Iraq seeks to reduce fees paid to foreign oil firms with revised contracts

The new developments will not affect the KRG who produces oil and gas from fields under its administration and implements its own production sharing model.

ERBIL, Kurdistan Region (Kurdistan 24) – New contracts expected to be granted to foreign oil companies operating in Iraq will eliminate production fees awarded by the government to the companies, an oil ministry official said on Thursday.

According to Abdul Mahdi al-Ameedi, head of the Iraqi Oil Ministry’s licensing and contracts office, the Iraqi government will send out the new contracts in June which include provisions that exclude oil by-products from the foreign companies’ revenues.

Foreign oil producers operating in Iraq currently receive a sum from the government based on production increases, including crude and oil by-products like liquefied petroleum gas and dry gas.

The contract changes are an attempt to prevent an economic crisis such as the one Iraq experienced when oil prices crashed in 2014, affecting Baghdad’s ability to distribute the fees.

The new contracts will “establish a linkage between prevailing oil prices and cost recovery,” Reuters quoted Ameedi. He added that the Iraqi government would also introduce “a royalty element.”

BP, Exxon Mobil, Eni, Total, and Royal Dutch Shell, foreign companies who are currently working in Iraq, have contributed to increased production in the last 10 years by over 2.5 million barrels of oil per day (bpd) to about 4.7 bpd, Reuters said.

Following Iraqi Prime Minister Haider al-Abadi’s “final victory” announcement over the Islamic State last December, the government said its focus was now on rebuilding its economy, calling on foreign investments for major projects.

The new developments will not affect the Kurdistan Regional Government who produces oil and gas from fields under its administration and implements its own production sharing model with foreign companies.