Mediterranean Institute for Regional Studies
Introduction
Kurdistan
Regional Government (KRG) and the Russian oil organization Rosneft agreed to a
progression of arrangements on oil matters, unrefined petroleum supplies with
an upfront cash payment sums on the side
of an "open communication"; that was finished amid the period between
February and June of this current year.
Despite
the absence of data and the privacy on all sides of the agreement elements,
what is accessible demonstrates, clearly, to their fiscal and money related
significance for KRG; to the geopolitical reviews of the Russian government; to
the benefit and the outside key situating observations of Rosneft; and, at long
last, to the crucial results and effects of Iraq and the central government.
This
shows the complication of the subject and the intertwinement of the issues
identifying with it; the conflicts or likenesses of interests of the concerned
gatherings; the vital consistency with
established and power essentials and lawful methods, among other sides.
These
are what this commitment tries to display, break down and examine. It giveaways
first with the representing structures of the consent to arrangements; at that
point tends to Russia key and geopolitical situating.
However,
the agreement between KRG and Rosneft pledge as a last and final opportunity
for KRG, its discusses as a possibility that these agreements could represent
the last life-saving rope for KRG.
The managing and organizing insight
between Rosneft and KRG
In the light of the accessible data, three separate
structures, as far as substance, goals, time skyline and different issues
identified with each of them, have been settled upon and could be summarised as
follows.
Firstly: Oil Supply Contract with
Forthright installment
As
indicated by Rosneft' Data Office, both side agreed in February 2017, in London
(UK), an agreement for the buy and offer of oil to Rosneft from 2017 to 2019.
The agreement accommodates some progress/forthright installments. The purchaser is Rosneft's exchanging auxiliary
Rosneft Exchanging. The unrefined Oil will be conveyed to Rosneft's refining
system, in Germany and somewhere else.
Aside
from the above, Rosneft’ Information Department-ID has not indicated any of the
essential parts and terms and states of this agreement, for example, value
setting system; amounts of oil included; issues identifying with prepayment,
particularly if there is a base mandatory supply; fines if there should be an
occurrence of resistance, loan fees, and so on.; Keeping money matters
identifying with the store and withdrawal of continues; operational methods for
the stacking and transportation of oil and other related issues.
Nevertheless,
the shortage of data, their dissimilarity, the unknown encompassing this
agreement and the absence of straightforwardness and transparent in the oil
area in the KRG, it is possible to give the following insights:
1- KRG
experiences an extreme monetary and financial crisis and is in desperate need
of budgetary assets.
2- Rosneft has frequently
underlined the primacy of
"gainfulness" and more profitability in this agreement.
3- Rivalry with or
substitution for or despite the present prepayment game plans. through the
Ministry of Natural Resources-MNR, KRG initiates
publishing information on the amounts it paid for the prepayment arrangements
to the concerned companies as well as the amounts it received from those
companies that would be paid in the future.
4- The Iraqi government
commitments to respond a few primary observations make it basic for the central
government to react viably and quickly to these arrangements.
Secondly: Exploration Blocks
and infrastructure projects
In
the start of June 2017, Rosneft declared that it has signed an agreement with KRG,
as a major aspect of the XXI St. Petersburg/Russia Worldwide Financial
Discussion, "a progression of agreements on increase their collaboration
in exploration and production of hydrocarbons, trade, and logistic." The declaration says further, "The
Gatherings consented to a venture arrangement under which they resolved to
create participation in exploration and production, approved to the adaptation of the export oil pipeline in Iraqi
Kurdistan, and also went into various production sharing agreement." And
"Likewise, the Gatherings resolved to go into the impact of the PSA signed as a
component of the discussion concerning five blocks with large geographical
potential and blueprints another point of
view territories of collaboration in exploration and production, including the
gas sphere. however, Rosneft declaration did not specify the groundwork of a
few refineries.
In
the light of the above statement can make the additional observations:
1-
Lake of Transparency and
absence of essential information: Add up to Nonappearance of
Straightforwardness. As because the prepaid oil buy contract said above, no
arrangement has been distributed or any data made accessible in regard to the material
of these declarations; their terms and conditions or timing or the legally
binding arrangements and other imperative issues.
