Exclusive: Oil companies offer to cut 2015 spending in Iraq

[SocalDinar]

This is two days old but I dont remember seeing it posted.  Sorry Mods if it has posted

By Ahmed Rasheed

BAGHDAD Thu Mar 12, 2015 12:08pm EDT

 

 

 

(Reuters) - Oil companies have proposed millions of dollars of cuts in development spending in Iraq, a senior oil ministry official said, after Baghdad told them low oil prices and its fight against Islamic State had made payments difficult.

In a series of letters sent to companies such as Royal Dutch Shell, BP and Exxon Mobil since January, seen by Reuters, the oil ministry set out the need for change in response to "the rapid drastic decrease in crude oil prices".

The slump in crude prices to below $60 a barrel from $115 in June has slashed government revenues in Iraq, OPEC's second biggest exporter, just as it faces economic crisis triggered by Islamic State's seizure of north and western provinces and surging expenditure to fund a military counter-offensive.

In view of the fact that a significant proportion of development costs are passed on to Iraq, the oil ministry called on firms to revise their oilfield development plans by considering postponing new projects and delaying already committed projects as long as no additional costs were incurred.

They should cut development budgets "by a certain percentage" and request subcontractors to reduce costs in order to match "the new oil prices world," the ministry said.

Those cuts should be made against a backdrop of maintaining or even increasing current oil production levels, the February letter added, requesting a response by the end of that month.

Most companies have replied, a senior oil ministry official said, with the largest offered cut in spending coming from Shell, which proposed slashing investment spending this year by more than a third to $1.5 billion from $2.4 billion.

BP proposed a cut to $3.25 billion from $3.50 billion, Lukoil to $2.1 billion from $2.3 billion, while Exxon Mobil said it planned to maintain development spending at $1.8 billion and Eni had yet to reply, he said.

"No direct meetings have been held with any of the foreign companies. We are now only testing waters with them via correspondence," said the official, who declined to be named because of the confidential nature of the correspondence.

A BP spokesman said the company held regular, confidential discussions with Baghdad about the development of the Rumaila field, which was operating normally.

A spokesman for Lukoil said the firm had received a letter from Iraq asking to postpone all new developments or reduce works in 2015, adding: “We are studying it.” The West Qurna project was developing on schedule and unchanged so far.

Exxon, the lead contractor to rehabilitate West Qurna, declined to comment. Chief Executive Officer Rex Tillerson said last week it was talking with Baghdad on restructuring oil agreements to help the government meet its near term cash needs. Eni and Shell were not immediately available for comment.

SHARING RISKS

International firms operate in Iraq's southern oilfields under service contracts, currently based on a fixed dollar fee for additional volumes produced - a formula which has seen Baghdad's bills ballooning just as its oil revenues collapse.

"The oil ministry has irreversibly taken the decision to amend its service contracts with foreign firms, due to the cash crisis brought by oil prices drop," the ministry official said.

"We have to acknowledge that current contracts were hastily drafted and short-sighted in failing to take into consideration the impact of a potential oil price crash."

A letter sent to oil firms last month asked them to propose amendments to their contracts "based on the linkage between oil prices and cost recovery and due remuneration as a sliding scale", so that both sides "take the risk and enjoy the reward".

The proposed amendment did not mean Baghdad was planning a formal move to production sharing contracts, but finding a middle ground between that and the current arrangements.

"We should fix these flaws to save our economy from collapsing," the official said.

A source at one of the oil majors said such discussions were not unusual: “For the past five years we had cost inflation in the industry as oil prices rose. Now we have cost deflation as prices fall. We renegotiate contracts with service and engineering companies all over the world to achieve lower costs without impacting production.”

Oil Minister Adel Abdel Mehdi said 10 days ago that Iraq was renegotiating the contracts with a view to restoring Iraq's state share to around 20 to 25 percent, after it was reduced in recent amendments to around 5 percent.

He said that under current contract terms, Iraq's payments due to international companies in 2015 would reach $18 billion.

It has already accumulated debts from last year and 2013. The government says it has started work on issuing a Treasury bond, and may resort to seeking forward payment for exports to address its growing debts to the firms, Finance Minister Hoshiyar Zebari said.

For now, sources say, Iraq is not providing the service companies with the repayment volumes they are due and is instead sometimes assigning more cargoes to companies who purchase its crude for cash under term contracts in monthly export schedules.

 

http://www.reuters.com/article/2015/03/12/us-iraq-oil-contracts-idUSKBN0M820X20150312

[vato96]

that doesn't sound good!!

[SocalDinar]

I worry about Elan Musk's New battery being unveiled next month. It could be a game changer for big oil and not for the better.

[Boozer]

Prices are going back up...Iraq will never go Broke.. Oil, Natural Gas, Tons of Gold, I think there doing just Fine.

[SocalDinar]

Prices are going back up...Iraq will never go Broke.. Oil, Natural Gas, Tons of Gold, I think there doing just Fine.

Crude sinks on glut prediction, strong dollar Friday, 13 Mar 2015 | 2:32 PM ETReuters

 

 

 

 

U.S. crude settled at $44.84 per barrel on Friday's session, dropping $2.21 or 4.7 percent. The settle marks the lowest close since Jan. 28.

