Iraq Cut Oil Exports in August

Crude oil exports from Iraq were reduced to around 3.3 million barrels daily last month in a boost to the country’s compliance with OPEC+ supply curbs.

This was down from 3.48 million barrels daily in July and 3.41 million barrels daily in June.

Reuters cited the Iraqi oil ministry as saying the country would maintain reduced levels of exports in the coming months as well as it seeks to compensate for overproduction and overexporting earlier in the year.

Also this week, OPEC+ said it would delay a planned partial rollback of the production cuts by two months because of the downward trend in international oil prices and few bullish factors to reverse that trend anytime soon.

Iraq, which is the second-largest producer in OPEC, is a regular laggard in production control deals in the cartel because of its overwhelming dependency on oil revenues as a source of financing for the state.

In a bid to boost those, earlier this year the government in Baghdad changed its oil and gas investment regime from technical service contracts to profit-sharing agreements as it sought to attract more fresh investment to its energy sector.

Under the profit-sharing contracts, the winners of the licensing rounds are being offered a share of the revenue from the license after deducting royalty and cost recovery expenses, an anonymous official at the Iraqi Ministry of Oil told Reuters.

In contrast, traditional technical service contracts offer a flat rate for every barrel of oil produced after reimbursing costs. They generally pay foreign investors less than what they would have received under production-sharing contracts.

Foreign firms operating in Iraq have complained that the technical service contracts, with the flat rate, do not allow them to benefit when international crude oil prices rise. These contracts become even less lucrative for foreign investors when costs increase.

By Irina Slav for Oilprice.com

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