2-
There are no less than four sorts of agreement here:
The joint venture
contract; the production sharing contract for the five exploration blocks in KRG; the allowance to the "establishing
of the exporting oil pipeline", lastly (maybe) a gas deal additionally.
3-
The PSAs for the Exploration Blocks.
None of the five blocks has been named appropriately, and also
their geographic area stays ambiguous.
due
to the absence of straightforwardness, it is expected that these agreements
work in favor of Rosneft at the expense of interests of both the KRG and
the country- Iraq at large.
It
is a confirmable reality that PSAs signed by KRG offer International oil
companies lucrative points of interest and conditions from money related,
financial, managerial and legal part, among others. These already signed PSAs
constitute, for Rosneft, capable "Legal point of reference" that
speaks to the base the organization hopes to have and would expand on them its
arranging position for better terms.
Among
the most essential money related, financial and legally binding components that
Rosneft could negotiate to accomplish them are summarised as the following:
(A)
Reducing KRG "royalties" and change the base for their calculation;
(B)
Increase the rate and percentage of the
"Cost Oil" to guarantee fast healing of the contributed capital and
this essentially implies weakening the proportion of (Profit Oil);
(C) Change the table and premises identified
with the R-factor, which gives Rosneft a higher level of benefit oil;
(D)
Reducing KRG' "Conveyed Interest", which viably lessening KRG's share
in benefit oil;
(E)
Reducing cash payment sums, for example, the signature
reward, production reward (or alike), and additionally consider these as
recoverable cost things (i.e., incorporate them into
cost oil);
(F) If
the exploration blocks are, all or some, among the resigned by IOCs, the
financial assessment of all assets, data and information and activities shall
be at its minimum financial value.
Conversely,
KRG is in a truly powerless arranging position that, for all intents and
purposes and hypothetically, makes it inadequate to having PSAs, with Rosneft
or some other organizations, work for the KRG's advantage.
As
it is a document and well-known matters
among international oil organisations, since 2014, IOCs have given up (19)
exploration blocks and terminated the related PSAs.
Furthermore,
the investigation lately organized by
McDaniel & Associates has reduced Taq Taq reserves from 172 million barrels
estimated at the end of 2015 to 59 million barrels at the end of March this
year. The company operating this field (Genel) had already reduced the reserve
estimates by half in February last year.
Additional
data points to the geographical resemblances amongst the Taq Taq field and
Kurdamir field, which may mean the likelihood of dropping the reserves of the
last field as well.
Thirdly: The Open Memorandum
The
Kurdistan Regional Government has denoted an indication of fact with Russian oil
company (Rosneft) in the field of energy" as apparently expressed by Buar Khansi, KRG, concentrating on that
"this notice is at present an open refresh for 4 months to discuss
assignments between the Rosneft and KRG in the field of work"; Rosneft did
not state this Open Memorandum. Note that this refresh may address a provisional
period during which all the formal and operational procedure relating to the agreement.
Russian tactical and geopolitical location
Rationally,
the covenant and contracts conclude because the KRG share is extraordinary
priceless and it’s an open door for Rosneft vital situating in the oil area of
the KRG from one perspective and for Russia geopolitical favorable position and use in the KRG, in Iraq,
and in the whole region on the other hand.
For
Rosneft, these agreements are the definite entry into the area after earlier
tries, particularly through ExxonMobil (which has with Rosneft exploration
cooperation agreements in the Russian part of the Arctic), failed.
In
February 2014, international oil companies
base discovered data on thoughtful consultations between ExxonMobil and Rosneft
on the sharing of the later in the contracts signed by the former oil company
in the Region.
The
agreement between ExxonMobil and Rosneft didn’t bear fruit for a few reasons,
including:
1-Da’esh
(ISIS/ISL) occupation of Iraqi and Syria’s Sunni territory in mid-June 2014 also rapidly other zones after
constituting "political/security risks".
2-The
consistent for starting about oil costs
collapse, which constitutes "effective investment also fiscal risks".
