Genel Energy outlines Payments to Govts for 2021

By John Lee.

Genel Energy has just published details of its payments to governments for the year 2021:

Introduction and basis for preparation

This report sets out details of the payments made to governments by Genel Energy plc and its subsidiary undertakings ('Genel') for the year ended 31 December 2021 as required under the Disclosure and Transparency Rules of the UK Financial Conduct Authority (the 'DTRs') and in accordance with our interpretation of the Industry Guidance issued for the UK's Report on Payments to Governments Regulations 2014, as amended in December 2015 ('the Regulations'). The DTRs require companies in the UK and operating in the extractives sector to publically disclose payments made to governments in the countries where they undertake exploration, prospection, development and extraction of oil and natural gas deposits or other materials.

Governments

All of the payments made in relation to licences in the Kurdistan Region of Iraq ('KRI') have been made to the Ministry of Natural Resources of the Kurdistan Regional Government ('KRG').

Production entitlements

Production entitlements are the host government's share of production during the reporting period from projects operated by Genel. Production entitlements from projects that are not operated by Genel are not covered by this report. The figures reported have been produced on an entitlement basis rather than on a liftings basis. Production entitlements are paid in-kind and the monetary value disclosed is derived from management's calculation of revenue from the field.

Royalties

Royalties represent royalties paid in-kind to governments during the year for the extraction of oil. The terms of the Royalties are described within our Production Sharing Contracts and can vary from project to project. Royalties have been calculated on the same barrels of oil equivalent basis as production entitlements.

Materiality threshold

Total payments below £86,000 made to a government are excluded from this report as permitted under the Regulations.

Payments to governments - 2021

Country/Licence KRI Total (1) Taq Taq (2)
Production entitlement (bbls) 1,234,564.87 1,234,564.87
Royalties in kind (bbls) 216,930.95 216,930.95
Total (bbls) 1,451,495.82 1,451,495.82
Value of production entitlements ($ million) 78.52 78.52
Value of royalties ($ million) 13.74 13.74
Capacity building payments ($ million) (3) 1.25 1.25
Total ($ million) 93.51 93.51
  1. Under the lifting arrangements implemented by the KRG, the KRG takes title to crude at the wellhead and then transports it to Ceyhan in Turkey by pipeline. The crude is then sold by the KRG into the international market. All proceeds of sale are received by or on behalf of the KRG, out of which the KRG then makes payment for cost and profit oil in accordance with the PSC to Genel, in exchange for the crude delivered to the KRG. Under these arrangements, payments are in fact made by or on behalf of the KRG to Genel, rather than by Genel to the KRG. For the purposes of the reporting requirements under the Regulations however, we are required to characterise the value of the KRG's entitlement under the PSC (for which they receive payment directly from the market) as a payment made to the KRG. Therefore, estimated value in $millions is not paid to the KRG, and is calculated to meeting the reporting requirements under the regulations
  2. The amount reported for Taq Taq, is the gross payment made to the KRI by the operating company (TTOPCO), Genel's share of these payments is equal to 55% (with the exception of capacity building payments)
  3. Capacity building payments reported are payments made by Genel directly to the KRI in cash as required by the PSC.

(Source: Genel Energy)

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GKP Revenues Triple

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) closed up nearly 13 percent on Wednesday after the company announced that revenue for 2021 had almost tripled.

In its results for the full year ended 31 December 2021, Jon Harris, Gulf Keystone's Chief Executive Officer, said:

"I am pleased to report a year of strong operational and financial delivery in 2021. With a 19% increase in gross average production to 43,440 bopd, our leverage to the recovery in oil prices and continued cost and capital discipline, we generated substantial revenue and free cash flow.

"We continued to deliver on our strategy of balancing investment in sustainable growth and shareholder returns, as we resumed drilling activities and submitted a draft Field Development Plan to the Ministry of Natural Resources while also returning $100 million of dividends to our shareholders in 2021. Following the $50 million dividend that we paid in February 2022, we are pleased to announce today the declaration of an additional $90 million of dividends. This brings aggregate shareholder distributions declared since 2019 to $340 million.

