Members of Iraq’s parliament downplay 5 million barrels of oil output
A number of Iraqi lawmakers downplayed a recent report from Moody’s Insurance that the country’s oil output could reach 5 million barrels per day. The members of parliament said the current prices and large shares that oil companies take from oil revenues will leave a “pittance” for the state’s treasury, reports AME Info.
Noura al-Beyjari, a member of the Iraqi parliament’s committee on economy and investment, said Iraq only earns $22 per barrel at the current price level, adding that foreign oil companies account for the largest proportion of returns. The minister also revealed that Iraqi authorities sell crude at prices below market-level in order to realize faster returns. The insurance agency predicted that Iraq could see oil revenues decline by 35% this year compared to last year.
According to the report from Moody’s, oil companies make up 50% of Iraq’s GDP, while the country depends heavily on oil revenues to pay for its imports. This, combined with low oil prices, $30 million per day to finance the country’s battle against ISIS, and $65 billion the federal government is required to make available to finance operation expenditures, could see Iraq’s deficit climb 18%.
The Iraqi central government recently sent out a letter to independent oil companies operating inside the company asking them to develop conservative spending plans for 2016. The pressure of low oil prices mixed with fighting a war against the Islamic State has made further development of the country’s energy industry increasingly difficult.
“Because of the drop in our oil-sales revenues, the Iraq government has sharply reduced the funds available to the Ministry of Oil,” Iraqi official Abdul Mahdy al-Ameedi worte. “This will…reduce the funds available for the reimbursement of petroleum costs to our contractors.” Ameedi added that the oil ministry did not expect lower funding to “reduce production from the levels that were [already] stipulated.”
More problems than prices
Adding to the strain currently being faced by the Iraqi oil and gas industry, the Kurdish Semi-autonomous region in the country’s north has been increasingly pushing for its right to market and sell its hydrocarbon wealth independent of the Iraqi federal government. The region plans to increase oil exports to Turkey by up to 200 MBOPD to a total of 900 MBOPD.
The U.S. Court of Appeals for the Fifth Circuit in New Orleans also dismissed a case between the Kurdish Regional Government (KRG) and the Iraqi government in Baghdad. Kurdistan’s Ministry of Natural Resources said Tuesday that the ruling would force the Iraqi oil ministry to drop its “baseless” lawsuit.
“Although the KRG believes that the case should have been dismissed earlier, and for different reasons, the state of play remains the same: there is no prohibition on the KRG’s export of oil to the United States or elsewhere, and the KRG will continue to export hydrocarbons as the Iraqi constitution permits.”