3-The likelihood about Rosneft acquiring most of
the data concerning ExxonMobil's yielded investigation blocks, which might have
been consequently uncovered by WikiLeaks Concerning illustration specified
above, what’s more, this speaks to
finding of "business risks"/
4- Rosneft's unwillingness will show up to be
standing for ExxonMobil against the Iraqi central government. (It may be worth
specifying that ExxonMobil needs as of
now attempted on 2012 including Rosneft
for West Qurna1 oilfield in the south of Iraq, but Rosneft didn't succeed
Furthermore that opened the field for the
Chinese company-CNPC).
5-The late choice Toward those United States government not with avoiding ExxonMobil from those monetary
authorizes against Russia (effectively intending collaboration with Rosneft)
need significantly decreased or wiped out any credibility of participation
between the two major oil organizations in Kurdistan.
With
respect to the Russian government, this
Agreement will reinforce its geopolitical position and improve its power
to Kurdistan and Iraq, also in the entire Middle East at the large, for the following
considerations:
1.The entree of Russian specific oil companies (which that
organization asserts the bigger part beforehand, its monetary structure) and
the absolute scope for its relationship
in the Kurdistan comes subsequently
taking off or reducing that activities of
broad Western oil companies for instance, with the end goal of Total and
ExxonMobil.
2. There is another Russian organization in the area, Gasprom Neft. Gazprom Neft is the administrator
of two blocks Shakal and Halabja with an 80% interest for each. In August 2012
Gazprom Neft took a non-administrator 40% stake in the Germain piece; at that point, it turned into the administrator toward
the finish of February 2016.
3. Whatever is left of Iraq, where long-haul
benefit contracts are the standard (not PSCs), Russian oil organizations are
associated with two oil fields and two exploration blocks.
4. The presence of Rosneft in the KRG’s oil transporting pipeline
(which has a limit of 700 thousand barrels for every day and intended to
increment to one million barrels for every day) urges, by need (for legitimate,
control and operational premises), the organization to arrange with and get the
authorisation of both Iraqi and Turkish governments; as the two nations have a
two-sided pipeline contract that is yet successful since mid-seventies of the
most recent century. Shared pipeline agreement that is still successful since
mid-seventies of the last century.
Conclusion
To
put it plainly, as is notable, KRG is experiencing a serious monetary and
financial calamity, which is generally of its own making, apart from the
crumple of world oil costs since mid-2014. The absence of straightforwardness
and transparent, wild debasement, and
lower oil trade incomes because of the extent of markdown it bargains of the sharing cost because of the turned idea
of the charge shipment process, the collection of outside obligation and the
unpaid duty of oil organizations are on the whole calculates contributing
extending the money related crisis.
Aside
this, there is an evident disappointment in the administration and terrible governing
of the oil area in the District, as showed obviously by the consequences of
worldwide mediation concerning Dana Gas and Perl; these "genuine and considerable
legal award", confronting KRG are a declaration
of thoughtlessness in overseeing and management gets that are initially out of
line.
At
the point when KRG covertly signed PSCs for six oil exploration blocks with ExxonMobil, it gave these agreements a
"military" measurement and significance. Parallel with that, the Minister
of natural resource declared the start of a mind-boggling period of
"merger and obtaining", indicating the predominance of extensive IOCs
on the littler ones. In this manner, a
"group out" arrangement may have been enhanced by MNR. However, now,
ExxonMobil has given up and deserted three of its explorations blocks, and
there is a question that it will hold the
staying three. As said above, IOCs, altogether, had resigned 19 blocks
regardless of the three-digit a great many dollars they did spend, and no
organization has presented any merger or procurement of any of these 19 blocks!
Source
and Bibliography
rosnaft/Ahmed-Mousa-Jiyad-KRG-Rosneft-Deals-IBN.pdf
rosnaft/iran_turkey_russia_alignment.pdf
rosnaft/Kurdish-Oil-and-Regional-Politics-WPM-63.pdf
rosnaft/Russia-Moves-Into-Kurdistan.pdf
rosnaft/201709_bp_a_new_state_in_the_middle_east.pdf