"Looking ahead to the remainder of 2022, we remain focused on delivering gross annual production of 44,000-50,000 bopd by bringing SH-15 online in Q2 2022 and optimising production with well interventions and workovers. While constructive engagement continues with the MNR on the FDP, timing of approval remains uncertain and further progress is required before we fully execute FDP activity.

"Following my first year as GKP's CEO, I would like to personally thank the Company's teams in Kurdistan and the UK for all of their efforts. We are in a strong position and I am excited about safely delivering the significant growth potential of the Shaikan Field to drive sustainable value for all of our stakeholders."

Highlights to 31 December 2021 and post reporting period

Operational

  • Continued strong focus on safety in 2021 despite one previously reported lost time incident ("LTI"); currently no LTIs recorded for  over 160 days  
  • Third consecutive year of production growth with 2021 gross average production of 43,440 bopd, towards the upper end of our tightened guidance range of 42,000-44,000 bopd and a 19% increase versus 2020
  • 2022 YTD gross average production of c.45,500 bopd, following milestone achievement in February 2022 of 100 MMstb cumulative production since inception
  • Successfully restarted drilling activities in June, resulting in two new wells, SH-13 and SH-14, coming online towards the end of the year
  • After acid stimulations, current SH-13 production in line with expectations while we continue to explore options to further increase SH-14 production
  • Following the early appearance of trace quantities of water, SH-12 is currently shut-in while we investigate near-term production options ahead of installation of planned water handling facilities  
  • Spudded SH-15, which is currently being hooked up ahead of targeted start-up in Q2 2022

Draft Shaikan Field Development Plan ("FDP")

  • Submitted draft FDP to Ministry of Natural Resources in November 2021 comprising plan to increase Phase 1 gross production plateau to between 85,000-95,000 bopd while eliminating routine flaring and significantly reducing carbon intensity
  • While final timing of approval remains uncertain due to the complexity of the project, we are providing today an interim update on progress to date on Phase 1 of the draft FDP. As we continue to review opportunities to further optimise the project, final details and cost estimates may vary and we expect to provide an update upon FDP approval
  • Expected components of Phase 1 of draft FDP:
    • Expand Jurassic gross production plateau up to 85,000 bopd
    • Test Triassic reservoir, targeting gross production plateau of up to 10,000 bopd
    • Concurrently, execute Gas Management Plan to eliminate routine flaring through gas reinjection, underpinning target of more than halving scope 1 and 2 emissions per barrel by 2025
  • From FDP approval, expected duration of Phase 1 Jurassic and Triassic projects is 36 to 42 months and the Gas Management Plan is 18 to 24 months
  • Total Phase 1 gross Capex currently estimated to be $800-$925 million, up c.$160 million from previous FDP with the objective of increasing production towards 95,000 bopd through project optimisations

Financial

  • Strong free cash flow generation of $122.2 million (2020: $(22.9) million)
  • Total dividends of $100 million paid in 2021, including a 2020 annual dividend of $25 million, a special dividend of $25 million and an interim dividend for 2021 of $50 million. An additional $50 million interim dividend was paid to shareholders in February 2022
  • Revenue almost tripled to $301.4 million (2020: $108.4 million), contributing to a return to profit after tax of $164.6 million (2020: $47.3 million loss)
  • Adjusted EBITDA increased by almost four times to $222.7 million (2020: $56.7 million) driven by higher gross production, leverage to the recovery in oil prices and the Company's continued strict control of costs:
    • Gross average production increased 19% to 43,440 bopd (2020: 36,625 bopd)
    • Realised price more than doubled to $49.7/bbl (2020: $20.9/bbl)
    • Gross Opex per barrel of $2.7/bbl (2020: $2.6/bbl), in line with 2021 guidance of $2.5-$2.9/bbl
  • Revenue receipts of $221.7 million in 2021 from the KRG for crude oil sales related to the December 2020 to August 2021 invoices and partial repayment of arrears related to the outstanding November 2019 to February 2020 invoices
  • Since the beginning of 2022, the Company has received a further $106.4 million net to GKP for crude oil sales and arrears related to the September 2021 to November 2021 invoices. As at 29 March 2022, the outstanding arrears balance is $21.9 million net to GKP
  • Net Capex of $50.8 million (2020: $45.9 million), primarily related to the completion of the SH-13 and SH-14 wells and debottlenecking of PF-2
  • Robust cash balance of $182.7 million at 29 March 2022

