Analyzing and Understanding Petroleum Fiscal Systems

By Ahmed Mousa Jiyad.

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

ORCID identifier is:

Upstream petroleum (Oil, Gas and Condensates) sector occupies very critical position and, accordingly, has influential impacts on the national economies of Iraq, some Middle East and North America- MENA countries, as well as many other developing countries that are endowed with such natural resources.

This importance is manifested through many significant economic parameters at macro-economy level, including balance of payments, trade balance, State budget (covering both investment and recurrent allocations), current account, it's share in GDP among others. Foreign exchange and revenues generated through this sector are the main fiscal determinants for financing socio-economic development plans.

Moreover, ownership of petroleum resources is, mostly, vested to the people through legal instruments such as constitutions.

The development of petroleum resources requires, in most cases, different forms of cooperation with and the  involvement of the international oil companies-IOCs through variety of  legal means and instruments such as contracts, agreements, memoranda of cooperation or understanding, protocols and alike. The involvement of IOCs (regardless of their 'home country' and associated geostrategic and geopolitical implications) is thus regulated and, accordingly, impacted by different components of the "Fiscal System" that are highlighted in or premised on many host-country national laws, regulations, directives among others and then translated into specific provisions, i.e., articles, and inserted into and comprised in these binding documents, mostly named contracts or agreements, with an IOC or a consortium of IOCs.

Analysing and professionally understanding upstream petroleum fiscal systems is a prerequisite qualification for all those who are involved directly in the development of petroleum resources in any country, particularly the related authorities and entities. Also, the comparative assessments of different fiscal systems is critically vital for national decision makers to be conversant with prior to deciding which system and what components of that system serve better their national aspirations in developing the upstream petroleum.

As a matter of practical and implementation purpose, understanding upstream petroleum fiscal system, of a concluded contract or agreement, is not and should not be confined only to those who are involved directly; reasonable familiarity with the components of the fiscal system of the concluded contracts is surely needed for many more others of officials at different branches of government as well as experts, research and consulting centres, academics, media, civil society organisation, economists, petroleum professionals and political leaders among others.

There is a wide range of reference books, publications, models and specialised consulting firms alike that cover variety of upstream petroleum fiscal regimes used in the global upstream petroleum industry.

Among the most important and relevant references is the book reviewed here.*

This is an excellent book, well written, carefully structured, articulate in debating the issues objectively- pros and cons, and follows good and constant methodology for each chapter; it is, therefore, a valuable addition to the library and knowledge of petroleum resource development and helps in formulating prudent management of these natural resources.

The book comprises three parts (not four, p. 13) and between them they have a combined total of sixteen chapters, in addition to Glossary and Bibliography. Part one, the shortest among the three and includes the first two chapters, presents the topics for the book, explains some terminology used, introduces fiscal systems in terms of what functions they have, their different forms and the process of licensing petroleum and outlines the structure of the book.

This part refers to the distinctions that sometimes made regarding the categories of fiscal systems such as concessionary, royalty/tax and contract-based systems and reviews four broad alternatives forms of petroleum licensing; these are:  Concessions (also called leases, licenses or extraction permits); Production sharing agreements/ contracts-PSA/C; Service agreements/ contracts  (including risk service contracts) and other agreements/contracts (mostly tax-based).

The second part addresses various Fiscal Instruments, i.e., the core and main pillars of petroleum fiscal system, and has chapters 3 to and including chapter 11.

Each chapter follows the same methodology: it begins with Definition and purpose, followed by thorough review and elaborated discussion of the topics covered in that chapter, a summary and ends with notes. The nine chapters of this part provide insights on and cover all important fiscal instruments by different governing modalities in upstream petroleum contracts and agreements. Fiscal instruments and issues covered in this part include: Levy on production (Royalty, severance tax, and revenue sharing); Production sharing; Remuneration for service;  Bonuses, lease sales and area fees; Privileged state participation; Tax on corporate income and distributed profits; Petroleum resource taxes; Taxes related to inputs and externalities; Business obligations in the national interests.

A significant and very helpful sub-section on the "Economic characteristics...." of the above mentioned instruments enriches the quality and usefulness of the book and expands the debates around these fiscal instruments. Also, this part addresses, rather eloquently and at length, with quantitative comparative analysis four main "trigger parameters" for "sharing of profit petroleum" or for fee payment that are in use in different contracts.

By this way the authors facilitate the understanding of the applications of these trigger parameters in the latter chapters of part three. These four triggers are: Rate of Return (ROR); R-Factor; Daily Rate of Production (DROP) and Cumulative Production (CP).

Examples on related contractual provisions drawn from many different countries are used or referred to throughout this part.

This part of the book is a must-read for those involved in upstream petroleum development through involving IOCs in such development, particularly professionals, ministry officials, legislating authorities and executive decision makers among others.

The third part focuses on Applications and comprises chapters 13 to 16. It aims at providing integrated perspective on the implication and implementation of the fiscal systems and their instruments. It begins with issues relating to fiscal valuation, particularly those connected to international tax issues then addresses some economic characteristics of petroleum operations and links fiscal analysis to some important economic features of the business.

Important feature of this part is the review of computer modelling, providing helpful insights on some available models, and uses its own fiscal model, Petrosharing, which was developed to support the analysis in this book. The last chapter proposes a step-by-step framework or a roadmap to design petroleum fiscal system, premised on the fiscal instruments that are discussed throughout the book.

This part presents many charts, uses simulations and modeling, and discuses thoroughly critical issues and development scenarios using data drawn from, mostly, Norwegian upstream fields.

The Glossary lists explanation of the main terms and concepts mentioned in the book and the book has Bibliography but has no Index, brief bios and photos of the authors are provided twice.

The authors' academic and professional backgrounds, an economist and legal profession, stand probably behind the impressive quality of this unique book as manifested by the depth and objectivity when analysing various economic and legal matters.

The book helps, to a great extent, in making a clear distinction between petroleum fiscal systems (and their different instruments on one side) and other macro-economy issues such as revenue management, oil policy and national development plans or programmes (on the other) to mention a few. Issues that are, more often than not, mixed up by commentators and result in confusion, unnecessarily, and spread inaccurate interpretation (this is much evidenced through debating such issues in Iraq over the last ten years). A contract relates to a specific oilfield project falls within the sphere of micro-economics analysis, while oil policy or revenue management and utilization and national development are of macro-economic nature. But surely, many fiscal instruments (such as taxation, state partner share, type of contract among others) are of macro-nationwide applications and implications, and thus, have direct bearings on upstream petroleum projects. Hence, there are dual attributions of or organic linkages between three levels of analysis; micro, sector-wide and macro level, which entails very careful and proper understanding and distinction.

The essence of and why there is petroleum fiscal systems, according to the authors, is sharing the resource rent between the host country and the resource firms, i.e., IOCs. But, the book asserts, "Calculating the resource rent is not straightforward, and is rarely done explicitly. It is an economic term discussed on a conceptual level, seldom found in Excel spreadsheets." (P. 4) and "rarely calculated as a precise value." (P. 457). Yet, there are, throughout the book, numerous examples on "resource rent tax" that are applied by many countries and jurisdictions. When a tax, which is important and significant petroleum fiscal instrument, is premised on or justified by the resource rent, then it is an empirical and material manifestation of a quantified/ quantifiable resource rent. Moreover, the "Project economics" spreadsheet (Excel or others) comprises a "precise value" of the resource rent tax as highlighted in Table 14.2, (P. 348). Is there some inconsistency here!

