Iraq to reduce fees paid to foreign oil companies

Iraq will exclude oil byproducts from foreign oil companies’ revenues in new contracts expected to be awarded in June, an oil ministry official said yesterday, effectively reducing production fees they receive from the government.

Oil producers in Iraq currently receive a fee from the government linked to production increases, which include crude and oil by-products such as liquefied petroleum gas and dry gas.

Opec’s second largest producer after Saudi Arabia decided to change the contracts after a glut caused oil prices to crash in 2014, reducing the government’s ability to pay the fees.

Iraq has invited foreign companies to bid for contracts to explore and develop petroleum reserves in 11 new blocks as it seeks to boost output capacity.

The new terms, announced at a press conference by Abdul Mahdi Al Ameedi, head of the ministry’s licensing and contracts office, include other provisions which will reduce companies’ profit.

The new contracts will “establish a linkage between prevailing oil prices and cost recovery”, Ameedi said. They will also introduce a royalty element, he added. Companies including BP, ExxonMobil, ENI, Total and Royal Dutch Shell helped grow production in the past decade by over 2.5 million barrels per day to about 4.7 million barrels per day.