Oil futures were little changed after the pace of rig reductions in U.S. oilfields slowed moderately in the last week, according to data from Baker Hughes.

The number of rigs exploring for oil in the United States fell by 56, compared with a 64-rig reduction in the prior week. Total U.S. oil rigs stood at 922, compared with 1,461 at the same time last year.

Canadian drillers took 65 rigs offline in the last week, Baker Hughes reported.

Read MoreIEA sees renewed pressure on oil prices as glut worsens

U.S. crude earlier fell more than 4 percent after the International Energy Agency said that a global oil glut is building and U.S. oil production shows no signs of slowing.

The IEA, which advises industrialized countries, said in its monthly report that the United States may soon run out of empty tanks to store crude, which would put additional downward pressure on prices.

U.S. crude finished Friday's session down $2.21 at $44.84. Brent crude fell $2.16 to $55.13.

"U.S. supply so far shows precious little sign of slowing down," the IEA said. "Quite to the contrary, it continues to defy expectations."

Read MoreUS DOE proposes buying up to 5M barrels of oil for strategic reserve

While OPEC output declined in February, global supply was up by 1.3 million barrels per day year on year at 94 million bpd, led by a 1.4 million bpd non-OPEC increase, the IEA said.

"The market will be more balanced in the second half, but there is still massive oversupply in the first half," said Barbara Lambrecht, an analyst at Commerzbank in Frankfurt.

"We still expect oil prices to fall in the coming weeks due to rising inventories."

News of a deal to end a strike by U.S. refinery workers provided some support because it could help to increase demand for crude for processing in the world's biggest oil consumer, reducing U.S. stockpiles that climbed last week to the highest level for this time of year in more than 80 years.

Read More ND's largest oil producer aims to sell assets: Sources

Still, forecasts of a tighter market to come may have to be revised should Iran and six world powers reach a deal over its nuclear program and lift sanctions that have limited Iranian oil exports. The aim is to reach a framework nuclear agreement by the end of March and full agreement by June 30.

"A question mark for the second half remains Iran, and the answer to that is expected to come in over the next two weeks," Petromatrix analyst Olivier Jakob said.

Investors also kept an eye on Libya, where fighting has slowed output. Production has varied between 410,000 bpd and 490,000 bpd this week, a senior industry source said, higher than estimates of February supply.

 

http://www.cnbc.com/id/102501923#.

This new Tesla battery will power your home, and maybe the electric grid too

By Brian Fung February 12

A Supercharger Station at the new Tesla Gallery and Service Center in Paramus, U.S., on Thursday, Dec. 11, 2014. (Ron Antonelli/Bloomberg)

Tesla is working on a battery that can power your home and even help large-scale utilities store energy more efficiently, according to company chief executive Elon Musk.

On an investor call Wednesday, Musk said the designs for a home or business battery are already complete and will likely be unveiled to the public "in the next month or two." Production could be as little as six months away, he added.

"It's really great. I'm really excited about it," said Musk.

While there's no word yet on price, Tesla's battery and charging technology could ultimately wind up saving you money on your electric bill. Although many of today's homes draw energy directly from the electricity grid, the spread of cheap solar panels means it's never been easier to generate some of your own energy. Storing renewables efficiently has been a big bottleneck for consumers and for utilities alike, but if Tesla's stationary battery takes off, it could change the way electricity is priced and traded on a market scale. (For years, it's been many people's dream to sell excess energy back to the grid.)

For the millions of consumers frustrated with their power companies thanks to frequent outages and poor customer service, the batteries could be a boon. In general, the choices for how people power their homes is relatively limited. Most have to rely exclusively on their local utility providers. Getting a generator can be expensive -- some homeowners pay around $20,000 for back-up generators that run on natural gas. So Tesla is eyeing a market that might be ripe for innovation.

Morgan Stanley made waves last year when it wrote that Tesla's forthcoming products in this space could meet a huge market demand.

“There may be a 'tipping point' that causes customers to seek an off-grid approach,” Morgan Stanley wrote last March.  “The more customers move to solar, the remaining utility customer bill will rise, creating even further “headroom” for Tesla’s off-grid approach.”

Tesla is already laying the groundwork to ensure its stationary batteries get as widely distributed as possible.

"A lot of utilities are working in this space, and we're talking to almost all of them," said Tesla's chief technical officer, JB Straubel. "It’s early stage stuff and a lot of these projects are very far out since the procurement cycle for utilities is so long. But this is a business that certainly is gaining an increasing amount of our attention."

Listen to the full investor call here.

http://www.washingtonpost.com/blogs/the-switch/wp/2015/02/12/this-new-tesla-battery-will-power-your-home-and-maybe-the-electric-grid-too/

 

 

Edited March 14, 2015 by SocalDinar

[FlintNPebbles]

Up until the Tesla battery or any other battery is affordable and efficient for everyone, the country will run on oil and it's derivatives.   That could be many years from now.    My son is very interested in alternative energy and he has been very excited about all of this.

[sandfly]

THANKS

[unirod]

As a builder the only reason to get building permits is to get on the grid. When or if such battery storage becomes affordable and long term reliable. Your going to see hundreds of thousands of people tell the MAN to go screw himself!