There is a strong link between resource rent and sovereignty, particularly in most developing countries. But the book refers twice to sovereignty: with regards to "Stabilization clauses" (P. 43) and a citation on the, "[R]enewed interest in such [risk service] agreements since the 1990s, largely due to national concerns with sovereignty over their petroleum." (P. 125).  The book, surprisingly, did not discuss or highlight the issue of state permanent sovereignty over its natural (in this case) petroleum, which is significant nation's right issue and has been recognized under international law for decades.[1]

Also, there is a sense of generalization in considering sharing resource rent between host country and the resource firms under all petroleum fiscal systems, but this is not necessarily the case. If "remuneration fee" is included in production cost, as it should be, then the whole resource rent is acquired by the host country under service contracts, such as the one adopted by Iraq' federal ministry of oil, and this is vital feature of this type of petroleum fiscal system.

The issue of "gold plating", the tendency that the contractor will be economically motivated to spend money unnecessarily,(P. 134) and thus "benefitting,..., due to distortions caused by the fiscal regime, (p. 405), attracted good attention by the authors, as evidenced by the frequency of the term in the book. It was discussed, at depth using its Petrosharing Model, with respect to "Saving index" (Pp. 380-90), with regards to the issue of "Neutrality" of fiscal system (Pp. 393-405 ) and with regard to Iraq, among others.

When it comes to service contracts adopted by Iraq, the book focus on "gold plating" relies on two references relating to Rumaila oilfield: Ghandi and Lin Lowell (2016) (p. 134) and Van Meurs (2009) (p. 136). Both studies give the impression that "gold plating" is peculiar to and intrinsic of service contracts; it is not. Moreover, both studies seems to premise their analysis on a "draft" model contract not on a "signed" contract; Rumaila is a brown oilfield that has been producing since mid-1950s and, thus, it is unreasonable to offer its re-habilitation under production sharing contract, as suggested by the two studies; the authors of the two studies seemed unaware of the measure to combat "gold plating" that were introduced in service contracts for the second bid round, due to a learning-curve, and finally, economic efficiency and cost effectiveness are, practically, impacted by both the "text" of the contract and the "monitoring and management" of the contact through various decision-making chain from the bottom at the field' joint management committee up to Energy Committee at the Council of Ministers.

That said, there are growing number of high profiled cases indicating to serious fraud and corruption in the Iraqi petroleum upstream projects, the impact of which could very well dwarf "gold plating" effects associated with Service contracts. Similarly, corruption in the KRG' production sharing contracts has been even more detrimental.

This brings to the discussion the importance and impacts of vital political economy factors and geopolitical considerations on these projects, since petroleum fiscal system is formulated upon or functions within the environment dictated by these factors and considerations.

The book uses the term "resource firms" instead of the widely used term IOCs; the authors' argument for adopting this term are not very convincing (Pp. 6/7) and they only add one more term to the existing ones: IOCs, Oil Majors; Big Oil; transnationals; multinationals.

Also the book mentions Middle East Gulf-MEG (P. 308; P. 416), probably referring to the known Arabian Gulf or Persian Gulf (depending where one stands) but hardly MEG!!

A few typing errors and sometimes numbers do not add up corresponding to what the narratives lead to; this could be due to either typing errors or to rounding effects. Some charts, particularly in part three are not clear due to scanning.

To sum up, this is invaluable highly informative and thus recommended book for oil professionals, contracts formulation and negotiation, and for authorities entrusted with upstream petroleum development. Moreover, from my own experience, this book is excellent source for designing and delivering human capacity development activities such as workshops and training on petroleum fiscal systems.


* Petroleum Fiscal Systems,

Erik T. Jarlsby and Eduardo G. Pereira (2019)

Publisher: PennWell Corporation. Oklahoma, USA,

ISBN: 978-1-59370-480-3 (hbc); 471 pages

Price: $101.15


My edited review article of the above book was published on:  Journal of Contemporary Iraq & the Arab World, Volume 14, Number 3, 1 September 2020, pp. 261-265(5)

[1] Brownlie, Ian (1995), Basic Documents in International Law, Clarendon Press, Oxford, UK, 4th Edition, Part Five.


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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

The post Analyzing and Understanding Petroleum Fiscal Systems first appeared on Iraq Business News.

IOC’s Strategic Positioning in Iraqi Upstream Petroleum

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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

The post IOC's Strategic Positioning in Iraqi Upstream Petroleum first appeared on Iraq Business News.

The Demise of ExxonMobil in the Iraqi Petroleum Sector

By Ahmed Mousa Jiyad.

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

The Demise of ExxonMobil in the Iraqi Petroleum Sector

A recent announcement by the Ministry of Oil (MoO) confirms months of speculation regarding ExxonMobil exiting one of the world's super-giant oilfields, i.e. West Qurna 1 (WQ1).

Ten years ago this highly recognized IOC had golden opportunity to operate three giant oilfields in the southern Iraq with a combined production plateau of 6.275 million barrels daily (mbd); an opportunity unavailable anywhere in the world, but now this company exiting the country empty-handed!!

Why was that? What went wrong? Who is to blame? Should any lessons be learned from this failed venture and what are the implications for Iraq as well as for ExxonMobil?

This article attempts to answer briefly the above questions and provide background review that could help in understand the complexity of the circumstances that contributed to and led to this eventuality.

ExxonMobil back in Iraq

IOCs comeback to Iraqi upstream petroleum began in earnest immediately after 2003 invasion.

ExxonMobil was one of too many IOCs that concluded Memorandum of Understanding/ Cooperation- MoU/C with MoO in 2004. That MoU/C was signed on 27 October 2004, renewed twice and remained valid until end of 2008; it comprises conducting seven joint studies and training. The joint studies includes: phases 1 &2 for the development of Zubair Oilfield; Seismic and evaluation study for exploration (old) block 12; Database; Model Tender Document  for exploration block 12; Rehabilitating Oil Training Center in Baghdad; Balad Oilfield; Deep drilling program for South Rumaila. Also, ExxonMobil committed to provide training for 129 MoO employees, totaling 1068 working days, during 2005 and 2006.

When MoO decided to hold the first bid round, ExxonMobil was one of seven American companies that were qualified, among 35 IOCs, for participating in the bid round that was held on 29 and 30 June 2009.

ExxonMobil formed three consortia and submitted bids for three oilfields but won nothing during the two days of the competition.

The first consortium with Petronas for Rumaila oilfield; eventually BP/CNPC won when they reduced their remuneration fee to the threshold stated by MoO;

The second consortium with Shell and Petronas for Zubair oilfield competing with three other consortia: Eni/Sinopec/Occidental/Kogas; CNPC/BP; Gazprom/ ONGC/ Turkish Petroleum. The third consortium with Shell for West Qurna1 oilfield competing with four other consortia: CNPC/Petronas/Japex; Lukoil/Conoco; Total; Repsol/StatoilHydro/Maersk.

None won during the biding event.

In October 2009, ENI accepted the MoO' maximum remuneration fee and agreed to expel Sinopec from its consortium, because Sinopec agreed, days after the biding event, to a C$8.3bn (US$7.2bn) takeover of Addax, which had a stake in the KR TaqTaq field. Hence, ENI consortium secured the Zubair contract.

As for WQ1 it was a totally different story.