Outlook

  • Remain focused on delivering 2022 gross average production of 44,000-50,000 bopd reflecting the anticipated production contribution from SH-15 and the benefits of well intervention and workover activities
  • 2022 net capital expenditure guidance of $85-$95 million:
    • Includes completion of SH-15 drilling, well interventions and workovers, and activity that enables us to expedite the FDP following approval 
    • With progress on the FDP, the Company expects to resume drilling and increase 2022 capital guidance
  • Gross Opex guidance of $2.9-$3.3/bbl, driven by increased operational activity and the continued catch up of previously scheduled work programmes deferred due to COVID-19
  • Today declaring $90 million of dividends, representing further delivery against GKP's strategic commitment of balancing investment in sustainable growth with shareholder returns:
    • $25 million final 2021 ordinary dividend subject to approval at AGM on 24 June 2022
    • $65 million interim dividend, expected to be paid on 13 May 2022, based on a record date of 29 April 2022 and ex-dividend date of 28 April 2022
    • The Company will disclose the US dollar and pounds sterling rate per share for both dividends prior to their ex-dividend dates
  • Assuming timely payment of invoices and continuing strong oil prices, we are expecting strong cash flow generation in 2022. This would provide flexibility to fund a potential increase in capital expenditure, with progress on the FDP, and the opportunity for further distributions to shareholders, while preserving adequate liquidity and maintaining a robust balance sheet

More here.

(Source: GKP)

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KRG “Remains Committed” to Oil and Gas Contracts

By John Lee.

The Prime Minister of the Kurdistan Regional Government (KRG) has assured the region's partners in the oil and gas sector that the KRG "remains committed" to the contracts that have been signed with energy companies.

Masrour Barzani told the Global Energy Forum 2022 that the contracts are "in line with our oil and gas law and the Iraqi Constitution and they are a bedrock of our shared future".

He added:

"The sanctity of the contracts are just as important to my government as they are to you ...

"Investors in Kurdistan have the right to receive regular payments. Ensuring this happens is a core focus of my cabinet, which will clearly help secure future investment. We value the investment and partnership of all the energy companies who are in Kurdistan - I know you have maintained commitment through the challenges ...

"We in Kurdistan have long sought mechanisms for the federal distribution of oil and gas revenues across all of Iraq. That's what the Constitution calls for, and the only practical way forward for both Baghdad and us."

His comments follow the recent Federal Supreme Court ruling that sales of oil and gas law by the KRG, independently of the central government in Baghdad, are unconstitutional.

Barzani described the ruling as "unconstitutional and blatantly political."

(Source: KRG)

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Genel Results: $400m Impairment, but Increased Divi

Genel Energy has announced its audited results for the year ended 31 December 2021.

Bill Higgs, Chief Executive of Genel, said:

"Our strategy and business model remain focused on cash generation. Prior to the invasion of Ukraine and the associated increase in the oil price, we were well positioned for our free cash flow to materially increase from $86 million in 2021 to around a quarter of a billion dollars this year. At the prevailing oil price, and given that there seems no quick resolution to the appalling events unfolding, this figure is expected to increase significantly.

"The forecast extent of our cash generation, from an existing position of financial strength, provides the potential to deliver significant growth and further returns to shareholders. Our priority is investment in production to maximise the value of our existing assets, and continuing to develop Sarta. Given the strong outlook and ongoing cash generation, we have increased our final dividend by 20%, continuing to fulfil our aim of paying a material and progressive dividend."

