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SOMO warns Int’l Companies not to buy Oil from KRG

By John Lee.

Iraq’s State Oil Marketing Organization (SOMO) has announced that it had taken “marketing measures” and informed all international companies not to buy crude oil from the Kurdistan Region of Iraq (KRI).

SOMO Director, Alaa Al-Yasiri, also told the state-run Iraqi News Agency (INA):

“The Federal Court issued a decision stipulating the invalidity of all contracts concluded by the Kurdistan Regional Government regarding the extraction and export of crude oil.

“The regional government sells oil at lower prices than the central government, and according to news published by Reuters, the region sells oil at discounts ranging from 16-20 dollars per barrel, despite the fact that the sale takes place in the same region and with the same quality of oil.”

He added that the KRG exported around 420,000 barrels per day last year, decreasing to about 355,000 bpd this year.

(Source: INA)

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KRG launches new Tendering Process for Medicines

By John Lee.

The Kurdistan Regional Government (KRG) has announced a new tendering process for medicines.

According to a statement from the KRG, the new system will stabilise the price of 230 different medications.

KRG Prime Minister Masrour Barzani commented:

“Through transparent contracts, we will provide our citizens with better quality medicine at a lower cost to the KRG.”

More here and here.

(Source: KRG)

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US Consul says Existing KRG Oil Contracts must be respected

By John Lee.

The US’s newly-appointed Consul General in Erbil has said that existing contracts between international oil companies (IOCs) and the Kurdistan Regional Government (KRG) must be respected.

Consul Irvin Hicks Jr. made the comment following a meeting with the KRG’s Minister of Natural Resources, Kamal Muhammed Salih, on Wednesday.

In a statement issued on the consulate’s Facebook page, the Consul said:

“We support the KRG’s dialogue with the Government of Iraq on hydrocarbons and agree existing oil contracts must be respected.”

Baghdad has challenged the legitimacy of the KRG’s oil contracts.

(Source: US Consulate in Erbil)

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KRG Condemns SOMO Threats to Buyers of Kurdish Crude Oil

From the Kurdistan Regional Government:

The Kurdistan Regional Government strongly condemns the letter issued on 23 August 2022, by Iraq’s State Oil Marketing Organization (SOMO) that threatens legal action against buyers and traders of crude oil produced in the Kurdistan Region.

SOMO’s letter is nothing more than another drip in a stream of disinformation published by federally-owned state organisation as part of a political fight, a fight which sadly includes an attempt by certain parties in Baghdad to undermine the Federal Constitution of Iraq. The letter is also intended to undermine the continuing good-faith dialogue between the Kurdistan Regional Government and the Federal Government. That dialogue seeks to agree on a plan for the future management of Iraq’s energy resources and revenues in line with the Federal Constitution.

SOMO’s letter relies on a politically motivated opinion by a panel of lawyers pretending to be the “Federal Supreme Court of Iraq”.

But there is no Federal Supreme Court and there is no binding decision. This is because the Federal Supreme Court has not yet been formed in accordance with the Federal Constitution. The panel in Baghdad therefore is not the Federal Superme Court and the opinions of the panel of pretenders carry no legal weight in Iraq or elsewhere. To suggest otherwise, as SOMO and others in Baghdad do, is to further a deception. It is a deception that undermines the Federal Constitution and threatens the republic. This political assault on the Federal Constitution is motivated by a desire to return Iraq to the centralisation of unconstrained power from a horrific past era.

Article 92(2) of the Constitution requires that the Iraqi Council of Representatives enact a law – by a two-thirds majority – to determine the workings of the Federal Supreme Court. No such law has been enacted. Iraq therefore does not have a constitutionally established Federal Supreme Court. The panel of lawyers that issued the 15 February 2022 opinion has no constitutional authority to do so.

The Kurdistan Regional Government has neither acquiesced nor stood aside. On 15 February 2022, the day of the so-called Federal Supreme Court decision, the Government issued a statement describing the decision as unjust, unconstitutional, and illegitimate.

On 28 February 2022, a joint statement was issued from Kurdistan Region Presidency, from the Kurdistan Region Parliament, and from the Judicial Council of the Kurdistan Region of Iraq. The statement was supported by KRG’s Prime Minister. The statement described the so-called Federal Supreme Court decision as unconstitutional and called for the establishment of a legitimate Federal Supreme Court in accordance with Article 92 of the Constitution. Similar statements followed in March.

On 4 June 2022, the Judicial Council of the Kurdistan Region of Iraq issued a further statement setting out that Iraq does not have a constitutionally established Federal Supreme Court, that the body that issued the 15 February 2022 decision had no authority to do so, that the management of all of the oil and gas fields of the Kurdistan Region fell within the exclusive jurisdiction of the Government, and that Kurdistan Oil and Gas Law was fully in accordance with the provisions of the Federal Constitution. The Judicial Council is an independent body made up of leading jurists in the Kurdistan Region.