Early October 2009 a BBC Monitoring report quoted Lukoil boss Vagit Alekperov had said, "We have let it be known to Iraq's Oil Ministry that the consortium of Lukoil and ConocoPhillips is ready to enter into direct talks concerning the West Qurna-1 project on the terms that were announced earlier by Iraq's Oil Ministry,"

Probably, ExxonMobil found itself left behind and empty-handed from the first bid round since BP/CNPC won Rumaila; ENI lead consortium secured Zubair and now Lukoil and ConocoPhillips conceding to MoO terms regarding WQ1. Moreover, ExxonMobil had no intention to participate in the second bid round to be held in December 2010.

All the above prompted ExxonMobil/Shell, four weeks after Lukoil and ConocoPhillips announcement, to present similar acceptance of MoO terms regarding the maximum remuneration fee.

The Ministry favoured ExxonMobil/Shell by not considering Lukoil/ConocoPhillips offer promptly, and when ExxonMobil/Shell made their offer it was selected; presumably due to suggested production plateau target-PPT differential that tilted towards ExxonMobil/Shell!!! The Cabinet approved the award of WQ1 to ExxonMobil/Shell on 25 January 2010.

But ExxonMobil negotiated secretly with KRG after the company secured WQ1 contract with the federal ministry and it had signed the second amendment to the contract on 18 August 2010 adding 500kbd to an already high PPT at a higher remuneration fee of $2/b.

ExxonMobil-KRG secret negotiation led to signing six production sharing agreements on 18 October 2011, though it knows of the blacklisting policy by the federal ministry of oil, i.e, ignoring and disregarding the federal government imposed policy.

Contracts with KRG add insult into injury since three of these contracts are related to exploration blocks and fields that fall within the "disputed territories"; these are Bashiqa, Al Qosh and Qara Hanjeer, the other three are Arbat East, Pirmam and Betwata.

That unwise and puzzling move by ExxonMobil led to excluding it from leading the Common Seawater Supply Project-CSSP; reducing its Participating Interest in WQ1 (through the Third Amendment of the contract dated 28 November 2013) and blacklisting it from any future upstream projects such as Nassiriya Integrated Project-NIP.

That unwise action was writing on the wall that had in fact commenced the demise of this giant IOC in the Iraqi upstream petroleum.

The position of ExxonMobil in WQ1 weekend further when Shell exited WQ1 after it had exited Majnoon oilfield in June 2018.

ExxonMobil attempted a comeback to Iraqi petroleum, by exploiting the naivety and narcissism of a former Minister of Oil, Jabbar Luaibi, through Southern Iraq Integrated Project- SIIP. He and ExxonMobil were close to trap Iraq in an Odious Contract. The Ministry of Oil was cautioned of the detrimental consequences of such a contract and luckily for Iraq that contract was dismissed.

The rise and fall of ExxonMobil in KRI was even more dramatic despite the fact that KRG offered lucrative production sharing agreements. Media sources' report that ExxonMobil had conducted geological studies that doubted the existence of enough reserves in most of these blocks. Such results prompted Exxon to relinquish three of its six blocks: Betwata in 2015, and Qara Hanjeer and Arbat East in 2016.

Of Exxon's six blocks, Bashiqa may be the most promising.  However, in 2017, it transferred half of its 80 percent interest in this block - along with operatorship - to DNO and early this year it agreed to sell 32 percent to DNO, which practically and effectively ends ExxonMobil involvement in this block. Finally, ten years on with no much progress in AlQosh and Primam.

ExxonMobil adventure in Kurdistan Iraq ended, mostly, miserably!

To sum up, in that first biding round the company had three valuable opportunities and, analytically and legally, it and its partners could have won all three super-giant oilfields (Rumaila, Zubair and WQ1) with a combined production plateau of 6.275 million barrels daily-mbd against a combined minimum PPT proposed by MoO of 2.758 mbd; it won nothing during the bidding event!!!!!!!!!.

Instead, ExxonMobil sought a divisive course of action in the domestic Iraqi politics by concluding ill-fated PSAs with KRG; was that due to lack of vision, or geopolitical nativity or arrogance that still reflects a "Seven Sisters" mentality, or a hidden political agenda aiming at disintegrating the country; who knows!!!!!

What went wrong with ExxonMobil and its economic model?

Many views argued that the fiscal terms of the Iraqi long term service contract-LTSC for WQ1 are tough enough that eradicate the Internal Rate of Returns-IRR of the economic model which the IOC premised its final investment decision-FID on it.

This might be partially true as the comparative analysis of LTSC with other types of contract, particularly the production sharing contracts-PSCs indicates the "Government take" are higher under the LTSC than the PSCs. This, from international energy political economy perspectives is good for Iraq and, moreover, that corresponds with the Iraqi constitutional provision that calls for "develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people" (Article 112, Second)

Nevertheless, contractually and analytically LTSC for WQ1is identical in structure, contents and fiscal terms, except the particularities of WQ1 oilfield,  to all LTSCs for the brown fields offered under the first bid round, i.e, Rumaila, Zubair and the 3 Missan oilfields- Buzurgan, Abu Ghrab and Faqa. This leads one to question why ExxonMobil finds the fiscal terms unfavorable while other IOCs continue in the redevelopment of the oilfields.

It took almost one year to prepare for the first bid round and the final text of the LTSC was thoroughly examined by all qualified IOCs for that bid round. Logically and imperially, all IOCs should have formulated their economic model and bid on what the LTSC offers. It is rather surprising to claim, ten years later, that the offered fiscal terms do not match with the company economic model!!

The economic model of any IOC is its own making; reflecting its vision, its global profile, strategic positioning, strengths, and stakeholder/shareholder's interests among other things. Accordingly, the level of IRR is the fiscal measure upon which the FID premised. Majors or Big Oil usually have high IRR, due to their international profile , their integrated structure across the value chain of petroleum industry and the "opportunity cost" of a particular investment.

IRR under LTSC fiscal terms depends mostly and directly on: production level, capital cost-investment, cost recovery and remuneration fee; indirectly it depends on oil prices through the term of "deemed revenues" provision that impact the quarterly cost recovery and remuneration fee entitlement.

Oil price fluctuates, and nothing new about that at all; its fluctuation like a "Yu-Yu" is more normal and usual than otherwise. Iraqi oil export price averaged at $53.19 a barrel during the 12 months period November 2008-October 2009; the time that IOCs considered oil prices in their economic model. During the period from July 2008 to March 2021 Iraqi oil export price averaged at $69.55 a barrel; hence the argument that IRR eradication was attributed to oil prices and, accordingly on cost recovery and remuneration fee is not convincing.

What remains is the impact of oil production level on IRR value. Oil production levels have implications and direct impact on capital cost, cost recovery and remuneration fee, and hence on IRR.

For WQ1 the MoO requests a minimum plateau target of 600kbd during the first bid round. ExxonMobil presented 2.325mbd, i.e., nearly four folds what MoO had envisaged!! Moreover, soon after signing the contract ExxonMobil requested adding further 500kbd leading to higher plateau target at 2.825mbd.

ExxonMobil should have known that such unreasonable unattainable plateau target within the contracted timeframe weakens the logical premises of its economic model and the assumed IRR; it was a problem of its own making and shed much doubt about the validity and soundness of its model not the LTSC stringent fiscal terms.