Results summary ($ million unless stated)

2021 2020
Average Brent oil price ($/bbl) 71 42
Production (bopd, working interest)  31,710  31,980
Revenue  334.9  159.7
EBITDAX1  275.1  114.6
  Depreciation and amortisation  (172.8)  (153.7)
  Exploration expense - (2.2)
  Impairment/write off of oil and gas assets (403.2) (286.3)
  Reversal of impairment / (impairment) of receivables 24.1 (36.9)
Operating loss (276.8) (364.5)
Cash flow from operating activities 228.1 129.4
Capital expenditure 163.7 109.7
Free cash flow2 85.9 (4.4)
Cash 313.7 354.5
Cash after settlement of bonds3 313.7 273.5
Total debt after settlement of bonds3 280.0 280.0
Net cash4 43.9 6.2
Basic LPS (¢ per share) (111.4) (152.0)
Underlying EPS / (LPS) (¢ per share)5 25.8 (34.2)
Dividends declared relating to financial year (¢ per share) 18 15
  1. EBITDAX is operating loss adjusted for the add back of depreciation and amortisation ($172.8 million), write-off of oil and gas assets ($403.2 million) and reversal of impairment on receivables ($24.1 million)
  2. Free cash flow is reconciled on page 12
  3. In December 2020, the Company gave notice to call the residual nominal $77.1 million of its 2022 bonds and thereby reduce its gross debt balance to $280.0 million. Under the terms of the bond settlement this took place on 8 January 2021 and reduced cash by $81.0 million
  4. Reported cash less IFRS debt (page 13)
  5. Underlying EPS / (LPS) is loss and total comprehensive income / (expense) adjusted for the add back of impairment / write-off of intangible assets, impairment of property, plant and equipment and reversal of impairment / (impairment) of receivables divided by weighted average number of ordinary shares

Highlights

  • Net production averaged 31,710 bopd in 2021 (2020: 31,980 bopd)
  • $281 million of cash proceeds were received from the KRG in 2021 (2020: $173 million)
  • Capital expenditure of $164 million (2020: $110 million), with c.$45 million spent at the Tawke PSC and c.$105 million at Sarta and Qara Dagh
  • Free cash flow of $86 million in 2021, pre dividend payments (2020: $4 million free cash outflow)
  • Following the termination of the Bina Bawi and Miran PSCs by Genel on 10 December 2021, there has been a required accounting write off of $403 million arising from derecognition of associated assets and liabilities. Genel has consequently taken steps to bring a claim for substantial compensation from the KRG at a private London seated international arbitration
  • Dividends paid in 2021 of 16¢ per share (2020: 15¢ per share), a total distribution of $44 million
  • Cash of $314 million at 31 December 2021, net cash of $44 million ($6 million at 31 December 2020)
  • Carbon intensity of 16 kgCO2e/bbl for scope 1 and 2 emissions in 2021, significantly below the global oil and gas industry average of 20 kgCO2e/boe

Outlook

  • Production guidance for 2022 maintained at around the same level as the 2021 average
    • Sarta-1D entered production on 8 March, at an initial rate of c.2,500 bopd
  • Genel expects free cash flow of over $250 million in 2022, pre dividend payments, at a Brent oil price of $90/bbl
    • An increase or decrease in Brent of $10/bbl impacts annual cash flow by c.$50 million
    • Cash flow in 2022 benefits from 10 Tawke override payments, with the last one set to be paid relating to July 2022 production
  • 2022 capital expenditure guidance maintained as between $140 million and $180 million
  • 2022 marks 20 years since Genel signed its first PSC in the KRI. We will be marking the year by increasing the scope of our social investments under the Genel20 banner, in line with UN Sustainable Development Goals
  • Due to Genel's robust financial position and confidence in the Company's future prospects, the Board is recommending a final dividend of 12¢ per share (2021: 10¢ per share), a distribution of $33.5 million. This would bring ordinary dividends declared for 2021 as part of our sustainable and progressive dividend programme to 18¢ per share (15¢ per share relating to 2020 financial year), a total distribution of $50 million
    • Should the current oil price strength persist, Genel will consider incremental returns of cash to shareholders in addition to our commitment to a material and progressive dividend

(Source: Genel Energy)

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In pursuit of Gas, will Turkey choose Erbil over Baghdad?