On 5 June 2022, the Kurdistan Regional Government started proceedings before the courts of the Kurdistan Region against Federal Minister of Oil. It seeks a comprehensive declaration of the constitutionality of the Kurdistan Oil and Gas Law and related matters and of the illegitimacy of opinion of the panel pretending to be the Federal Supreme Court.

Neither SOMO nor any other spokesman in Baghdad has even attempted to justify the legitimacy of the so called Federal Supreme Court. This is because the Federal Supreme Court is obviously illegitimate. This inconvenience is understood in Iraq, but perhaps less understood outside of Iraq. Given the fatal weaknesses in Baghdad’s institutions, and the fatal weakness in Baghdad’s arguments, Baghdad’s strategy is to fabricate a story to create market uncertainty outside of Iraq in respect of the Kurdistan Region. The statements and threats from Baghdad should be understood as such and should be dismissed. The truth is found clearly and unequivocally in the Federal Constitution and the hope of the Iraqi people that Iraq remains a truly federal republic.
The rights of the Kurdistan Region to develop and produce hydrocarbon resources within the boundaries of the Region continues as provided by the Federal Constitution and Kurdistan law. Oil produced in the Kurdistan Region continues to be produced, to be shipped, to be sold, to be refined, and to be consumed. Investment interest remains and production is expected to increase.

The Kurdistan Regional Government remains fully committed to the process of mediation and dialogue to resolve outstanding differences with the Federal Government on the management of oil and gas in Iraq. Those differences, like any other differences of opinion, must be resolved in accordance with the Federal Constitution and the constitutional rights of the people of the Kurdistan Region and all of Iraq. Until that time, the Kurdistan Regional Government will continue to take vigorous steps to defend those rights.

(Source: KRG)

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Three Contractors “Quit” Khor Mor Field

By John Lee.

Three companies have reportedly stopped operations at Kurdistan’s Khor Mor gas field following rocket attacks.

According to Reuters, the companies are Texas-based Exterran, and Turkish subcontractors Havatek and Biltek.

The field is operated by Pearl Petroleum, a consortium led by UAE-based Dana Gas and Crescent Petroleum.

More here.

(Source: Reuters)

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Will Oil Dispute with Baghdad shift Dynamics in Kurdistan?

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Will oil dispute with Baghdad shift dynamics within Iraqi Kurdistan?

In Iraq, the federal government and the authorities in the Kurdistan region are locked in a serious and multipronged dispute over the country’s oil and natural gas resources.

The drama is playing out both in the courtroom and via attacks on sites associated with the energy industry.

The full report can be viewed here (registration required).

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DNO Raises Kurdistan Output Forecast

DNO ASA, the Norwegian oil and gas operator, today reported strong second quarter operational and financial results powered by high oil and gas prices and by solid production in its operated flagship Kurdistan Tawke license.

Spurred by quarterly revenue of USD 361 million and free cash flow of USD 167 million, the Company reduced debt and exited the quarter in a positive net cash position for the first time since 2018.

“DNO is committed to put its capital to work in its core competency and capture new opportunities created as peers and even some of the largest European companies scale back spending and focus instead on harvesting,” said Executive Chairman Bijan Mossavar-Rahmani. “We believe in the oil and gas business and in our responsibility to all stakeholders, including host governments who want to capitalize on current prices and consumers who now call for more production, not less,” he added.

Operational cash flow totaled USD 341 million, including USD 50 million towards arrears built up by Kurdistan from non-payment of certain 2019 and 2020 Tawke invoices. These arrears, which stood at USD 259 million at yearend 2020, were reduced to USD 87 million as of 30 June 2022, excluding interest.

The Company’s operational spend in the second quarter totaled USD 198 million in line with the USD 800 million projection for the year. During the quarter, operational spend of USD 81 million in Kurdistan was divided between the Tawke license (USD 66 million) and the Baeshiqa license (USD 15 million); operational spend in the North Sea stood at USD 117 million.

Operating profit dropped to USD 81 million from USD 236 million in the previous quarter due to asset impairments of USD 127 million primarily related to the Ula area in the North Sea and expensed exploration of USD 48 million.

The Company reduced its interest-bearing debt through a USD 200 million bond redemption and exited the quarter with cash deposits of USD 801 million. With USD 671 million in bond and reserves-based lending debt, net cash stood at USD 129 million.

