On 28 March Iraq’s Oil Minister gave an interview about his OPEC meeting and in this interview the Oil Minister Al-Shahristani gives his views on what is currently happening in Iraq about Iraq Oil Production and relations between the Oil contracts, KRG Oil Contracts. The interview is conducted by Amir Ibrahim who is based in Paris.
At the OPEC meeting it was decided to maintain the same level of oil production and Al-Shahristani was asked if Iraq was disappointed in this decision. Al-Shahristani denies that it was a disappointing decision, adding that the OPEC members reviewed the status of the international oil market, the demand for crude oil, and the commitment level of the 11 OPEC members, excluding Iraq to continue the production ceiling that was set at the Algiers meeting held at the end of 2008. Al-Shahristani continued at the meeting in Vienna it was determined that there was 80 percent commitment this agreed upon ceiling figure by OPEC members.
Al-Shahristani was asked about Iraq’s oil production share, which is supposed to be 6 million barrels daily and who benefits from this now. Al-Shahristani said due to the successive wars and oil embargo imposed on Iraq the Iraq production level has dropped to less then 2 million barrels a day and who is benefiting from this low production is the major producers such as Saudi Arabia and other Arab countries. He adds that following the downfall of the former regime, Iraq’s oil production improved and that “in 2008, we were able to raise production to more then 2.25 million barrels daily.”
Asked if 2009 will be a very difficult year for the Iraq’s if world oil prices remain as low as they currently are, Al-Shahristani says this year is difficult for all oil producing and non-producing countries, including Iraq, explaining: “Oil production last year was higher than usual, exports were larger than what was planned in the 2008 budget, and prices were much higher than what was expected. Accordingly, we realized a huge surplus of hard currency. We saved 62 billion US dollars from the 2008 oil revenues, at a time when the budget allocations required only some 36 to 40 billion US dollars. Thus, the 2008 surplus will lessen the economic crisis impact in 2009, but if the situation remains unchanged until 2010, we should definitely seek other measures.” He adds that he does not expect the oil market situation to remain as it is beyond 2009.
Al-Shahristani was asked about the ministry’s plans to raise the oil export level.
Al-Shahristani says Iraq exports oil from the ports of Basra, Al-Umayyah near Basra, and Jihan in Turkey, noting that some 1.5 million barrels are exported from Basra daily; much less than this figure is exported from the old Al-Umayyah port; and exports from Jihan are less than they were in previous decades. He adds that Iraq is in the process of concluding contracts with companies to clean Iraqi ports from the remains of previous wars, to install a third pipeline, and to erect a floating dock “that is capable of exporting some 4.5 million barrels daily.”
With the current economic crisis, world oil companies will be eager to invest in developing Iraqi oil field, Al-Shahristani says “There is an urgent need for increasing Iraqi crude oil production as soon as possible due to Iraq’s great need for oil revenues to fund its reconstruction projects.”
The ministry is moving along four parallel lines: The first is granting licenses to major oil companies that are competing over developing 16 oil fields, but this process will take some time; second encouraging local oil companies to increase production, but their capabilities are limited; third, inviting only three oil companies to prepare designs, provide equipment, and install it in a very short period of time, but these companies are not eager to do so because they do not consider themselves contractors implementing limited scope contracts; and fourth, signing production sharing contracts with oil companies who will either receive a flat dollar amount for each barrel produced or a percentage of the produced oil, but he emphasizes that Iraq is not in favor of sharing its oil production with others.
Al-Shahristani was asked to explain the Iraqi oil industry workshop’s recommendation to reactivate the Iraqi National Oil Company contradicts the policy of contracting with foreign oil companies to invest in oil, Al-Shahristani denies that there is contradiction between the two issues, explaining that the national company will supervise the work of all Iraqi oil companies. He says that in addition to the oil companies of the south, north, and Misan, Iraq “is planning to establish other companies, such as Al-Nasiriyah Oil Company, whereupon we will conclude a contract this year to develop Al-Nasiriyah oil field in order to raise production next year to more than 100,000 barrels per day. We also have the Al-Ahdab oil field in Wasit, where we concluded another contract to raise production within two or three years to more than 100,000 barrels daily.” He adds that the ministry is focusing on developing oil fields in every Iraqi governorate.
Asked whether the Iraqi oil industry workshop’s recommendation to establish a higher commission to supervise oil production and exports makes the ministry’s work more complicated, Al-Shahristani denies this, saying that the workshop’s recommendation was to facilitate the measures taken by the ministry in performing its duties. Concerning the establishment of a higher oil and gas commission, he says this recommendation was made by his ministry and its purpose is “to oversee and discuss oil policies,” adding: “The establishment of the Iraqi National Oil Company is part of our project to administer the daily oil operations in order to avoid bureaucracy. This company will be a non-profit company, similar to other local oil companies, because they are not involved in trading oil, which is the property of the Iraqi Government and people.”
Asked about the criticism of the Oil Minsitry in not achieving progress. Al-Shahristani says this criticism has been made on political grounds and the Iraqis know which sides made it, emphasizing that the outcome of the provincial council elections was “a real response to this criticism.” He refutes these claims by noting the progress that has been achieved in oil production, the decrease in the quantities of oil purchased from outside Iraq, and the availability of oil derivatives in the local market for consumption by the citizens. He says: “We have reached the point of self-sufficiency. We signed contracts for the installation of four new refineries and opened letters of credit to this effect, installed hundreds of kilometers of pipelines, repaired the great damage to pipelines, and developed many oil fields.”
Asked whether the oil produced in the Iraqi Kurdistan Region and other parts of Iraq falls within Iraq’s oil production ceiling, Al-Shahristani says oil produced in every part of Iraq is the property of Iraqis, noting that “regardless of its quantities, oil produced in the Iraqi Kurdistan Region should be handed over to the Iraqi Government and be exported through Iraq’s export system – in this case via pipelines to Jihan port in Turkey – and the returns from this oil should be deposited in the central Treasury and distributed according to the budget approved by the Iraqi Council of Representatives, which represents the will of all Iraqis. No other mechanism is acceptable.”
Concerning oil contracts, Al-Shahristani says: “The only Iraqi side that is authorized to sign oil contracts is the Oil Ministry and its companies, with the concurrence of the Council of Ministers.”
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