Iraq is racking up increased levels of debt to the International Oil Companies (IOCs) charged with developing its enormous oil fields, due to the falling price of crude, according to Reuters news agency.
IOCs including Shell, BP and Exxon Mobil are working at Iraq’s Basra oilfields under fixed value service contracts. These contracts are based on a fixed dollar fee for any additional volumes produced.
As a result of the halving of oil prices to around $56 a barrel from $115 in June, the amount of crude needed to pay the companies has roughly doubled – reducing revenue to the government.
“The Iraqis have a problem. The number of barrels they have to give to the companies as service fees has risen two-fold because the oil price has fallen two-fold. So Iraq simply has less barrels for themselves,” a source with an oil major told Reuters.
The source with the oil major said the barrels it had received in February covered only half the dollar amount it was due under its service contract.
“The situation is very tense with the upstream companies,” said a second source with another company which deals in Iraqi crude. “Their allocation is lower and lower when it should be higher and higher. It’s a quagmire for the budget.”