Gross production at the Tawke license averaged 106,900 barrels of oil per day (bopd) during the second quarter, of which Peshkabir contributed 62,300 bopd and Tawke 44,600 bopd, the latter representing the first quarterly production increase since 2015 at this legacy field as new wells are drilled, workovers conducted on existing ones and gas injection continued.

Of total Kurdistan production, 80,400 bopd were net to DNO’s interest. North Sea net production averaged 11,600 barrels of oil equivalent per day (boepd), bringing the Company’s total quarterly net production to 92,000 boepd.

In the second quarter, four new production wells were brought onstream in the Tawke license with three at Tawke and one at Peshkabir. Together with wells drilled in the first quarter, natural field decline has been arrested and reversed, including at Tawke, raising the Company’s full-year projection to 107,000-109,000 bopd.

Following government approvals, DNO commenced trucking of production in mid-June from the Zartik-1 discovery well in the operated Baeshiqa license for export at an average rate of 600 bopd. Production from the well has been choked back as the Company targets zones with lower gas-to-oil ratios to avoid flaring. Development of the license continues with the drilling of Zartik-2 and Zartik-3, to be followed by Baeshiqa-3 in the fourth quarter.

In the North Sea, operated Brasse field development progressed into front end engineering and design ahead of planned project sanction by yearend 2022. The Company remains an active North Sea explorer with three more exploration wells to be drilled this year in addition to the four already drilled in the first half of 2022, one of which, Kveikje (DNO 29 percent), is considered a likely commercial discovery, as previously reported.

Key figures

Q2 2022 Q1 2022 Full Year 2021
Gross operated production (boepd) 107,178 106,465       108,713
Net production (boepd)    91,937    92,548         94,477
Revenues (USD million)       361        339          1,004
Operating profit/-loss (USD million)         81        236             321
Net profit/-loss (USD million)         72        140             204
Free cash flow (USD million)       167        152             362
Net debt (USD million)      -129          27             153

(Source: DNO)

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Dana Gas: “Strong Operational and Financial Performance”

Dana Gas PJSC has announced its financial results for the half year ended 30 June 2022.

In the first six months of the year, the Company generated a net profit of AED 407 million ($111mm) or 5.8 fils per share, an 82% increase compared to an adjusted net profit (excluding reversal of impairment) of AED 225 million ($61mm) in H 1 2021.

The gains in Dana Gas’s profitability in the first half were driven by elevated hydrocarbon prices, the Company’s continued commitment to maintaining a low-cost base and strong operational performance in the Kurdistan Region of Iraq (KRI).

The Company’s revenue for the first six months of the year increased 31% to AED 1,041 million ($284mm) as compared to AED 792 million ($216mm) in H1 2021 and its operating costs dropped 16%. The Company’s realized prices during the first half of the year averaged $87/bbl for condensate and $44/boe for LPG compared to $48/bbl and $32/boe respectively in H1 2021.

Despite the challenging security situation, the Company’s current operations in the KRI have continued uninterrupted. Production from the KRI increased 1% in the first half and the KM250 expansion project has progressed well. During the first half, drilling of the project’s first development well was completed, and drilling operations for the second well are currently in progress. Whilst EPC construction work on KM 250 was suspended in June amid heightened security concerns, the Company is working with the authorities to address security concerns and to resume construction.

Given the strong operational and financial performance the Board expects to maintain its semi-annual dividend payment in keeping with the Company’s dividend policy.   The interim dividend will be decided by the Board at its meeting in September.

Dr Patrick Allman-Ward (pictured), CEO of Dana Gas, commented:

“Dana Gas delivered strong half year results, supported by our robust operational performance, low cost base and favourable energy market conditions. Despite an increased uncertainty around the global economy amid high inflation, the outlook for the remainder of 2022 is still encouraging with both energy prices and demand remaining high.”

Operations & Production

The Group’s overall production in H1 2022 was  61,100 boepd, a 5% reduction from 64,000 boepd in H1 2021. This was due to a 9% production drop in Egypt mainly as a result of natural field decline. Production output in the KRI increased by 1%, with production averaging 34,500 boepd in H1 2022 versus 34,300 in H1 2021.

Operations have continued as normal during the period. Heightened uncertainty in the region and subsequent precautionary security measures have impacted the Khor Mor expansion project. As a result, the KM250 project remains on temporary suspension. The Company and its partners are working closely with the KRG to address all concerns and all parties remain committed to implementing the expansion project and resume construction activities as soon as possible.

Liquidity and Collections

The Company’s cash position at the end of H1 2022 stands AED 759 million ($207mm) including AED 436 million ($119mm) held at the Pearl level.

The Group collected a total of AED 660 million ($180 mm) during the H1 2022, with the KRI and Egypt contributing AED 495 million ($135mm) and AED 165 million ($45mm) respectively.

(Source: Dana Gas)

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