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

In pursuit of gas, will Turkey choose Erbil over Baghdad?

Iraq's federal supreme court last month ruled that a 2007 law allowing the Kurdistan Regional Government (KRG) to manage oil and natural gas resources independently of Baghdad is unconstitutional.

The top court also ordered Erbil to hand over all oil operations to the central government.

The Feb. 15 verdict followed a Feb. 2 meeting in Ankara between KRG President Nechirvan Barzani and Turkish President Recep Tayyip Erdogan.

Two days after the meeting, Erdogan said Turkey sought a "win-win" deal with Iraq's government to import gas, and that Barzani promised to facilitate negotiations towards this end.

The court ruling may now jeopardize the energy agreements signed between Ankara and the KRG.

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

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DNO Updates Oil Reserves

By John Lee.

DNO ASA, the Norwegian oil and gas operator, today announced it exited 2021 with 321 million barrels of oil equivalent (MMboe) of net proven and probable (2P) reserves, notwithstanding production of 34 MMboe during the year. The Company's 2P reserves life stood at 9.3 years. Combined with contingent (2C) resources of 189 MMboe, DNO's reserves and resources life stood at 14.8 years.

Of the total, the Company's Kurdistan portfolio accounted for 267 million barrels of oil (MMbbls) of net 2P reserves compared to 295 MMbbls in 2020, and 71 MMbbls of net 2C resources compared to 27 MMbbls at yearend 2020.

Across its North Sea portfolio at yearend 2021, DNO's net 2P reserves stood at 54 MMboe compared to 64 MMboe a year earlier. 2C resources totaled 113 MMboe compared to 120 MMboe at yearend 2020.

Effective from 2021, the Company reports its net production, reserves and resources based on the participation interest in all of its licenses. Prior to 2021 and for the licenses governed by Production Sharing Contracts, the Company reported its net figures after royalty and included DNO's additional share of cost oil covering its advances towards the government carried interest (if any) as well as volumes attributed to the three percent of gross Tawke license production under the August 2017 Receivables Settlement Agreement. The main reason for the change is to improve comparability with peer companies and to show the Company's share of production before the government take.

International petroleum consultants DeGolyer and MacNaughton carried out an independent assessment of the Tawke and Baeshiqa licenses in Kurdistan. Gaffney, Cline & Associates carried out an independent assessment of DNO's licenses in Norway and the United Kingdom.

Full report here.

(Source: DNO)

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Ahmed Mousa Jiyad: Nullification of KRG Oil Contracts

By Ahmed Mousa Jiyad.

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

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

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

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

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

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

What the Verdict Says

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

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

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

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

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

What Next

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

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

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

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

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

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

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

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

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

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

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

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

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

Views and Reactions

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

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

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

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

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

 

Final Remarks

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

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

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

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

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

Click here to download the full report in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq's Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

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The Death of Oil Federalism? Implications of Court Ruling

By Bilal Wahab for the Washington Institute for Near East Policy. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

The Death of Oil Federalism? Implications of a New Iraqi Court Ruling

The legal decision and its political fallout are threatening some of the country's key interests, including its aspirations toward federalism, its relations with Turkey, and its ability to attract sorely needed international investment.

Click here to read the full article.

The post The Death of Oil Federalism? Implications of Court Ruling first appeared on Iraq Business News.

Iraqi Court Rules Against KRG Sales of Oil and Gas

By John Lee.

Iraq's Federal Supreme Court has ruled that sales of oil and gas law by the Kurdistan Regional Government (KRG), independently of the central government in Baghdad, is unconstitutional.

In a statement on Tuesday, the court said that the Oil and Gas Law of the Kurdistan Regional Government, No. (22) of 2007, violated the provisions of Articles 110, 111, 112, 115, 121 and 130 of the Constitution of the Republic of Iraq (2005).

