By Ahmed Mousa Jiyad.

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

The Ministry of Oil and the “Odious Contract’ Trap” with ExxonMobil’ Consortium

Talks have intensified recently about the continuation of negotiations between the Ministry of Oil (MoO) and ExxonMobil/CNPC consortium that might lead to the signing of a contract for the “South Iraq Integrated Project (SIIP)” at an estimated cost of $53 billion and a duration of 30 years, but no official confirmation or indications on the fundamental contractual provisions that were agreed on and those still pending.

In the light of the available information, material evidence, actual examples, international geopolitical considerations and comparative analysis, a detailed evidence-based research and Report* was done on the project and related negotiation.

The report on SIIP’ possible contract comprises:

  • A necessary introduction and caveat;
  • Political and geopolitical implications of ExxonMobil behavior and its apparent link to the “deep state” based on many evidences that actually and factually had negative consequences on oil projects, for example, in Russia and in Iraq.

In Russia, ExxonMobil caused a delay of almost four years in the development of the Pobeda oil discovery in the Kara Sea when ExxonMobil withdrew, in late 2014, from its deal with Rosneft due to imposing US sanctions on Russia.

Iraq had three bad experiences with this company in recent years. The first, when ExxonMobil negotiated secretly and concluded, against declared government policy, deals with KRG in 2011 soon after the company secured West Qurna 1 contract through first bid round with the federal ministry.

That move led to excluding ExxonMobil from leading Common Seawater Supply Project (CSSP), reduce its Participating Interest in WQ1 and blacklisting it from any upstream project.

The second and third bad experience occurred this year when the company evacuated, unilaterally and without government consent, all its foreign staff from WQ1. All these three incidents caused tremendous damage to Iraqi economic interest.

  • Potential strategic risks, of an enormous scale, on SIIP that could be generate from the growing deterioration of the American-China relations as evidenced from the blacklisting of two major state oil companies, i.e. Zhuhai Zhenrong Corp and Sinopec. US escalating tension against Iran adds further geopolitical risks;
  • Analyses of what would be SIIP contract was premised on what was reported by national and international sources that are originally based on information given by unnamed Iraqi officials. That was due to the absence of clarity and lack of transparency of the ministry regarding essential contractual terms and conditions.

Based on the analyses and findings of the report, I am compelled to clearly alert and strongly, frankly and loudly warn both the Prime Minister and the Minister of Oil of the danger of pushing Iraq into a “trap of an odious contract” and by specifying ten of its most grave risks and disadvantages:

  1. ExxonMobil, as the consortium leader, is granted a monopoly position that allows the company directly controlling all vital oil projects in southern Iraq, and thus the entire national economy, for thirty years;
  2. It poses a multiplicity of major threats to national security and economic interest due to what can be called contractually-connected high strategic and geopolitical risks, since SIIP comprises many critical and vital projects such as Common Seawater Supply project-CSSP (for water injection), pipelines, storage tank-farms, export facilities, gas processing units and two oilfields;
  3. It contravenes the fundamental premises of the Iraqi Constitution because the contract requires “mortgaging/ reserving/ booking” two oilfields, with a combined plateau production of 500kbd, exclusively for the two foreign oil companies, i.e. ExxonMobil and CNPC, for the entire term of the contract- 30 years;
  4. It offers “Profit-Sharing Contract”, which, in reality, represents the monetary side of a “Production Sharing Contracts”, which, is impermissible by the Constitution;
  5. The announced astronomical cost (of $30bilion) increased already by $11billion in less than ten weeks while negotiating!;
  6. It offers all rent (windfall) resulting from oil price increases exclusively to the two foreign companies, nothing for Iraq!;
  7. It prevents SOMO (the only State Oil Marketing Company) from performing its role in marketing crude oil from the “mortgaged” two oilfields; this contravenes established policy, undermines annual state budget laws and weakens almost 50 years of SOMO’s function;
  8. It reduces the “national efforts” in the development of oilfields, thus, contradicting declared Ministry policy, weakens Iraq’s flexibility to comply with OPEC decisions through “swing fields”;
  9. Inconsistent with the regulations for tendering and contracting government projects;
  10. It lacks both transparency and competitiveness.