However, Amendment 4, signed on 19 February 2014, to WQ1 contract, provides further relieves from the terms of the contract such as reducing the plateau target, performance factor and R-Factor among others that provide significant fiscal incentives to WQ1 consortium.

All the above refutes the argument that put the blame squarely on the terms of the contract in the deteriorating IRR and ExxonMobil economic model.

Even if one, for the sake of the argument, accepts for a while the tough terms of WQ1 contract, what about ExxonMobil economic model for KRG' PSCs!!

All commentators and oil experts agree that KRG' PSCs provide lucrative terms for the benefits of the IOCs. Why then ExxonMobil fails measurably there too?

Was that demise due to wrongly-premised economic model or "inside-misguidedness"!! Media sources revealed that Ali Khedery, a former American diplomatic advisor in Iraq who subsequently joined Exxon as director of public and government affairs for ExxonMobil Kurdistan Region of Iraq Limited (EMKRIL), Exxon's KRG-focused subsidiary, "had facilitated the negotiations that brought the company to Kurdistan." Was ExxonMobil victimized by its own staffer!!!!???

ExxonMobil Exit and MoO Options

Contractually, to exit WQ1, ExxonMobil should invoke the termination Article 8 in WQ1 service contract, particularly sub-article (8.2) and, therein, sub-article (8.1 (c)). If ExxonMobil wishes to assign its rights and obligations, as it seems doing so far, it should comply with the provisions of Article 28-Assignment.

Available information indicates that the company launched the contractually exiting process in January by sending a formal letter to notify MoO it had found prospective buyers; ExxonMobil and MoO had three months, until 28 April, to agree on a course of action.

The ministry has three options: the first is to accept the prospective buyers found by ExxonMobil; 20 percent to CNOOC and 12.7 percent to PetroChina-CNPC. This means increasing CNPC participating interest to 45.4% and increase China position in WQ1 to 65.4%.

The second option is to find another American company to acquire ExxonMobil share; this what the Ministry has publically announced and it seems to favour Chevron, but Chevron  was reportedly not hugely encouraged to invest in WQ1. (But again Chevron was blacklisted by the Ministry due to the company' involvement in KRG oilfields, though such blacklisting was revoked, unofficially, during the time of former minister Jabbar Luaibi. He paving the way for this company to enter the upstream petroleum through direct backdoor. By the way the Iraqi team in MoU/C with Chevron 2004-2008 was chaired by Jabbar Luaibi).

The third option is to acquire ExxonMobil share by the Ministry through Basra Oil Company-BOC or any other national companies affiliated under the Ministry. This option is similar to what was done when Occidental - Oxy relinquished its participating interest in Zubair oilfield

In any of these options, the Ministry should extract a "capital gain tax-CGT" from the total value of the sold share. The Iraqi tax authority decides the CGT rate, the estimation equation and the compounding rate to arrive at the present values taking into consideration three related variables: the value of the sold share (minus) the present value of the invested capital (plus) the present value of the recovered invested capital (cost recovery).

In my article written almost twelve years ago assessing the first bid round I wrote the following: "What is rather surprising is the somewhat weak contribution of the American oil companies. While they topped the 35 qualified IOCs with 7 companies, only three had participated in the bidding. Were they expected to capitalise on the American military presence and political pressure to have guaranteed access to the Iraqi oil? Or they simply have their own capacity, technical and financial limitations? Or Iraq is not on their strategic priority screen? Or they are trapped in a mind-set of own making that centred on production sharing agreements and "reserves booking"? Or they are not used to this type of open bidding and transparency, and they prefer behind closed doors deals? Only time would provide the satisfactory answer." (MEES 52:33 17 August 2009)

Any lessons learned, Ministry of Oil????????

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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

The post The Demise of ExxonMobil in the Iraqi Petroleum Sector first appeared on Iraq Business News.

Jiyad: Iraq, and the China-Iran Cooperation Program

By Ahmed Mousa Jiyad.

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

Iraq and the China-Iran Comprehensive Cooperation Program

The China-Iran Comprehensive Cooperation Program (CICCP) was signed on 27 March 2021; two days later the CICCP's direct impacts on Iraq began emerging and one of such impacts seems to benefits both Iraq and Iran!!

A few days ago I completed a detailed preliminary assessment of CICCP document. The assessment was written in Arabic entitled "China-Iran Comprehensive Cooperation Program: Tactically Important Strategically Impacting if Implemented", it was circulated widely and posted on many websites.

The assessment uses composite methodology of three researches approaches (Text analysis, SCOR (Strength, Challenges; Opportunities and Requirements) and facts/evidence based) and comprises an introduction, three parts and concluding remarks. Part one provide brief review of CICCP document structure: preamble, articles, annexes, effective date and term of the deal, coordinating and supervising authorities. Part two, provides detailed assessment of eight fundamental topics/ areas of cooperation, from the perspectives of the political economy of bilateral relations and geopolitical considerations. Part three provides the direct official reactions to CICCP from Iraq, USA, Arab Gulf States/Saudi Arabia and Russia.

The political economy perspectives are related to the following basic issues: The first relates to the nature of bilateral relations in terms of sovereign independence or dependency and hegemony; the second is whether the principle of "mutually beneficial" is also equitable; the third concerns the structuring of the Iranian economy on whether the deal will eventually deepens the dependence on the export of raw materials, oil and gas, or introduces the required and desirable structural changes horizontal, vertical and knowledge-based levels; and the fourth is about the financial and banking independence, monetary and currency issues pertaining to funding investments and trade exchange.

The geopolitical considerations were addressed at four levels, starting from the domestic (national for both countries), continental (Asian from China to Syria), regional (West Asia / Middle East) and international levels.

The assessment argues that the timing of signing and announcing CICCP is tactically motivated and important, while its proper and timely implementation could be a game-changer and thus strategically impacting; but, as usual, reality seldom coincides with expectations.

This brief intervention focuses on the direct current evidenced impacts on Iraq. Interested readers are kindly invited to read the Arabic version of my detailed initial assessment through the web-links mentioned at the end of this article.

In a remarkable speed and substance CICCP has already prompted both Iraq and the US to react!

First; after the current prime minister, Mustafa al-Kadhimi, denied, rather harshly, in a press conference on November 18, 2020, the existence of an Iraq-China agreement by saying, 'You know there is no China agreement, why are you promoting these lies?', he returned to authorize, on March 30 - that is, only three days after the signing of CICCP, "to start implementing the Chinese agreement"!!

While I do not find it necessary, now, to discuss what has happened between Iraq and China since the government of Haider al-Abadi, I find it useful to remember the statement by the Prime Minister's Financial Affairs Adviser, Dr. Modhir Muhammad Saleh, on March 29, 2021, that the "Iraq-China agreement" became effective on October 18, 2020, and then he affirmed the "cooperation framework agreement ... and the final accounting and oil annexes were signed on September 23, 2019." So why has not been published to this day any official document on this agreement / cooperation framework agreement, nor any of its annexes or memoranda of cooperation/ understanding related to it!!??

But there is a document at the Ministry of Finance entitled "Export Credit Insurance Cooperation Framework" between the China Export & Credit  Insurance Corporation and the Iraqi Ministry of Finance) dating back to May 11, 2018 (that is, before the date of the agreement signed by former Prime Minister Adel Abdul Mahdi) !!!!

