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Cabinet calls on oil ministry to conduct 'appropriate' study

Some politicians have called for changes in financial terms of contracts

Oil majors operate some of Iraq's biggest fields

Iraq plans to conduct a study to review all oil and gas exploration and transport contracts with foreign companies, according to a Cabinet decision, amid calls by some politicians in OPEC's second-largest producer to amend some agreements with international oil companies.

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The oil ministry should conduct an "appropriate" study on the contracts, the Cabinet said in a June 1 statement carried by the state-run Iraqi News Agency. The Cabinet issued the decision following its regular weekly meeting.

Some members of parliament and other politicians often express concern about certain contracts signed with oil majors, which they believe carry unfair financial terms, a debate that has gone on for years.

The government of Prime Minister Mustafa al-Kadhimi, which was elected in May last year, listed in its program at the time a number of measures that included plans to restore the country's oil market share and renegotiate contracts with IOCs.

Iraq wants to form a negotiating delegation to discuss amending technical service contracts with international oil companies in light of the current oil market developments, according to the program released in May 2020.

The current calls for a review now coincide with ExxonMobil's planned exit from the giant West Qurna 1 oil field in southern Iraq.

Iraq is considering buying Exxon's 32.7% stake in West Qurna 1, the country's oil minister said May 3, as the US major seeks to exit one of the world's largest oil fields with expected recoverable reserves of over 20 billion barrels.

Oil minister Ihsan Ismaael had previously said Iraq was in talks with potential unnamed US energy companies to take over Exxon's stake. Other partners in West Qurna 1 are PetroChina (32.7%), Japan's ITOCHU Corp. (19.6%), Indonesia's Pertamina (10%), and Iraq's Oil Exploration Co. (5%).

International oil companies in Iraq operate some of the country's biggest fields in return for a per barrel fee linked to production.

The terms of the contracts have been a point of contention over the years, although Iraq needs international expertise to run these fields.

Exxon's exit from the southern West Quran 1 field may be similar to Shell's 2018 divestment of its stake in Majnoon, where operations are now managed by state-owned Basrah Oil Co., the minister said May 3.

In February, Oslo-based DNO bought Exxon's 32% stake in the Baeshiqa license in Iraq's Kurdistan region, part of a plan by the Norwegian company to boost spending in the semi-autonomous area and speed up production from existing wells in 2021.

As some Western oil majors exit Iraq, others have made headway. Iraq signed $8 billion worth of deals with five US energy sector companies last August during Kadhimi's first state visit to the US. The deals included an upstream pact with Chevron and power agreements with GE. Other companies involved were Baker Hughes, Honeywell and Stellar Energy.

Meanwhile BP operates the giant Rumaila field, which can produce around 1.5 million b/d out of Iraq's estimated 5 million b/d capacity. Italy's Eni runs the Zubair field, while Russia's Lukoil operates West Qurna 2.

Exxon unveiled plans in February to sell most of its UK North Sea operations as part of a roadmap to divest $15 billion in assets by 2021 and $25 billion by 2025.

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Iraq to conduct study on oil, gas exploration and transport contracts with foreign companies - S&P Global