Therefore, I suggested to the Ministry of Oil not to continue on wasting time and causing further delays: it should officially declare that it is not in Iraq’s economic interest and national security to award SIIP to ExxonMobil-CNPC (and for this matter to any one consortium) and end, immediately, all and any related negotiations.

In the event that the Ministry of Oil and/or the Government insist on going ahead with this Odious Contract with ExxonMobil-CNPC, it becomes inevitable to refer the matter to the Federal Supreme Court to invalidate the contract on the bases of incompatibility with the Constitution; for eradicating the highest interest of the Iraqi people, including future generations (principle of inter-generational equity)  and for returning Iraq to what looks like abhorrent concessions of the, colonial, past.

*A brief of the original Arabic text of the entire report was circulated widely within many networks and was published by and posted on many websites, and accessible on the following links:

الحذر يا وزارة النفط من “فخ العقد البغيض” مع شركة اكسون موبل

https://www.akhbaar.org/home/2019/8/261291.html

http://www.tellskuf.com/index.php/mq/83987-as174.html

http://www.sahat-altahreer.com/?p=49115

Click here to download the full article 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.

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

 Oil, budgets, Kirkuk still nag Baghdad-Erbil relations

Meetings last month between representatives of Iraq’s federal government in Baghdad and the Kurdistan Regional Government (KRG) in Erbil failed to produce any clear resolutions of their ongoing differences.

A high-level delegation from the Baghdad government visited Erbil on July 25 for talks with the newly elected government there. Discussions focused on KRG oil exports, its share of the federal budget and control of disputed, oil-rich Kirkuk.

The Baghdad representatives included Oil Minister Thamer Ghadhban and Finance Minister Fouad Hussein, national security adviser Faleh al-Fayadh and the director of the prime minister’s office, Mohammed al-Hashemi.

Click here to read the full story.

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

It has been five years since the Islamic State of Iraq and the Levant (ISIL or ISIS) was defeated in the Kurdish region of northern Iraq.

The area has been stable since then, but it has struggled economically.

There are 1.4 million people working in the government and public sector in the semi-autonomous region. They watched their paychecks shrink or disappear, beginning in 2014.

That was when the war with ISIL began, the price of oil plummeted and the federal government of Iraq cut budget payments to the Kurdistan Regional Government.

Austerity measures were implemented and workers paid the price with reduced salaries.

However, following the formation of a new government this year, many people are hoping that this is starting to change.

Al Jazeera’s Natasha Ghoneim reports from Erbil:

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

Former government spokesman tapped as KRG foreign relations head

Iraq’s Kurdistan Regional Government (KRG) has formally announced that Safeen Dizayee, the former spokesman of the KRG, will serve as the head of its Department of Foreign Relations — in other words, as its de facto foreign minister.

Click here to read the full story.

By John Lee.

The Kurdistan Regional Government’s long-serving Minister of Natural Resources (MNR), Ashti Hawrami (pictured), is to be appointed to the post of Assistant Prime Minister for Energy Affairs in the new KRG cabinet.

According to a report from Rudaw, it is not currently clear whether the move will result in the scrapping of the Ministry of Natural Resources.

Hawrami was first appointed as Minister for Natural Resources in 2006.

(Source: Rudaw)

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

Kurdistan Regional Government (KRG) Prime Minister Masrour Barzani presented his new Cabinet July 10, vowing to institute reforms and reinvigorate the semi-autonomous government in Erbil, Iraq.

Three main parties in Iraqi Kurdistan were able to reach an understanding on their ministerial nominations to finally form the new government: the Kurdistan Democratic Party (KDP), Patriotic Union of Kurdistan (PUK) and Gorran (Change) movement.

