Top Energy Stories

Production has resumed at the Qayarah heavy oil field in Ninewa province after a 14-month shut-in due to protests at export terminals, OPEC-plus output restrictions, and disputes over crude transport, according to four industry officials. Production at Qayarah, which is operated by Angolan state oil company Sonangol, restarted at 10,000 barrels per day (bpd) and the crude is being trucked to Kirkuk, according to the industry officials. This is far below the field’s 30,000-plus bpd capacity. Read the full story on Iraq Oil Report.

The Iraqi Cabinet has filed a legal challenge to the 2021 federal budget law, including new financial rules for state-owned oil companies and fuel import taxes. The lawsuit is a sign of the deep political dysfunction that is hindering attempts at economic reform and coherent management of public finances. In a detailed complaint to the Federal Supreme Court, a copy of which was obtained and verified as authentic by Iraq Oil Report, the Cabinet says it opposes six articles in the 2021 federal budget law, which was eventually passed two months ago after an extended delay. The appeal, signed by Cabinet legal secretary Haider al-Sofi on May 9, essentially involves Prime Minister Mustafa al-Kadhimi’s government asking the Federal Court to overturn certain provisions that Parliament added to the budget law. Read the full story on Iraq Oil Report.

A deal by the recently established American oil company Delta Crescent Energy (DCE) to develop and sell oil from northeast Syria hangs in the balance after a license granted by the U.S. Treasury Department expired at the end of May, with no official word on whether it would be extended. At stake is $2 billion worth of net oil sales that DCE says are contracted for shipment through Iraq if its license is renewed. The original license was granted in April 2020 by the administration of former U.S. President Donald Trump and allowed DCE to operate in northern Syria without falling foul of sanctions. But now, according to one U.S. official, the Biden administration has told DCE it should prepare to wind down its operations. DCE is still holding out hope that it can rescue the deal. Read the full story on Iraq Oil Report.

Iraqi oil exports in May averaged 3.336 million barrels per day (bpd), according to Oil Ministry and industry data — a slight decline from April for both the federal government and Kurdistan Regional Government's (KRG) oil sectors. The average price for Iraqi oil increased by nearly $3 per barrel, giving the federal government $5.882 billion in oil revenue last month, up from $5.550 billion in April, and the highest monthly total since $6.163 billion in January 2020. Read the full story on Iraq Oil Report.

National News

Iran-backed militias are using drones to attack coalition bases and diplomatic facilities in Iraq and evade detection systems, U.S. military officials told the Washington Post’s Louisa Loveluck and John Hudson. The reporters write that instead of rockets, militiamen are now using “small, fixed-wing drones that fly too low to be picked up by defensive systems.” The evolving drone threat is now the U.S.-led coalition’s biggest concern in Iraq, said a coalition official. In April, a drone strike targeted a CIA hangar in the Erbil airport complex. “The drone’s flight was tracked to within 10 miles of the site, but its path was then lost as it moved into a civilian flight path,” a coalition official told the reporters, adding that analysis of the recovered drone indicated that it was made in Iran. The covert and sophisticated nature of the strike has “deeply concerned” White House and Pentagon officials.

Iraq is now a “virtual battleground” for fake news between major international players vying for influence, Aws al-Saadi, founder of the Tech 4 Peace collective, told the news agency told the AFP news agency. The problem is so severe that authorities have now set up a surveillance service, trying to track the spread of misinformation. The head of the Interior Ministry's misinformation department said that staff monitor news channels and websites, and raise an alarm if information seems suspect. The report says that a new draft of a cybercrimes law is under consideration by Parliament, but is under fire from rights groups who say it could stifle free expression. As an example of the growing problem, al-Saadi cited an incident in January when radical groups loyal to Iran tried to blame a Saudi national for a suicide attack in Baghdad. It turned out that the Saudi national had actually blown himself up in Saudia Arabia in 2015.

Water levels in Darbandikhan dam are dangerously low. The director of the dam said this week that the water level in the reservoir is 11.5 meters lower than last year, according to NRT news. The dam director said that 2.5 million people depend on the dam for drinking water, agriculture, and industry in Garmiyan and Diyala. To save agriculture in the area, water flow is now being reduced. A dry winter and upstream damming projects in Iran and Turkey mean that the Kurdistan region is heading for a “serious drought this summer,” wrote NRT news, citing experts. The report states that Darbandikhan dam also produces much of the local electricity through its hydroelectric generators, and therefore that low water levels in the reservoir could also affect electricity supplies over the coming months.

Commentary and Analysis

Iraq’s economic outlook is set to improve in line with the global oil market, according to the World Bank's latest Iraq Economic Monitor for spring 2021. The fiscal deficit is predicted to go down to 5.4% of GDP this year, but the bank cautioned that an expanding budget due to structural problems such as the public wage and pension “rigidities” remain unaddressed. Aspects of Iraq’s fiscal outlook threatening this “cautious improvement” remain Iraq’s dependency on oil; continued underinvestment; weak execution of the public investment budget; an unfavourable business climate; the potential for further lockdowns; and a possible deterioration in security conditions. The bank sees the fiscal reforms included in the government’s recent White Paper as a way forward – even though those reforms have been watered down and only partially implemented.

A UN report on human rights violations and abuses in Iraq said there have been several arrests related to the targeted killings of protesters since October 2019, but that “not a single case appears to have moved beyond the investigative phase.” The report documented 48 incidents of attempted or completed targeted killings of protestors and critics by “unidentified armed elements,” and highlights the abduction and torture or ill treatment of at least 32 protestors, and abduction of at least 20 protestors by “unidentified armed elements.” The report concludes that “the rights of many victims and their families to truth, justice, redress and reparation have not been fully respected.”

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