Oil
Iraq stay ahead of Iran in rivarly for OPEC No. 2 spot
VIENNA – A full lifting of sanctions on Iran could spark new rivalries within OPEC as Tehran seeks to reclaim its rank as No. 2 producer from former foe Iraq.
The two neighbors both aim to expand supplies in the next few years, which could make life difficult for the Organization of the Petroleum Exporting Countries if surging output from outside the group forces OPEC to consider cutbacks.
Baghdad got off to a galloping start this year, ramping up production to 3.4 million barrels per day (bpd) and lifting exports to a record 2.8 million bpd in February, nailing its position as OPEC’s second-biggest producer behind Saudi Arabia.
“It’s a race for capacity. They may be neck and neck for the next few years, but my money is on Iraq pulling away from a trailing Iran,” said Peter Wells of geological consultancy Neftex, who has worked in Iran.
Deteriorating security has reversed early gains, but Iraqi output of around 3.2 million bpd is still up on 2013 and Baghdad is targeting about 4 million by year-end including the autonomous northern Kurdish region.
Iran, more confident after a partial lifting of Western sanctions, has squeezed out more oil to pump 2.8 million bpd. Oil Minister Bijan Zanganeh has vowed to return Tehran to its No. 2 slot as soon as sanctions are fully lifted.
Oil experts say rates could surge to 3.5 million bpd within six months of Tehran being fully unshackled – although the prospects for a final deal between Iran and Western powers may be some way off. Even so, that may not be enough for Iran to overtake Iraq.
“Iran’s infrastructure is old but functional. The biggest issues affecting production growth are likely to be bureaucracy and logistics,” said a senior oil company source.
“It will be difficult for Iran to surpass Iraq on a sustainable basis in less than two years and more likely three.”
IRAQI EXPANSION
The world’s biggest oil companies have been expanding Iraq’s southern fields – Rumaila led by BP, West Qurna-1 run by Exxon Mobil and Zubair operated by Eni – since 2010 when they signed a series of service contracts with Baghdad.
That revival has gained momentum with the start-up of Lukoil-operated West Qurna-2, considered the world’s second-largest untapped deposit, and additional oil from Majnoon, where Royal Dutch Shell is in charge.
But Big Oil could also be tempted by the riches of neighboring Iran, once sanctions are lifted. To woo them, Tehran has worked up a vastly improved version of its former buy-back investment contract.
Iranian officials say their terms are far more attractive than Iraq’s.
“There will be no shortage of companies wanting to help. And if the new upstream terms become clear in the course of this year it would cut the negotiating time,” said a senior oil executive from a Western oil company.
Foreign oil companies at work in Iraq’s oilfields have long complained about slim margins, red tape and contract delays. But they are unlikely to give up on Iraq in favor of Iran.
“There are quite a few companies committed to Iraq right now. You don’t just drop everything and leave after you’ve built up a local organization and made investments,” said an executive from a Western oil company involved in Iraq.
“But when Iran does open up, it will put more pressure on Iraq to ensure their terms are competitive.”
Both straddle huge reserves of oil – Iran the world’s fourth, Iraq the fifth – but Iraq may have the advantage when it comes to extracting them.
“Iraq is building up mostly from new fields with potential to exceed 8-9 million bpd by 2025,” said Wells.
“Iran’s capacity – built mainly from old fields plus Azadegan/Yadavaran – is likely to be restricted to around 4.5 million bpd. This could be achieved by 2019 if sanctions are removed this year and projects are awarded quickly.”
There are major risks for both OPEC members when it comes to tapping their reserves.
For Iraq, internal conflicts, torturous bureaucracy and spiraling unrest pose major challenges. Exports and production since March have been cut by at least 200,000 bpd by attacks on Iraq’s northern pipeline to Turkey.
For Tehran, the danger is that sanctions continue to be applied or that internal politics will stymie the process once the measures are removed.
OPEC, meeting in Vienna on Wednesday, expects its market share to come under pressure in the next few years as the U.S. oil boom and other competing sources boost rival supply, making it harder to accommodate rising Iraqi or Iranian output without a hefty cutback by Saudi Arabia and Gulf allies Kuwait and the United Arab Emirates.
“Iran should be able to get well above 3.5 million barrels per day in a relatively short time from sanctions being lifted,” said Samuel Ciszuk, analyst at the Swedish energy agency.
“And with Iraq’s recent and continued growth that could be an interesting challenge for OPEC to handle.”
– REUTERS
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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