Iraq Oil Lawwwwww

2011

25 mv

61 mv

29 mv+?mv

Oil Fields and DistributionReservs• Recoverable Reserve (2P): 150 billion bbl

( World’s % 9)• Recoverable Natural gas (2P): 3.1 Tcf

( World’s % 2) • 1/3 of the country explored• 1/3 of the country partially explored, • 1/3 of the country unexplored (Western

Desert)

Production• 71 fields discovered;

o 22 fields developed and producingo 31 undeveloped fields are located in

the North o 18 undeveloped fields are located in

the South • In December 1979 the production was 3.7

million bbl/d• During 2004 production was 2 million bbl/d• Within 2012 the producion was 3.115

million bbl/d •To increase production in Rumeli and Kerkük to 1 million bbl/d 1.9 billion $ and 0.95 billion $ investment is needed in order •To increase the production of the other regions and new fields to 1 million bbl/d 3-6 billion $ of investment is needed•Iraq planned 12 million bbl/d and 16 billion m3/year natural gas export ; and this needs more than 40 billion $ investment.

ZEY, 2011

Administration of Oil and Natural Gas Resources_Comparision Table

4 July 2007 17 August 2011 25 August 2011

House of Representative + + +Council of Ministers + + +Federal Council of Oil and Gas (FCOG)

+ + +

Ministry of Oil + + +Representative from each region - + -Representative from each Producing Governorates

- + -

Iraqi National Oil Company + - +

Regional Body + - +ZEY, 2011

Iraq Draft Oil Law_Compasision Table

4 July 2007 17 August 2011 25 August 2011

MoO + + +

KRG defined + - +

Exploration + + -

Iraqi Company

+ + +

Bureau + + +

Producing Governorate

+ + +

Oil and Gas is For all the people in Iraq

in all regions and governorates

To achieve the highest benefit to Iraqi people

For all the people in Iraq in all regions and

governorates

Management Federal Government

Coordination and partnership between Federal Government,

Regions and Producing Governorates

Federal Government

FCOG + + +

INOC and OMC

+ + +

Existing E and P contracts

Review all existing E and P contracts in force and

make necessary changes and submit to FCOG

Review all existing contracts by a committee comprising MoO, MKRG and Chairman of OENR, committee

of HoR.

Review all existing E and P contracts in force and

make necessary changes and submit to

FCOG

Importance from KRG point

KRG becomes a legal regional administration.

KRG can only take place in the contract committee but can not be legal regional administration.

KRG becomes a legal regional administration.

ZEY, 2011

FCOG _Federal Council of Oil and Gas

4 July 2007 17 August 2011 25 August 2011

Prime Minister Chairman of Council Deputy Prime Minister

Minister of Oil Vice Chairman Minister of Oil

Minister of Finance Minister of Oil Minister of Finance

Minister of Planning Minister of Finance Minister of Planning

Director of Central Bank

Minister of Planning and Development Cooperation

Governor of Central Bank

Ministery representative from

Region3 independent experts

Ministery level representative from the Region

Representative from each Producing

Governorates not included in a Region

Representative from each region and governorates

Representative from each Producing Governorates not

included in a Region

Head of INOC and OMC - Head of INOC and OMC

3 Experts - 3 Experts

Power and administration belongs to Federal Government where as they are legitimizing the KRG existence and authority.

Power and administration belongs to Federal Government and KRG is not recognized. INOC and OMC are not taking place and all the power is left to FCOG. MoO is a member.

Power and administration belongs to Federal Government where as they are legitimizing the KRG existence and authority.ZEY, 2011

Negotiation Procedure

No violiation against to Law and model Contracts

subm

issi

on

CoM

Competent Body(MoO, INOC, RB)

Neg

oti

tes

wit

h I

OC

an

d

sig

ns

FCOGSends to BIA to check the competencey with the Oil and Gas Law

BIA

CoR Approval

Violation against the Law and model

contract

Decision given by 2/3 of the

resu

bmis

sion

ZEY, 2011

KRG Oil Law_9 August 2007• Definitions

• Iraqi Federal Government

• Region and Regional Government _KRG

• President _KRG President

• Parliament_ KNA

• CoM_ CoM of KRG

• Regional Council_ KRG

• Ministry_MNR

• Sharing of revenues of the producing fields in the KRG with Federal Government of Iraq after 2005

