Iraq: Iraq, IOCs Eye Changes in Oil Contracts to Mitigate Impact of Falling Crude

Mar 30, 2015 | Platts
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Iraq's Oil Ministry and international oil companies are moving toward a shared vision on contract changes that will mitigate the impact of low oil prices and increase profits but will not be production sharing contracts, Iraqi oil minister Adil Abd al-Mahdi said on Sunday.

The ministry has asked IOCs that have signed technical service contracts to recommend changes to the deals. The contracts are currently more expensive to the state, the minister said. In addition, they have a very quick cost-recovery process, which places a burden on the state at a time of low oil prices, he added.

The cost recovery and remuneration fee payments are made in oil, which essentially means Iraq owes double the amount of oil to IOCs than it did a year ago when prices were twice today's level.

IOCs have complained of lagging in-kind nomination schedules, and both sides are worried of what the demands on Iraq's already stressed budget will mean for the contract.