OREANDA-NEWS. Thamir Ghadhban is chairman of the Iraqi prime minister's energy advisory commission. He spoke to Argus today on the fringes of the Basrah Oil, Gas and Infrastructure conference.

What is Iraq's production at the moment, with and without the Kurdistan region?

Well, if we include the Kurdistan region, Iraq is now producing more than 4mn b/d, definitely. And the exports from the south are just in excess of 3mn b/d. and from the north the figure varies, but let us say, 500,000 b/d in exports.

What is the target for 2020?

A forecast by 2020 is not easy, of course. But we expect there will be production of around 7mn b/d. There are conditions — first of all, that market fundamentals allow Iraq to export in excess of 5mn b/d.

We have contracts with reputable international oil companies, and those contracts include development plans with certain production targets. BP, CNPC should produce 2.1mn b/d. And, similarly, when we go to West Qurna phase 1, phase 2, Majnoon etc they are all in excess of 1mn b/d. When you add them together, we have commitment by international oil companies of production in excess of 7mn b/d. Add to that production in the north and the oil fields in the south and Kurdistan, we will actually have a capacity of 9mn b/d capacity. So, 7mn b/d is production, and 9mn b/d is capacity.

Is there progress on re-establishing an export agreement with the KRG?

The old agreement worked for a while, but it had difficulties. But now the [federal] government is in the process of finalising the budget of 2016. Embedded in it is that the region of Kurdistan will hand over 550,000 b/d to the government, in return for the region receiving 17pc [of total federal government revenues]. The Kurdistan region is also facing very hard times, lots of problems in paying salaries, projects have stopped, so many companies have left the region, and they have their own political problems. So, I think they are much wiser now to come to terms with the federal government, and there has been an announcement by [KRG] Prime Minister Nechirvan Barzani himself, and yesterday even also the federal minister of oil also mentioned that they are expecting a high-level delegation from the KRG to come to Baghdad to discuss this matter. I think there is a very strong likelihood they will decide to agree.

Is Baghdad still threatening to take legal action against anyone who is handling or buying crude from the KRG?

This is a known policy and there is no change in this.

What amendments are you looking to make in the service contracts?

We made major amendments in the last two years — 2013-2014 —in which we reduced the plateau of the first bid round and also made lots of improvements benefiting the international oil companies. For example, we removed penalties, and we extended the duration of the contracts, in order to increase the profitability of the companies in each contract. But, there were a number of issues that were overlooked. One of them was payment. When the oil price went to about $40/bl, it became a burden on the government to pay about $20bn to the international oil companies. There should have been a linkage between payment and the price of oil. So, the oil minister is thinking along this line: either a linkage to the price, or there is a ceiling to the level of payment for them. Otherwise it will not be practical. The oil companies know this — they want a win-win relationship.

Are these the only amendments?

I have raised other issues. One of them is the utilisation of gas in the first bid round. We cannot really continue flaring gas, and it should be the commitment of oil companies to take measures to stop flaring. The second is in the second bid round contract and is that there should be a deadline for flaring, a certain date to construct the processing facilities for the gas.

And when will these amendments be finalised?

We hope this year. The oil minister has already approached the oil companies and they have reacted, and given their own ideas. They reacted positively. There are, of course, still differences. They need time to agree.

Are all the SPM units working now?

No, not all of them. Three are already in operation but the one financed by the yen loan is not ready, as it has had design problems.

When will it be completed?

Another year.

Has the split of Basrah crude into two grades caused any infrastructural bottlenecks?

This was an issue. First of all, we increased the volume of crude coming from the new fields, and blending them together led to downgrading of regular Basrah oil. The separation of the two gives better marketing stability to [state-owned marketer] SOMO, and better control quality of the crude. This will continue. But once we construct the Fao depot, then the ministry of oil should have a much better flexibility in market and quality control as we will have enough storage.

How much capacity will that have?

We should have at least five days.

And when will it be completed?

We are aiming for the coming two years.dity news, data and analysis services.

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