure now forecast to be $150-170 million (from c.$115 million)
• Opex and G&A guidance unchanged at c.$30 million and c.$20 million respectively
• Genel expects to generate material free cash flow of over $100 million in 2019, inclusive of investment in Sarta and Qara Dagh
• Given the strong free cash flow forecast of the business, even after investment in growth opportunities, Genel is initiating a material and sustainable dividend policy
  • The Company intends to pay a minimum dividend of $40 million per annum starting in 2020, with the intention for this to grow
  • The dividend will be split between an interim and final dividend, to be paid one-third/two-thirds
  • The Company is set to approach bondholders to request a temporary waiver of the dividend restriction, which limits dividends to 50% of annual net profit, in relation to accelerating the start of distribution to 2019
• The Company continues to actively pursue growth and appraise opportunities to make value-accretive additions to the portfolio

More details - 40 pages of them! - here.

(Sources: Genel Energy, Yahoo!)

By John Lee.

The Trump administration has reportedly granted Iraq a further 90-day extension to the waiver exempting it from US sanctions on Iran.

CNBC quotes a senior State Department official as saying on condition of anonymity:

"While this waiver is intended to help Iraq mitigate energy shortages, we continue to discuss our Iran-related sanctions with our partners in Iraq."

According to some energy analysts, without continued sanctions exemptions, Iraq could lose more than a third of its power overnight.

More here.

(Source: CNBC)

From Al Jazeera. Any opinions expressed are those of the authors, and do not necessarily reflect the views of Iraq Business News.

There is a fight over energy in Iraq between the US and Iran. Iraq relies on Iranian gas for nearly half of its energy - gas that is now subject to US sanctions on Iran.

The Iraqi government originally obtained a 45-day sanctions waiver from the US, but that waiver is set to expire next week.

Iraq is particularly sensitive to the issue after protests against electricity cuts rocked Basra earlier in the year and Iraq's new government is treading a thin line trying to keep both the US and Iran happy, and its people satisfied.

Al Jazeera's Charlotte Bellis reports:

The United States has told Iraq that it will be allowed to keep importing crucial gas, energy supplies and food items from Iran after Washington reimposes sanctions on Tehran’s oil sector, three Iraqi officials said.

The waiver is conditional on Iraq not paying Iran for the imports in US dollars, said the officials, who included a member of Iraq’s ministerial committee that oversees energy activities, Reuters reported.

The US sanctions take effect on Nov. 4.

The ministerial committee official said Iraq’s finance ministry had set up an account with a state-run bank where Baghdad would deposit in Iraqi dinars the amounts owed to Iran for the imports.

Central bank officials said in August that Iraq’s economy is so closely linked to Iran that Baghdad would ask Washington for permission to ignore some US sanctions.

Iraq imports crucial supplies from its neighbor including gas for power stations.

(Source: Tasnim, under Creative Commons licence)

Iraq is negotiating with the U.S. for exemptions from the impending snap-back of sanctions against Iran, arguing that it could not cut consumption of Iranian electricity and natural gas immediately without suffering serious economic harm and social instability.

An Iraqi delegation was in Washington last week seeking a waiver for its cross-border trade, meeting with senior officials in the State Department, Treasury Department, and National Security Council, according to multiple officials familiar with the talks.

More details here from Iraq Oil Report (subscription required)

(Source: Iraq Oil Report)