Top Energy Stories

Iraq’s average oil production fell to a five-year low in 2020. Annual output averaged just 4.11 million bpd, well below the 4.77 million bpd produced in 2019. In the past few months, however, OPEC constraints have begun to ease and production is trending upward. Nationwide output in December increased for the third month in a row, averaging 4.05 million bpd. Read the full story on Iraq Oil Report. And, to view the field-by-field data behind these production estimates, check out the Iraq Oil and Financial Dataset.

As OPEC-plus constraints continue to ease in 2021, Basra oil fields are ready to surge. Iraq Oil Report interviewed Hassan Mohammed Hassan, the deputy director general of the state-run Basra Oil Company (BOC), whose role includes overseeing all fields under technical service contracts with foreign oil companies in Iraq's largest oil province. He predicted that many projects would end up benefiting from the recent period of lower production and pandemic, since companies have been able to perform maintenance, and Iraqi staff have taken on larger roles in the absence of international personnel. Hassan also serves as the head of the joint management committee for West Qurna 1, operated by ExxonMobil. He expressed confidence that the American super-major will not leave that project anytime soon, and also gave an updated on the Southern Iraq Integrated Project. Read the full interview on Iraq Oil Report.

Oil Minister Ihsan Ismaael is eager to open the taps. Going into 2021, the OPEC-plus coalition is expcting Iraq — along with other countries that produced over their quotas in 2020 — to make "compensation cuts." But in an interview with Iraqiya TV, the minister said he was lobbying other OPEC members for leniency. "There is serious discussion with the OPEC countries and allies to delay Iraq's payment of the compensation [cuts]," Ismaael said. He was quick to add, "Iraq is of course committed to meeting its commitment to make cuts to protect the market. We would never try to evade this obligation." But he also emphasized the country's readiness to boost production. "During this whole crisis, we haven't stopped a single project," Ismaael said. "All of the projects to increase production and export capacity have continued with the same urgency. Because we know this is a severe crisis, but a passing one."

How To Transport Personnel in a Pandemic

A message from FronteraSky:

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And to hear directly from FronteraSky President Carlos Barbosa, read his interview with Iraq Oil Report.

Economic News

One Basra development project that has been in the works for decades is the Grand Fao Port. The deep-water port would allow large vessels to dock and could help Iraq become more of a regional trade hub. After a political tussle, the Iraqi Ports Company in the Ministry of Transportation signed a contract on Dec. 30 with the company Daewoo to complete the port, writes Adnan Abu Zeed for Al Monitor. Some political factions had thrown their weight behind a Chinese company being granted the contract for the final stage of the works, claiming that it had less demanding payment terms than South Korean Daewoo, and would also build power and desalination stations, railways and roads. But the South Korean enterprise had already completed prior stages of the project — its Iraq director says that the breakwater is now finished, with the port basin at 40 percent completion — and they are now scheduled to complete the whole project by 2023.

The Iraqi government's plan to borrow extensively from the Central Bank of Iraq (CBI) is "frightening." So said the CBI’s own director general for accountability, Ihsan al-Yasseri, in an interview this week with al-Mirbad Radio. Yasseri said that the draft budget currently being debated in Parliament could authorize as much as 47 trillion dinars ($32 billion) in indirect borrowing from the CBI's foreign currency reserves. Yasseri said he expects Parliament to reduce the size of the deficit as it goes about revising the Cabinet’s draft budget. But that might be optimistic. While many MPs have paid lip service to the idea of reducing spending, few have advocated for the kinds of measures — such as reducing the public-sector payroll — that would lighten the government's need for extensive borrowing.

National News

The U.S. government slapped sanctions on two prominent Iraqi paramilitary leaders. Falah Fayyadh, the chairman of the government's al-Hashid al-Shabi (Popular Mobilization) Commission — the umbrealla organization overseeing a range of paramilitary groups — is accused of bearing responsibility for abuses against anti-government protesters. Abdulaziz al-Mohammadawi, widely known as Abu Fadak, is a senior figure in the powerful, Iran-backed militant group Kataib Hezbollah, who also succeeded Abu Mahdi al-Mohandis as the deputy chairman of the Hashid. The sanctions come as the outgoing Trump administration uses its final days to take action against Iran-aligned entities. “Indeed, further designations are likely,” writes Michael Knights for the Washington Institute for Near East Policy. Knights quotes an anonymous senior State Department official: "[The United States] is considering support for terrorism sanctions against senior politicians who are enabling and protecting the [Iran-backed] militias. [These militias] are killing peaceful protestors, stealing from the Iraqi people, and taking orders from the Qods Force. This behavior is destroying Iraq and has to stop.”

Fayyadh is a familiar figure in Washington. A former national security advisor, he has visited D.C. before and has been able to serve as a liaison between the U.S. government and the Iraqi security apparatus, including its Iran-aligned factions. The Iraqi Foreign Ministry said it would raise the designation of Fayyadh (but not Abu Fadak) with the incoming Biden administration.

Separate sanctions on Iranian organisations are noteworthy for the oil industry. Alongside the Hashid leaders, the U.S. also this week blacklisted two Iranian conglomerates whose subsidiary oil field operators are closely linked to Iraq. The Execution of Imam Khomeini’s Order (EIKO) organization has multiple energy sector subsidiaries, including the Ghaed Bassir Petrochemical Products Company, Tadbir Drilling and Development Company, Persia Oil & Gas Industry Development Co., and the Pars Oil Company. The Persia Oil & Gas Industry Development Company last year signed a $300 million contract with the Iranian state to develop the Yaran oil field – the Iranian side of a field straddling the border with Iraq, which is the BOC-operated Majnoon on the Iraqi side.

The other organization sanctioned this week is Astan Quds Razavi, which the U.S. Treasury describes as an “ostensibly charitable organization tasked with overseeing the operations of the Imam Reza shrine in Mashhad, Iran.” Former Iraqi Prime Minister Nouri al-Maliki has met AQR officials in Iran on at least one occasion, according to Iranian media, in hopes of increasing cooperation between the holy Shia shrines in Iraq and the organization. The organization has also set up mobile hospitals in Iraq. AQR also has oil sector subsidiaries, although it is not clear if they have any involvement in Iraq. Both EIKO and AQR are controlled by Iran’s Supreme Leader Ali Khamenei.

New Regulatory Hurdles

A message from New Frontiers:

International oil companies, oil service companies, and other contractors in Iraq face a major new compliance challenge. The oil sector has long enjoyed a de facto exemption from some Iraqi regulations, including Ministry of Labor requirements associated with social security and work permits. But in September 2020, the government started enforcing the rules on foreign oil contractors. If they don't comply, companies risk severe consequences — including payment delays, visa problems, and exclusion from tenders.

To learn more about these latest challenges, Iraq Oil Report spoke with Steve Rahola and Mustafa al-Janabi, two key leaders of New Frontiers Business Consulting. For more than a decade, New Frontiers — which is also known by its Kurdish-language name, Asteki Nwe — has been on the ground navigating Iraq's bureaucracy, gaining the experience and relationships necessary to help foreign companies. Read the full interview here.

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