It is worth mentioning that 2021 State Budget Law includes a few infrastructure projects worth 1.803 trillion Iraq Dinnar to be funded, presumably by the above mentioned 2018 framework; since there is no new framework agreement officially published by the Ministry of Finance, nor approved by the Council of Ministers, nor legislated by the House of Representatives/ the Parliament. Moreover, even if such agreement is ratified and activated it utilization will be differed to future state budget for 2022 or even 2023 because of the national election scheduled for October this year.

Apparently, CICCP was a wakeup call for the Iraqi government but it is in reality too late for 2021 budget funding.

But on the other hand, the Iraqi Premier rushed for quick visits to Saudi Arabia and the UAE, immediately after signing CICCP; is there a relationship between the two events? Time will only tell!!!!

Second, among direct reactions by the US administration and as far as Iraq is concerned relates to Iraq-Iran interests. Just two days after signing the CICCP the U.S. renewed and extended the Iraqi exemption from the practices of maximum US pressure on Iran from 45 to 120 days; a waiver to avoid penalties for buying natural gas and electricity from Iran. This exception entails two positive consequences for both Iraq and Iran: the first is to ensure the continued supply of Iranian gas to generates electricity; this what the Iraqis suffer from its shortages especially the heated summer is on the doorstep, and the second is that Iraq pays Iran's accumulated dues for importing gas and electric power (which constitutes about a third Iraq's production of electricity) as the total of those receivables were mentioned in the 2021 budget, about 1688 billion Iraqi dinars.

Third, another important reaction by the US administration was its quick decision to hold a new round of strategic dialogue with Iraq; the discussions began on April 7, and mainly relate to the issue of US forces remaining in Iraq and the Strategic Framework Agreement signed in December 2008. (This agreement and related matters face strong opposition and many important, influential, legal and judicial challenges, especially after the Trump administration assassinated two leading heavy weight individuals, Abu Mahdi Al-Muhandis (Iraq) and General Qassem Soleimani (Iran), on January 3, 2021 near Baghdad airport).

It is worth noting that energy cooperation is one of the eight topics included in the said strategic framework agreement. Evidence suggests that the previous round of the Iraqi-American Committee for the Coordination of Cooperation in the Field of Energy, which was held, virtually remotely, on January 18 of this year was brief and did not include any important issues or noticeable impacts or new achievements. Hence, it did not attract attention from domestic or external media. Even the two ministries, i.e, Oil and Electricity, that should be directly involved, hardly mentioned anything on their websites on that latest meeting. Will CICCP invigorate Iraqi-American cooperation for the benefit of the energy sector in Iraq?? Who knows, will see!!!

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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

The post Jiyad: Iraq, and the China-Iran Cooperation Program first appeared on Iraq Business News.

Jiyad: The Federal Oil and Gas Law in Iraq

By Ahmed Mousa Jiyad.

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

The Federal Oil and Gas Law in Iraq:

A sudden alarming move that calls for caution and readiness to encounter

In a very surprising and sudden move it was announced that the "Opinion Board" (Hayaatul raay  هيئة الرأي) of the Ministry of Oil (MoO) discussed and approved the final version of the Federal Oil and Gas Law (FOGL) at its meeting on Wednesday, February 24, 2021.

In a statement by Ministry's Press Office, Minister of Oil Ihsan A. Ismail confirms this final version will be referred to the Council of Ministers (CoM) for approval after it was reviewed by the "concerned authorities in the Ministry", and then CoM will review this text, and in turn refer it to the House of Representatives (HoR) to enact it as law.

The Press Office did not provide, in its brief statement, any important or new information about the components and contents of this final version of the bill, or on its similarity to any of the previously presented drafts (a minimum of three), or to what prompted the Ministry to take this action at this particular timing in this way!!

The real reasons behind this "suddenness" at this particular time could be explained by or related to many issues or events that are dominating the current political environment. It could be linked to the stalled approval of 2021 budget law, or to the ongoing back and forth dialogue between the federal government and KRG (including efforts by some politicians and heads of some politico-religious groups), or with the end of the current government's mandate and the HoR term, as the national election is rescheduled from June to October this year, or with the current debate at HoR regarding the 15 year old Federal Supreme Court Law (FSCL), or with the coordination efforts (covert or overt) between the announcement of this bill and the proposed first amendment to the Iraqi National Oil Company (INOC law), which seems to be expedited by the Head of the Oil and Energy Committee in the House of Representatives (Haybat Al-Halbousi) ... or all of these ... or a combination of them ... or maybe even others.

Each of the previously presented versions of FOGL is complex, incoherent, long and highly politicized; all has been under consideration for more than fifteen years, and much was written about the law throughout that period.

Because of the urgency, importance and necessity for discussing this "final version" of the law seriously and professionally to protect the country's hydrocarbon wealth in serving the Iraq interest and the rights of future generations, I find it imperative to make very brief assessment on the background and what has been revealed on this abrupt move.

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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

The post Jiyad: The Federal Oil and Gas Law in Iraq first appeared on Iraq Business News.

Iraqi Refineries: Continued Misalignment amid Investment Illusion

By Ahmed Mousa Jiyad.

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

The Refining Industry - Continued Misalignment amid Investment Illusion

More than fifteen years ago a new refinery-specific law was promulgated and then the Ministry of Oil-MoO paid millions of dollars for commissioned international consulting firms to undertake Front End Engineering and Design (FEED) and feasibility studies for a number of new refineries configured to produce petroleum derivatives in compliance with Euro 4/5 standard.

Many tacit objectives stood behind the move: modernize the refining sector to address initially domestic supply-demand misalignment (import substitution) and then export the surplus (export promotion).

All that to introduce a vertical structural diversification along the value-chain of petroleum (desirable structural change) and the new refineries should, mostly, executed through private investment, national or foreign (privatizing the refining industry).

When the FEED and feasibility studies were done, MoO organized promotional events to attract private investors for these new modern refineries and throughout the years many of the refineries went for repeated offering.

At end 2020, none of those refineries materializes despite of the many and high valued incentives and exemptions offered by the related investment laws.  Surprisingly, the Ministry keeps déjà vu; reoffering and offering even more other new refineries for investment without any FEED or feasibility studies.

Recently, I published two-part essay written in Arabic, circulated widely and posted on many websites; the essay undertakes, in part one, comparative Gap Analysis, uses formal data, adheres to evidence-based approach and presents six facts (with Infographic) featuring the reality of the refining sector.

In part two, the essay argues that lack of planning, mismanagement, wrong policy orientation captured by private investment illusion and, possible, formidable "pressure interests" had contributed to this very serious failure of Iraq' oil policy that keeps costing the country dearly, annually. The essay presents some suggestions to remedy the situation.

This article is premised on the findings of the said essay; it also demonstrates that refinery gap manifests chronic local production-demand misalignment as outcome of the technological configuration of the outdated refineries. It calls for careful important distinction between two types of refinery gap analysis: aggregate and product-specific to avoid misleading interpretation and wrong policy recommendations.

The article argues further that private investment illusion-PII causes the country dearly, through dual-capturing effects, due to delay in resolving refinery gap. All charts are based on formal monthly data retrieved from different credible sources and compiled tabulated and produced by this author.

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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

The post Iraqi Refineries: Continued Misalignment amid Investment Illusion first appeared on Iraq Business News.

Recent Data Draws Bleak Prospect for Iraq Next Year

By Ahmed Mousa Jiyad.