It added that the KRG must hand over all oil production to the federal government, represented by the Federal Ministry of Oil.

Of possible concern to oil companies operating in Iraqi Kurdistan, the court said the Ministry of Oil has the right to "follow up on the invalidity of oil contracts concluded by the Kurdistan Regional Government with foreign parties, countries and companies regarding oil exploration, extraction, export and sale".

With regard to the validity of contracts, the KRG responded that it "will take all constitutional, legal, and judicial measures to protect and preserve all contracts made in the oil and gas sector."

The statement from the KRG says the court's decision is "unjust, unconstitutional, and violates the rights and constitutional authorities of the Kurdistan Region. It is unacceptable and the Court must investigate further."

More here (Arabic), here (Arabic) and here (English).

Full text of KRG response here.

(Sources: Ministry of Oil, Supreme Judicial Council, KRG)

The post Iraqi Court Rules Against KRG Sales of Oil and Gas first appeared on Iraq Business News.

DNO reports Record Revenues

DNO ASA, the Norwegian oil and gas operator, today reported record revenues exceeding USD 1 billion in 2021, up 63 percent from a year earlier, on the back of high oil and gas prices and solid production performance. Annual operating profit climbed to USD 321 million, reversing operating loss of USD 315 million in 2020.

Strong 2021 free cash flow of USD 362 million drove a 68 percent reduction in net debt to USD 153 million at yearend.

"Notwithstanding the continued impact of the pandemic, DNO became a billion-dollar company last year on the fiftieth anniversary of its founding," said DNO's Executive Chairman Bijan Mossavar-Rahmani. "We are as committed as ever to explore for and produce oil and gas in a commercially attractive but also socially responsible and environmentally sensitive manner," he said, adding, "This is our business model, this is DNO's DNA."

As previously reported, gross production at the Company's flagship Tawke license in Kurdistan averaged 108,700 barrels of oil per day (bopd) last year, of which the Peshkabir field contributed 61,800 bopd and the Tawke field 46,900 bopd. Of the total, 81,500 bopd were net to DNO's interest. North Sea net production averaged 12,900 barrels of oil equivalent per day (boepd), bringing the Company's total 2021 net production to 94,500 boepd.

In 2022, DNO plans an operational spend of USD 800 million across the portfolio.

In Kurdistan, DNO is ramping up its drilling activities to maintain Tawke license gross production at around 105,000 bopd during the year, as well as a contribution from the operated Baeshiqa license in excess of 4,000 bopd. In December, the first phase field development plan for the license was approved by the Kurdistan Regional Government, clearing the way for a fast-track project to deliver early production from previously drilled but suspended discovery wells. Three additional Baeshiqa development wells will also be drilled this year.

In the North Sea, DNO projects net production in 2022 to remain around 13,000 boepd. The Company will participate in drilling the highly anticipated Edinburgh exploration well in the UK and six additional prospects offshore Norway, aiming to build on last year's successes with the Røver Nord exploration well and the Bergknapp appraisal well.

Also in Norway, the DNO-operated Brasse project as well as the partner-operated Iris-Hades, Gjøk and Orion discovieries target 2022 project sanction, supporting the Company's North Sea growth ambitions.

The Company's net reserves stood at 321 million barrels of oil equivalent (MMboe) of proven and probable reserves (2P) at yearend 2021 with additional contingent resources (2C) of 189 MMboe, according to preliminary numbers.

A videoconference call with executive management will follow today at 10:00 (CET). Please visit www.dno.no to access the call.

Other key figures

Q4 2021 2021 2020
Gross operated production (boepd) 107,472 108,713 110,282
Net production (boepd) 94,175 94,477 100,063
Revenues (USD million) 396 1,004 615
Operating profit/-loss (USD million) 128 321 -314
Net profit/-loss (USD million) 65 204 -286
Free cash flow (USD million) 227 362 150
Net debt (USD million) 153 153 473
The post DNO reports Record Revenues first appeared on Iraq Business News.