Bagh­dad had ini­tially set June 21 as date to open bids for new ex­plo­ration blocks

Arab News - - BUSINESS -

the same day, he added.

The oil min­istry an­nounced on Thurs­day mea­sures to re­duce the fees re­ceived by the oil com­pa­nies from the gov­ern­ment in the new con­tracts.

The new con­tracts will ex­clude oil by-prod­ucts from the com­pa­nies’ rev­enues, es­tab­lish a link­age be­tween pre­vail­ing oil prices and their re­mu­ner­a­tion, and in­tro­duce a roy­alty el­e­ment.

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

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

Com­pa­nies in­clud­ing BP, Exxon Mo­bil, Eni , To­tal and Royal Dutch Shell helped Iraq grow its pro­duc­tion in the past decade by over 2.5 mil­lion bar­rels per day (bpd) to about 4.7 mil­lion bpd.

The semi-au­ton­o­mous Kur­dis­tan Re­gional Gov­ern­ment pro­duces oil and gas from fields un­der its con­trol in north­ern Iraq un­der a pro­duc­tion shar­ing model more prof­itable to com­pa­nies.

The new con­tracts of­fered by Bagh­dad will also set a time limit for com­pa­nies to end gas flar­ing from oil fields they de­velop on ter­ri­tory un­der its con­trol.

Iraq con­tin­ues to flare some of the gas ex­tracted along­side crude oil at its fields be­cause it lacks the fa­cil­i­ties to process it into fuel for lo­cal con­sump­tion or ex­ports.

Iraq hopes to end gas flar­ing by 2021, which costs nearly $2.5 bil­lion in lost rev­enue for the gov­ern­ment and would be suf­fi­cient to meet most of its un­met needs for gas-based power gen­er­a­tion, ac­cord­ing to the World Bank.

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