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

Recent Data Draws Bleak Prospect for Iraq Next Year

The Iraqi economy has been in a bad shape and, in the short term, it is going to get worse; nothing new about this and there is almost a consensus about it despite differences in the cited material' verifiable evidence, manifestations and root-causes for such a degenerating situation.

A "multi-whammy" combination, or association, of effective impacting factors and circumstances played their part in what the country has been and is facing. These include political instability and divisions; fragile security conditions; vulnerability of high-dependency economic structure; bad and inefficient management and decision making; kleptocracy governance coupled with hyper corruption, particularly the formalized and institutionalized; and impacting external intrusion, among others.

Data and information on these factors and circumstances are massive, and hardly any day passes without adding new items to the long list of cases and examples reported by the media, formal entities, experts and legal authorities; the apparent outcome of all that is a severely deteriorated economy of Iraq.

Data I compiled from a recent IMF report regarding main macroeconomic indicators are presented in the table, which you can view in this pdf. The table provides the progression of 26 macroeconomic indicators over the last two decades using three different sets of data: the first is the average, of a long and rather up-normal period 2000-2016; the second, annual data for each of the last three years 2017:2019, and the third are projections for 2020 and 2021.

The focus in this brief contribution is on the prospects for the economy in this and next year, in comparison with the last three years.

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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

The post Recent Data Draws Bleak Prospect for Iraq Next Year first appeared on Iraq Business News.

Detailed Assessment of INOC Law First Amendment

By Ahmed Mousa Jiyad.

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

The following is an executive summary of my detailed assessment of the INOC Law First Amendment, currently debated by the Council of Ministers:

  • The verdict by the Federal High Court-FHC regarding the appeal against INOC Law 4 of 2018 was historical and extremely significant. Briefly the Court refutes almost two-thirds articles of the said law and most of these articles have substantive importance for the good and proper implementation of the law;
  • It seems that the amendments proposed by the Ministry of Oil-MoO are either premised on inaccurate understanding of FHC verdict and its implications or deliberate attempt to undermine and circumvent that verdict;
  • On the other hand, opinion given by the Legal Directorate at the Council of Ministers are more mature, relevant and demonstrates good and accurate interpretation and understanding of the FHC verdict;
  • It is not clear why the urgency and what prompts the Ministry to stress for promulgating the amendment of the law at the current difficult conditions (in every aspects) which the country is facing. Moreover, the justifications presented by the Ministry are hardly convincing to say the least. It is more puzzling when the MoO calls for approving the amendments without going through the due legal process. Also, its reliance on a relatively old, personal and rather confused communication from the chairman of Energy and Oil Committee of the Council of Representative diminishes the strength of the Ministry' argument;
  • The disparities and divergence between the positions and opinions of Legal Directorate of the Council of Ministers and the proposed drafts of amendments by the MoO are very serious indeed with very different legal and operational implications. Hence, the "decision" by the Council of Ministers on the suggested amendments could create a "loop" that needs further and intensive efforts and probably long time to resolve and make them commensurate with the Constitution;
  • The timing causes concerns as the term of the current "caretaking" government and the current Council of Representatives is relatively short as the national election is officially scheduled for June 2021. The efforts and intentions to approve the proposed amendment is, ironically, a replica of passing the ill-fated Law 4 of 2018, i.e., passing unconstitutional law in a hurry while all are preoccupied with election!! They never learned even a lesson;
  • As for the amendments proposed by the Ministry of Oil they suffer from many serious flaws, ambiguities and lack of coherence and consistency; particularly when one look at the entire amended law. The details of the of the comprehensive assessment, in Arabic, of the proposed First Amendment of INOC Law is provided hereunder; it was circulated widely, emailed to all concerned high authorities and posted on many website.

Click here to download the detailed analysis (Arabic) 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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

The post Detailed Assessment of INOC Law First Amendment first appeared on Iraq Business News.

Mousa Jiyad Questions Norwegian Tanker Deal

By John Lee.

Iraq Business News Expert Blogger, Ahmed Mousa Jiyad, has demanded an investigation into Iraq's reported contract to buy tankers from a Norwegian company.

The Ministry of Oil announced on 18th August that the Iraqi Oil Tankers Company (IOTC) had concluded a contract with Norway's Batservice Mandal [Båtservice Mandal AS] to build two oil tankers.

According to Mr Jiyad, the company has no experience in building ships of this sort, and filed for bankruptcy last year.

The full text of Mr Jiyad's statement (in Arabic) can be read below:

Issam Al-Chalabi’s 50 Years in the World 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.

A number of Iraq's oil professionals and technocrats have authored books documenting their own experience during the period of their time in the Iraqi petroleum sector. In addition to providing invaluable first-person anecdotes and empirical evidence these works have also delivered to the reader their considered views on - and interpretations of - the course of events and developments that took place across these varied timeframes.

Notable examples include Abdullah Ismael's Iraq's Oil Negotiations, 1952-1968 (1989) that documented and shed new light on the details of more than fifteen years of negotiations between various Iraqi governments and the foreign oil companies that were then controlling oil production in the country. Ismael was the acting deputy for the Ministry of Oil and the rapporteur for the Iraqi side during these long and often contentious negotiations.

Thus, his book has been considered as a highly valuable first-hand source that informs our understanding of the political economy of the relationship between the host government and foreign oil companies across the concession era. Similarly, Ghanim Anaz's Iraq's Oil and Gas Industries in the Twentieth Century (2012) provides an account of the difficult relationship between the Iraqi government and the Iraq Petroleum Company (IPC), informed by his employment at the IPC over that period. In an even more personal testimony, Jabbar Allibi's  Standing in the Storm: the challenges of difficult times provides a detailed account of his work and experience in Iraq's southern oilfields from 1972 through his retirement as an advisor at Iraq's Ministry of Oil in 2009.[i]

Saadallah al-Fathi, a recognised downstream engineer and accomplished professional, published his From the Refining Tower: More than memoirs, less than history (2014), which proved to be an interesting, engaging and enjoyable book to read. Al-Fathi provides the story of his life from early childhood until the publication of the book and the volume is recommended for those who want to know more about development in the Iraqi refining sub-sector as he details many such projects.

One-fifth of al-Fathi's book of 480-pages covers his youth and the years prior to his joining Iraq's Ministry of Oil, while the remainder provides a detailed memoir of his experience, particularly during the Iran-Iraq war and the damages inflicted on the refining sector and a variety of important projects in that era. He also provides insights from the point of his joining OPEC, where he served as Director of Energy Studies from May 1986 until his return to Iraq in July 1994. On 21 April 2002 al-Fathi retired, facing the emotions attendant to saying goodbye to his active leadership in the sector and a great many friends, colleagues and staff following some thirty-nine years.

As a testimony to the value of Fathi's book, it has, in addition to the author's introduction, three forwards written by well-known and respected oil professionals: Mishall Hmudat, Issam al-Challabi and Dr. Falih al-Khyat. Though I fully concur with what Mishall Hmudat wrote in his forward to the book, where he argued that al-Fathi's work was 'more historical than analytical' as a study, I am nevertheless of the opinion that the book provides a good reading of the development of the downstream sector in Iraq as well as a significant amount of inside information rarely accessible to the public.

