ALJUHUD Oil Services

The fifth licensing

From Baghdad – By Iraqi News Agency (INA)

The fifth licensing round differs from the previous rounds, as it is concerned with border patches, part of which is cross-border, in order to optimally invest the oil and gas resources in those areas and achieve maximum benefit from those fields and exploration patches of the country.

As the importance of investing in oil wealth aims to improve the living situation by employing the labor force and improving the infrastructure in addition to strengthening oil and gas reserves and increasing production capacities, especially in the central and southern regions, which contributes to increasing the country’s financial imports by increasing the export capacities of crude oil and reducing or eliminating the need for Importing gas to operate gas electric stations.

What distinguishes holding the fifth round from the contracts of the previous four licensing rounds is the strengthening and support of the contractual and legal aspects that are primarily in the interest of the Iraqi side, in addition to adopting a financial system that guarantees the protection of the Iraqi side’s revenues from economic risks by adopting the principle of profit as a percentage and not as a fixed number (which It was approved in the previous four rounds), in compliance with the budget laws for the years (2016, 2017 and 2018), which stipulate that contracts include an equation linking cost recovery to the oil price.

Among the amendments made to the contracts for this round are:

This model takes advantage of the advantages of an effective financial system to share risks with operators, while emphasizing the Iraqi people’s ownership of all oil and gas, whether stored underground, extracted or sourced, as well as not mortgaging any quantities or ownership rights to any party other than the Iraqi government.

  • Linking the recovery of petroleum costs with international oil prices in order to ensure a rewarding return for the government in conditions of low oil prices, as the government’s share reaches (70%) of the total revenue when the price of a barrel reaches the current (22) dollars.

Obliging contracting companies to rationalize and limit their expenditures for the necessary requirements of petroleum operations by linking their profits to rationalizing expenditures, controlling development costs, and achieving the planned production rates for each field with the maximum possible efficiency.

Introducing the idea of royalty in the commercial model of contracts at a rate of (25%). This will achieve stability for the minimum direct revenues of the Iraqi government during the period of recovery of the oil costs of the field.

  • All transactions of transferring and selling shares between qualified companies are subject to a fee of (35%) of the total value of the transaction, provided that it is amended in the event of the issuance of the Capital Gain Tax Law.
  • Giving preference to Iraqi sub-contractors in obtaining sub-contracts, even if the prices of their offers are higher than foreign sub-contractors, at a rate determined by the instructions.

Canceling administrative overhead charges amounting to (1%) of petroleum costs, and this saves significant amounts for the government.

The total financial returns for the government are the proceeds + tax + the remainder of the net financial returns remaining after paying the profitability to the contractor, in addition to the ownership of the assets (facilities, equipment, wells…).

Not allowing the contracting company to transfer or assign its share of participation in the contract to another company unless this company is qualified by the Ministry of Oil.

In front of the production expected to be achieved from the fields and plots allocated within this round are:

Crude oil production at a rate of (250) thousand barrels / day.

Gas production at a rate of (1000) cubic metres/day

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