Because BP, Exxon and Lukoil no longer care about Iraq’s oil (while China …)
Large foreign oil companies like BP and Lukoil want to break away from Iraq. China, on the other hand, is close to signing an agreement to build a new refinery. All the details
Iraq's oil minister, Ihsan Abdul Jabbar Ismail, announced that British oil company BP and Russian Lukoil want to divest their respective properties in the country.
ESCAPE FROM WEST QURNA AND RUMAILA
Specifically, Ismail said Lukoil has notified him that he plans to sell his stake in the West Qurna-2 oil field, which has a capacity of about 13 billion barrels. BP, on the other hand, wants to withdraw from Rumaila: it is the largest oil deposit in Iraq and one of the largest in the world, with a production capacity of almost 1.5 million barrels per day.
UNSUITABLE INVESTMENT CONTEXT
The reason for the withdrawal of the two companies, according to the explanation offered by Minister Jabbar, is the inadequacy of the Iraqi context. "The current investment environment in Iraq is inappropriate for keeping large investors," he said. “All major investors are looking for another market or partner. We, as an investment environment, are unsuitable ”.
EXXON ALSO WANTS TO SELL
Last week Jabbar, during a hearing in the Iraqi parliament, announced that the US oil company ExxonMobil also wants to sell its 32.7 percent stake in the West Qurna-1 field for a maximum sum of 400 million dollars: a a price that the minister called "very cheap". He also said the Basra Oil Company, Iraq's national oil company, is considering a deal with ExxonMobil.
WHAT BP WILL DO WITH THE CHINESE CNPC
The decision by BP to break away from the oil and gas assets Iraqis part of a wider plan of the company for the transition to a low-carbon energy sources (low carbon), in line with the emission reduction targets announced by many governments around the world.
According to sources heard by the Wall Street Journal , BP would like its operations in Iraq to pass into the hands of a new company of its own, which will control BP's stake in Rumaila and be jointly owned by China National Petroleum Corporation (CNPC). the Chinese state oil company already a partner of BP in the development of the field.
This new entity will be separated from BP, will have its own debt and distribute its profits through dividends.
The whole operation will serve to guarantee BP greater flexibility to increase investments in low carbon energy and instead reduce spending on fossil fuels such as oil and gas.
SYMBOLIC DECISION
BP's divestment from Iraq also has a certain symbolic significance: the company has been present in the country since the 1920s, and was the first international oil company to return to Iraq in 2009 after the US coalition invasion in 2003.
WHAT WILL HAPPEN NOW
BP is one of the most important partners of the Iraqi government, writes Argus , a portal specializing in energy issues. In 2009 it obtained a 47.6 percent stake in Rumaila in the first auction since the war; operates in the field together with the Chinese CNPC and Somo, the Iraqi state company that deals with the marketing of crude oil extracted in the country.
For about two years, BP has been evaluating the possibility of detaching its properties in Iraq and handing them over to a new separate joint venture , in partnership with CNPC. The move would allow BP to eliminate the negative impact of late – or absent – payments from the Iraqi Oil Ministry from its balance sheet. At the same time, it would allow it to have a "cleaner" image in front of shareholders, given the large amount of greenhouse gas emissions from Iraqi hydrocarbon fields: the country has not made much progress in gas capture technologies.
However, the spin-off and creation of a new entity requires the approval of the Minister of Oil.
WHAT LUKOIL WANTS TO DO
Before considering the sale, Lukoil hoped to renegotiate the terms of his contract for the Yamama formation – the deepest – at the West Qurna-2 field. The Russian company would like to double its oil production capacity by 2025, bringing it to 800,000 barrels per day.
THE PROBLEM OF IRAQ
Iraq extracts about 4 million barrels of crude oil a day, more than any other member of OPEC (the Organization of the Petroleum Exporting Countries) except Saudi Arabia. Yet it struggles to capture the interest of foreign companies, which in fact want to leave the country. Or they have already done so: in 2018 Shell renounced the Majnoon oil refinery, which has 240,000 barrels a day of capacity. The American company Occidental left the Iraqi mining sector as early as 2015.
The main reasons are three: late payments (which BP complains, for example), the harshness of the contractual terms (mentioned by Lukoil) and instability. On the latter point, just a few days ago the Islamic State claimed responsibility for a Katiuscia rocket attack on a power plant.
HOW CHINA ADVANCES
Meanwhile, Oil Minister Ihsan Abdul Jabbar Ismail announced on 3 July that Iraq is close to concluding an agreement with a group of Chinese state-owned companies for the construction of a new 100,000-barrel-per-day refinery.
The plant will be built in the governorate of Dhi-Qar, in the south of the country, and will produce Euro 5 fuels.
Among the Chinese companies participating in the investment is Norinco, which in 2018 had already signed an agreement to build a 300,000 barrels per day petrochemical complex on the Al Faw peninsula in southern Iraq. The project, however, as Argus writes, made no progress.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/iraq-bp-lukoil/ on Mon, 05 Jul 2021 10:13:46 +0000.