While clearly joining this long line of predecessors, Issam Al-Chalabi's recently published 50 Years in the World of Oil: memoirs and autobiography (2019) is in a class of its own for many reasons. Al-Chalabi is a well-known and respected oil professional with more than twenty years in leadership positions within Iraq's petroleum sector. From the then powerful 'Follow-up Committee for Oil Affairs and Agreements Implementation' until he was removed from the post of Minister at 47 years of age, al-Chalabi has established himself as a sage voice, one who faced retirement with much still left to offer his country.

50 Years in the World of Oil provides interesting insights and inside information, allowing the reader to see how important issues were debated and decided upon by the top political circle under the Ba'ath regime of Saddam Hussein. A wealth of data, information and documents that add value to the narratives of the book are provided in support of al-Chalabi's writing. In this way, the book is unique in its coverage, constituting a valuable addition to the library of the Iraqi petroleum sector and a must-read reference on the development of the sector during this period of Iraqi history.

My relationship with Issam began in 1981 and went through three different phases: the first was a brief 'boss-staffer' relationship when he became INOC Deputy President in July 1981 while I was with INOC's Economic Studies of the Reservoirs and Field Development. That short period witnessed the beginning of INOC downsizing with the abolishment of the Economic Studies department; I was thereafter transferred to INOC's Economic Advisor Bureau, before in January 1982, transferring to the Council of Ministers- External Economic Relations Committee (EERC), which inherited and replaced the 'Follow-up Committee'.

The second phase of our relationship lasted between January 1982 and July 1988, when I left Iraq for the United States on a Fulbright-Fletcher visiting scholarship. During that phase, I was representing EERC on teams for many major oil projects, such as the second expansion of the Iraq-Turkey Pipeline, the second phase of Iraq's pipeline across Saudi Arabia (IPSA2), and the lubricant plant in Baiji's refining complex among other projects executed by the State Company for Oil Projects (SCOP). He and I also participated, through official delegations, in many bilateral economic cooperation committee meetings with representatives from Italy, France, the former Yugoslavia as well as the former Soviet Union, often focussing on project financing and debt rescheduling.

The third phase began while when we both joined the Iraqi diaspora, with Issam residing in Amman, Jordan while I settled in Norway. During this third phase our cooperation and contacts came to be focused on addressing various aspects of Iraq's petroleum sector. We have met on many occasions, joined coordinated efforts on specific issues such as INOC law, oil and gas law, bid rounds among others as Iraq transitioned from the Ba'th regime to a post-Saddam state apparatus. Hence, reading 50 Years in the World of Oil brought back vivid memories, both good and bad, pleasant and sad, of what the petroleum sector and those who worked in it, had gone through.[ii]

It is rather difficult to review books comprised of autobiography and personal testimonies as they usually represent views on and accounts of events from the perspective of the witness over their long professional life. The difficulty becomes more acute, particularly when such views are about who said or did what, why and under what circumstances. There is a problem of verification, especially in the absence of formal records, as such events occurred inside the corridors of power under a ruthless dictatorial régime. Challabi has highlighted these difficulties well, successfully providing explanations and whatever available materials he can to document the course of events, he nonetheless has had to rely primarily on his memory, as he notes in the book. Since this important book is written in Arabic and faces limited circulation for purchase outside bookshops in Jordan and Lebanon, it becomes necessary to provide here a brief overview of the book's structure and its contents for the reader of this journal prior to providing a few analytical remarks.

Structurally, 50 Years in the World of Oil comprises introductory items, eighteen chapters, a final word, as well as annexes and lists of references in both Arabic and English. Moreover, there are tables, maps, illustrative figures, copies of 'official communications and orders', texts of relevant laws, newspaper clippings and scanned copies of articles, formal statements and many photos. The brief introduction expresses the author's attempt to write the book as early as the end of 1990, when it was blocked from publication for not receiving an authorization from the 'Presidency Office' (Chalabi 11). When Chalabi followed-up on his request, he received clear warning and an implicit threat, 'It is better for him to forget the matter' (Chalabi 582)!!  That probably explains, and justifiably so, why the book was not published until some twenty-eight years later. This is why, in April 2018, the author decided to return to the writing of the book, depending on his memory and by reviewing what was available at his disposal of various materials. 50 Years in the World of Oil was completed by the end of 2018 and published in Arabic in early 2019. The book's size and inclusion of such detailed content as well as documents belies this short period and indicates the work Chalabi had completed decades earlier.

The first chapter covers two topics: the historical development of the discovery of petroleum from as far in the past as Iraq's antiquity, through the colonial competition to control Iraqi oil, before Chalabi turns to a thorough examination of the development of modern Iraq's oil reserves (Chalabi 19-98). Chalabi provides a comparative context alongside this examination, noting contemporaneous developments in the region and internationally. The annex to the chapter provides data on drilling activities and their cost from 1927 to 1987; exploration activities across 1947-1960 and then 1971-1989; and major fields discovered between 1968 and 1988, including year of discovery, name and numbers of the 'main reservoirs' in each field. This is very useful information aiming, obviously, to help provide comparison between the two eras: the foreign oil companies' concession era and that of INOC. In chapter two, Chalabi addresses pipeline networks and the politics surrounding their development and construction (Chalabi 99-170). Again, he provides a brief history of Iraq's pipelines since the discovery of oil in Kirkuk in 1927, with considerable detail of Iraq's attempts - as a semi-landlocked country - to diversify oil export outlets since the early 1980s. He provides details and inside information on various pipeline projects, the politics behind them, details of their execution, negotiations and bilateral agreements with the concerned transit countries, options that were under considerations and many more related matters.

It was of interest to know that Iraq considered a pipeline through the Arabian Gulf to the shores of Oman, though financial cost and geopolitical considerations discounted this option (Chalabi 118).[iii] At the end of the chapter the author endorsed the Iraqi-Jordanian pipeline that has been stranded since the mid-1980s, proposing for its capacity to be increased to 2mbd. However, he did not present a calculated economic argument in support of his call.

Oil production and export development are covered in chapter three (Chalabi 173-221). Here, Chalabi asserts that oil production increased from 1.5mbd in 1968 to 3.4mbd in July 1990. From what was contained within this chapter, these achievements could be attributed to three interrelated factors: oil nationalization, INOC's effects and national efforts - or direct investment with specified cooperation with non-concession International Oil Companies (IOCs). Moreover, the ministry presented a seven-point plan to reach production capacity of 6mbd by 1995 (Chalabi 186-193). Interesting to note a risky January 1990 personal encounter between the author and Sadam Hussain occurred, resulting in the Iraqi dictator telling Chalabi of his demand to increase Iraqi production capacity to 10 million barrel daily-mbd (Chalabi 180) and how he, the Minister, sailed through that awkward situation rather safely!! That being said, Chalabi did not name this small and supposedly not well-known oil company, information that would have been of invaluable benefit to his reader. In particular, this would impact our perception had the chairman he names stood behind the idea of 10mbd as well as whether that same company remained active in 2018 during the fifth bid round (Chalabi 184). Chalabi devotes enough space to address, with some repetition, the relationship between Iraq and IOCs at different phases over the 1921-2018 period, focusing in particular on the post-2003 period and the five bid rounds (Chalabi 225-266).

