Iraq asks IOCs to cut budgets by 30%, postpone payments due to oil price crash

[The Englishman]

• OIL
•  
• 26 Mar 2020 | 11:58 UTC
•  
• Amman | Jordan

Iraq asks IOCs to cut budgets by 30%, postpone payments due to oil price crash

HIGHLIGHTS

Letters sent to BP, ExxonMobil, Lukoil, Eni

Basrah Oil wants payments cut in Q1, Q2

Iraq's crude prices have dropped to about $25/b

 

Amman, Jordan — Iraq's state-run Basrah Oil Co. asked four international oil companies operating in OPEC's second-biggest crude producer to cut budgets by 30% and postpone payments to subcontractors due to the oil price crash.

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The March 22 letter from Ihsan Ismaeel, Basrah Oil's director general, was sent to BP, lead operator of the Rumaila oil field, Italy's Eni, which works at the Zubair field, ExxonMobil, operator of West Qurna 1, and Russia's Lukoil, which works at West Qurna 2. The fields have a total production capacity of about 3 million b/d, well above more than half of the country's total output.

The letter seen by S&P Global Platts requests IOCs to reconsider work programs and reduce budgets by 30%. inform BOC of their ability to postpone or reduce payments by half in Q1 and Q2 and amend contracts with subcontractors to include "deferred payment plans."

A spokesman for Basra Oil couldn't be reached for comment.

Other state-run companies are likely to send similar requests to IOCs working in their jurisdictions.

 

Oil sales

 

Oil income makes up around 90% of the Iraq's federal government budget revenue. Last year, Iraq -- excluding the Kurdish region in the north -- earned an average $6.794 billion/month from 3.527 million b/d sales on an oil price of $61.13/b. In January and February, it earned $5.608 billion/month from average exports of 3.360 million b/d on an oil price of $55.80/b. Brent crude has since tumbled, causing Iraqi crude prices to fall to around $25/b, signaling monthly revenue could be only $2.55 billion.

Federal Iraq has to pay IOCs the crude oil equivalent of $1 billion/month to cover their costs and remunerations, according to the 2019 budget. On that basis, and if the low prices continue, it would leave the 2020 budget at about $1.55 billion/month, which is barely enough to cover wages and salaries.

 

Kurdish shortfall

 

The semi-autonomous Kurdistan Regional Government in northern Iraq is also suffering from low oil revenue and has been unable to pay IOCs operating there, the latest being the late Ross Perot's HKN Energy.

"HKN has overdue receivables from the KRG of over $55 million related to oil sales for October, November and December of 2019," it said in a statement on Thursday. "Our last payment was received in January. The KRG has not provided any recent assurance on the timing of payments. There has been some discussion that the KRG is considering partial payments for oil sales receivables, but we do not know any specifics on timing or amounts."

HKN joins Norway's DNO and UK's Genel Energy in warning that their ability to spend and operate in Kurdistan may be limited by delayed payments and the coronavirus outbreak.

Payments for crude production in October and November 2019, which were due in January and February 2020, have not been received, Genel said earlier this month. The London-based company said drilling activity at the Tawke license have been scaled back and the Qara Dagh-2 well spud set for Q2 is likely to be delayed.

DNO, Genel's partner in Tawke with a 75% stake, said it had last gotten paid in January, covering September 2019 exports. As it faces delayed payments from the KRG, DNO said its operations in the region are also being curtailed by the virus, which will lead to a drop in production from several fields.

The KRG is unable to pay IOCs because $1 billion of its cash is stuck in a Lebanese bank suffering from a liquidity crunch, sources have told Platts.

[nannab]

NO NO NO you bunch of whining babies. Put up and shut up  

 

Thanks Englishman  

[horsesoldier]

Pizz poor planning on your part does not constitute an emergency on their part. ( or special consideration ). 

[Stabstones]

Well.. well.. u been happy spending all the petrodollar since last year.. now asking for postpone the payment??? No way.. no way..

[3n1]

10 hours ago, Stabstones said:

Well.. well.. u been happy spending all the petrodollar since last year.. now asking for postpone the payment??? No way.. no way..

 

 to funny SS , that OIL / USD thievery got cranked up in 2004 and has never let up ... im thinking its time to call in all the citizens stolen oil money from the fat cats thats controlled iraq the last 16 years,  that should be more than enough to meet iraqs needs during their latest crisis , i swear they thrive on em , they seem to never plan ahead for anything  .... all the best dv'ers