• KRG shall together with the Federal Government jointly manage Petroleum Operations related to producing fields

• Regional Council of KRG

• President

• Deputy President

• Minister of Natural Resources

• Minister of Finance and Economy

• Planning Minister

• KEPCO_KRG E&P Company

• KNOC_KRG National Oil Company

• KOMO_KRG Oil Marketing Organization

• KOTO_KRG Oil Trustt Organization for receiving revenues from Current Producing Fields and Future Fields on behalf of the KRG

• KRG and Federal Government must jointly manage Current Fields provided that KRG shall have proportional role on FCOG and a partner in INOC

• Federal Government must not practice any new Petroleum Operations in the disputed territories without approval of KRG

ZEY, 2011

Deloitte

Organizational Structure in Iraq and KRG

• Licences are given on the negotiation base

• Production sharing agreements are given

• Passed their own oil law in 2007

• Service contracts are given by bidding in order to get the best benefit on behalf of the Iraqi people

• The contracts main scope is to increase and rehabilitiation of the currently producing giant fields

ZEY, 2011

Deloitte

Irak Bidding Rounds_SC – KRG _PSC

Iraq Part

• 3 “bidding round” realized• Total 14 contracts signed• Exxon, Shell, CNOOC, BP aresome of

the major operators in these contracts

KRG Part• Before 2005

• 8 contracys signed (BinaBawi, Dohuk, Erbil, Kalar Bawinoor, Kewa Chirmala, Shakal, Taq Taq, Tawke).

• 2005-present • 39 kontrat• 22 discoveries• 4 producing

ZEY, 2011

Deloitte

PSA_ KRG Model

Profit Share Breakdown

Goverment Revenue Breakdown

ZEY, 2011

SDPC_Iraq

As it is a service type contract there is no transfer of rights

Cash flow breakdown

ZEY, 2011

Iraq_Objectives of Oil Sector

• To increase oil and gas reserves by the help of new technology

• To develop the 15 unedveloped field and to drill the 395 structure

• 12 million bbl/d production in 2017

• To reach 3 million bb/d production in 2011 (realized by the of 2013)

• KRG wants to reach 4 million bbl/d by the end of February 2014

ZEY, 2011

Deutsche Bank

2010

Deutsche Bank

Iraq: non existing Oil Law but existing Oil Contracts !

• Baghdad should come into consensus with all the regional governorates in making a collaborative oil law

• The draft oil law could not pass from the parliament as it did not take all the consensus of all the parties present in the country.

• The reason for this is the Iraqi Sunnis want a centralized authority where as the Kurdish want regions to be more powerful. Iraqi Shiis also desires the Central authority as the biggest producing regions belong to them. This will lead them to control all the oil sector in Iraq.

• KRG passed her oil law and signs contracts accordingly which creates more autonomous region. And ıt is very late for the Federal Government that she can ignore the contracts that has been signed by KRG.

• KRG gets the most benefit out of the oil law conflict, because although a non existing oil law seems to be a risk for an investor, KRG signed big contracts with the major oil companies which will result a more powerful regional government both politically and materially.

• With in the Parliament the vote of Kurdish is mandatory in order to pass any law which gives more power to KRG also.

• Federal government is in the prosperity of realizing the big contracts with the major IOC’s ; however these plateau targets are hard to achieve as the infrastructure is not sufficient; so she can not reduce the amount of fee paid when the plateau target has not been reached by the contractor. In fact Iraqi goverment is loosing money.

ZEY, 2011

Future of Iraq

• Iraq will still continue to play an important role in oil business in near and far future.

• The increase of production in Iraq is important as non-OPEC producing countries faces with production declines.

• Iraq has enourmous amount of oil reserves still waiting to be explored and waiting huge amount of investment in order to be developed.

• There is no other place left on Earth with such a low technical risk and big reserve in return of big investment.

• Iraq need urgent infrastructure as in 2017, all the fields should to reach their plateau where 12 million bbl/d of oil production should be realized according to the contracts.

What has Iraq to do first?

ZEY, 2011