Iraq asks foreign oil companies to cut budgets to develop fields

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Economie

Al Ain newsletter Agencies
Oil field in Iraq - archives

Oil field in Iraq – archives

Iraqi officials and sources in the oil sector told Reuters: Iraq has sent proposals to all international oil companies asking them to reduce the budgets of developing fields by 30%. The decline in oil prices has affected government revenues, provided that the proposed cuts do not affect production.

International companies operate in oil fields in southern Iraq under service contracts, according to which companies pay fixed fees in dollars for the produced quantities, and Baghdad pays the companies the cost of building projects and approves plans to develop the fields.

Energy companies around the world cut spending after Brent crude fell more than half since the start of the year, to be traded at about $ 26 a barrel on Friday.

Iraqi officials said that the drop in oil prices forced the Oil Ministry to review its plans on how to pay the dues of foreign companies for the first six months of the year.

The ministry is still awaiting the oil companies’ response to the proposal.

A senior official in the government-run Basra Oil Company told Reuters: Iraq proposes that international oil companies cut their spending by 30%, on condition that those cuts do not affect crude production levels in the country.

Iraq is the second largest producer in OPEC, and pumps about 4.6 million barrels per day.

The Basra oil official said: “We are still without the budget allocations for 2020, and the drop in oil prices has exacerbated the situation … That is why we need foreign contractors to do their best and cut spending and postpone their dues as well.”

A source in one of the foreign oil companies said: “We received the letter about the 30% budget cut, and we have not taken a decision yet.”

Asim Jihad, a spokesman for the Ministry of Oil, said: “Dialogues are always open between partners on many common technical and financial issues, etc., and there is communication to discuss ideas, proposals and topics of common concern, according to developments in natural and other conditions.”

He added: “Since no one can predict at the present time the effects of the Corona crisis on the oil market and the global economy, it is wise to postpone the dialogue and take the appropriate decision at the right time.”

He continued: “There is no problem with that as long as there are understandings between the parties concerned, which is a natural issue. We hope that the oil markets will recover during the coming period.”

Meanwhile, a letter seen by Reuters reported that ExxonMobil, the main developer of the West Qurna-1 oil field in southern Iraq, had asked all of its suppliers in Iraq to cut costs.

“The oil and gas sector is greatly affected by the downward trend in crude oil prices, which reached the lowest level in the past twenty years,” Exxon wrote in a letter to suppliers.

And she continued: “Therefore, Exxon Mobil Iraq … expects your company to discuss opportunities to reduce costs urgently.”

Exxon said it had notified contractors and vendors of planned short-term cuts to capital and operating expenditures due to the Corona virus pandemic.

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