INOC has an important and special status in the history of Iraqi petroleum development, as well as the country's economy and politics, particularly due to its role and achievements since its formal establishment in 1964. In 50 Years in the World of Oil the author addressed INOC over this long history and in the fifth chapter he provides narratives regarding the demise of INOC beginning in 1987. As early as Saddam Hussain's 6 April 1987 visit to the Ministry of Oil, only a few short days after al-Chalabi's ascendance to the helm of the Ministry, the Iraqi dictator asserted the idea of abolishing INOC. Then, in yet another risky encounter with Saddam, Chalabi proposed the 'merger' of INOC within the structure of the Ministry rather than seeing it abolished altogether. This compromise was accepted (Chalabi 275). A more detailed examination of the merger is illustrated in chapter six (Chalabi 303-333). What should be mentioned at this juncture is that 'Decision 267' of 26 April 1987 asserts that the 'Merger of INOC Headquarters' (Article first-1) refers to the 'abolished' INCO (Article third-1).[iv] This creates the appearance of a case of legal ambiguity that could be interpreted in many different ways with contrasting implications. Surprisingly, the INOC chapter in the book makes no reference to the appeal before the Federal High Court against reinstating INOC by Law nr. 4 of 2018 (Chalabi 269-299), though al-Chalabi is certainly one of the strong supporters of that appeal.[v] Moreover, the chapter seventeen which examines the post-Ba'th regime period and development of the new Oil and Gas Law, does not address INOC either, though it occupies significant space in that law. The chapter on the Kurdistan Regional Government's (KRG) approach and efforts in the oil sector is rather brief, though it provides data on the main producing fields, production, reserves and involved IOCs through production sharing contracts (Chalabi 337-352). However, I believe the chapter requires updating as the landscape in 2018 is rather different from a decade ago when this chapter was penned, with newcomers replacing many departing actors with early hopes and ambitions un-realised.

Chalabi had an important role in Iraq's external petroleum and economic relationship through OPEC (examined in chapter 8) as well as on the bilateral level with many countries, which he details through specific chapters: Kuwait (chapter 10), Iran (chapter 11) and with Jordan, Syria, Turkey, Yemen, Indonesia and the United States (chapter 12). In these chapters, Chalabi reveals some important information, provides considered remarks and notes events and meetings he experienced during his ministerial term, particularly prior to the invasion of Kuwait on 2 August 1990. Matters relating to the petroleum processing industry, mainly associated gas utilization and the refining sub-sector, were addressed in chapters 9 and 15 respectively. Due to executing many projects, notably the north and south gas projects and their related operations, Iraq utilized more than ninety-five per cent of the associated gas prior to the devastating invasion of Kuwait (Chalabi 394). Similarly, refining capacity increased gradually, though fifty per cent of total refined products was fuel oil and due to misalignment between supply and demand, Iraq was compelled to import petroleum product to the tune of $35.6 billion during the period between 2003 and the end of 2016 (Chalabi 598).

The author provides data and an estimation of oil production, exports and earnings from 1927 through 2018 in chapter 16. The remaining chapters (13, 14 and 18) saw Chalabi assess his own performance and achievements, while also addressing personal matters. The most painful part must have been what was discussed in chapter 14, where he was admitted to the hospital for treatment arising from exhaustion. In spite of his health, he was directed to attend a 29 October 1990 meeting chaired by Saddam Hussain, following which he was dismissed as minister at the age of forty-seven (Chalabi 562-566). 50 Years in the World of Oil description of that meeting, which Chalabi characterized as a 'trial', conveys that he believes he was unjustifiably dismissed, with the narrative provided reading as a dramatic plot between others looking to usurp his ministerial authority. Such a reading is buttressed by the unfair treatment he received following his dismissal, leading to his decision to depart Iraq. In looking back, one might suggest that he was lucky to leave alive.

This excellent comprehensive work was, as mentioned earlier, completed in a rather short period, relying primarily on the memory of the author. Considering the length of the period covered, the volume of writing provided, as well as the personal and policy details and data provided, 50 Years in the World of Oil is bound to have some shortcomings regarding methodology, format and style as well as Chalabi's personal perspective on substantive matters that other participants may have seen differently. There are a number of errors included in the printed version, including some names and dates need rechecking. The tables of data included would be more useful if they had uniform descriptive titles, units of measurement and followed a unified format and most of the scanned copies are rather difficult, if not impossible, to read. Moreover, referencing should be made consistent with the included bibliography and be as comprehensive as possible in the information provided. Finally, the sequence of the chapters could be redone to reflect a more logical flow of issues examined.

On substantive matters there are a small number of inaccuracies (see especially 238 and 265) that need checking, updating and correction; a degree of selectivity in coverage (especially regarding the INOC 'merger' and information on the ill-fated proposal of 1964/65 to establish a 'Baghdad Oil Company' (Chalabi 270-71 and 304); a very questionable comparison with implicit similarity and effects that the author tried to draw regarding 'reserves depletion' that resulted from production sharing agreements by the U.S.-based Hunt oil company in Yemen where the author surmises that a similar outcome will befall the service contracts of the Iraqi bid rounds in southern Iraq (Chalabi 518)!

All the above remarks are easy to address if and when the author decides to produce a second edition of the book.

Chalabi has, undoubtedly, made a serious and worthy contribution to the study of the Iraqi petroleum sector and the policy process by authoring this impressive book. It is enjoyable to read, rich in data, documents and information and, surely, serves as an excellent reference on an extraordinary era in the history of the petroleum sector as well as that of modern Iraq.



Allibi J. (2010) (Standing in the Storm: the challenges of difficult times). Damascus: Alsarraj for Modern Printing.

Anaz G. (2012) Iraq's Oil and Gas Industries in the 20th Century. Nottingham, U.K.: Nottingham University Press.

Al-Chalabi I. (2019) (50 Years in the World of Oil - Memoirs and autobiography), Beirut: Arab Establishment for Studies and Publications. ISBN:  978-614-419-945-(HC);

Al-Fathi S. (2014) (From the Refining Tower: More than memoirs, less than history). Amman: Dar Al-Ayam for Publishing and Distribution.

Ismael A. (1989) Oil Negotiations 1952-1968). London: Dar Allam.


[i] See: Ahmed Mousa Jiyad. (2011) 'Global, national and local perspectives on Iraqi oil', in International Journal of Contemporary Iraqi Studies, 5 (1), p 152-159. The moderately favourable impression the book left of Allibi and his policy recommendations were quickly swept away due to the failure of his subsequent policies, destructive practices as well as significant question with regard his personal integrity during his term 2016-2018 term as Iraq's Minister of Oil.

[ii] I am very grateful to Issam for sending me a copy of his book and for the Journal of Contemporary Iraq & the Arab World for accepting my suggestion for it to be reviewed. My sincere thanks go also to Tariq Shafiq, who brought the book from Amman to London before posting it to me,  for his invaluable and refreshing information as well as providing some pages from the Ismael and Anaz books referred to above.

I am deeply thankful to both Professor Tareq Ismael for his invaluable suggestions and comments on this review article and to the editorial assistant for excellent editing of the text.

[iii] An Iraqi oil professional, Hamza Al-Jawahiri, circulated his article a couple years ago claiming similar route as his new idea!!

[iv] Decision 267 became effective upon its publication within the official Gazette, Al-Waqaee Al-Iraqiya الوقائع العراقية, nr. 3149, 5 November 1987.

[v] See the memo by Iraqi oil experts in support of the appeal against INOC law posted on 2 June 2018, accessed 8 March 2019.


*A slightly revised version of this Book Review Article was published on the Journal of Contemporary Iraq & the Arab World, Volume 13 Number 2 & 3, pp. 289-294, Intellect Limited,


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), Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.