Parliament now has confirmed 21 ministers for the Cabinet, though the controversial post of the natural resources minister remains vacant.

Click here to read the full story.

The Al-Bayan Center for Planning and Studies has just published a new report from our Expert Blogger Ahmed Tabaqchali:

The current debate over the interpretation of the 2019 budget that governs the Kurdistan Regional Government’s (KRG) share of the federal budget in return for contributing 250,000 bbl/d to federal oil exports has echoes of the first conflict in April 2012 on the issue.

The adept quote above by the International Crisis Group (ICC), in its description of the relationship between the two sides leading to that conflict, is as applicable today as it was then, and over the many repeats of similar conflicts in the intervening years.

The current flare up is initiated by members of the federal parliament against the Government of Iraq (GoI) over its continuing payments to the KRG, under the terms of the 2019 budget, while the KRG has not or refused to honour its obligations under the terms of the same budget.

The internal and external dynamics of the players on both sides, the federal politicians and the regional Kurdish politicians, follow the same trajectory that led to countless struggles over this issue and others since 2003. Each side is not only blind and deaf to the other side’s needs and motives but views it with suspicion and mistrust.

Unless something breaks the mould, either an intervention by Iraq’s international stakeholders or a change in the balance of relative power between the two, both will continue to think and act in the same manner that each had acted in the past, while still expecting a different outcome for the conflict or a different response form the other side.

Read Ahmed Tabaqchali’s full report here.

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

President Nechirvan Barzani of the Kurdistan Regional Government (KRG) left Erbil for the first time since taking office and headed to the Iraqi capital on June 20 to discuss several outstanding issues with the central government, especially KRG oil exports, the public budget and the situation in the disputed city of Kirkuk.

After meeting with Iraqi Prime Minister Adel Abdul Mahdi, Barzani said they agreed to resolve outstanding issues based on the constitution and to convene a joint committee next week to negotiate oil, the budget, the peshmerga forces and Article 140 of the Iraqi Constitution, concerning a census in Kirkuk.

The most important issues addressed during the visit were Kurdish oil and KRG salaries. Baghdad has not yet received its share of KRG oil in about six months, but the federal Ministry of Finance continues to deliver salaries to KRG employees.

Click here to read the full story.

By Ahmed Mousa Jiyad.

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

2019 Budget Law: Politics of Appeasement, Non-Compliance and Extortion

Data from different sources indicates that KRG oil exports, so far in this year, ranged between 418.8 and 438 thousand barrels daily-kbd and KRG gross oil export revenues at end of May mounted to $3.681 billion.

Draft of the budget law was debated, amended and approved by the parliament; then endorsed by the President of the Republic and finally promulgated as a law when it was published on the official gazette. KRG, Kurdish politicians, parliamentarians and commentators praised the law as it favors them.

Yet, so far and as it officially confirmed by the Minister of Oil and the Prime Minister, KRG did not deliver a single barrel of oil; this is the usual KRG’ non-compliance extortion practice.

Such practice prompts a wave of criticisms and accusations against the Prime Minister, who is known for his appeasement towards KRG even at the expense of the rest of Iraq. KR leaders know too well how to exploit Prime Minister’s weaknesses and his lack of resolve and leadership; KRG succeeded so far.

Click here to download the full article 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.

The President of the Kurdistan Region, Nechirvan Barzani, has tasked Masrour Barzani, as Prime Minister of the Kurdistan Regional Government, to form the ninth ministerial cabinet, in the presence of the Speaker of the Kurdistan Parliament Ms. Vala Farid and the Head of the Judicial Council of the Kurdistan Region Judge Bangin Qasim.

It was proceeded by regional executive decree no. 1 (2019) and under the provisions of paragraph 12 of article 10 of the amended Law of Presidency of Kurdistan Region no.1 (2005), supported by parliamentary decision no. 7 of 2019.

According to the regional decree, the process of the formation of the ministerial cabinet must not exceed 30 days from the date of this decree, signed on Wednesday, 12 June 2019.

(Source: KRG)