BAGHDAD: Iraq’s oil minister said on Monday development costs for foreign oil companies had been revised down to just over $9 billion in 2016 from $23 billion following complex negotiations. Adel Abdel Mahdi said on his official Facebook page that most foreign oil companies had approved the revised costs, and that it would not affect production and development plans.
The slump in crude prices has slashed government revenue in Iraq, OPEC’s second biggest exporter, just as it faces an economic crisis and surging expenditure to fund a military campaign against Islamic State. Since a significant proportion of development costs are passed on to Iraq, the oil ministry had called on firms to revise their oilfield development plans by considering postponing new projects and delaying already committed projects as long as no additional costs were incurred.
“In 2016, the companies estimated costs at $23 billion but we entered into complex negotiations … and were able to reduce them to just over $9 billion whilst preserving production and development plans,” Abdel Mahdi said, adding that around $13.6 billion had been paid to firms in 2015 and $13.1 billion the previous year. Earlier on Monday, Abdel Mahdi said Iraq plans to increase oil output to more than 7 million barrels per day over the next five years, and export 6 million of that.
Oil production in Iraq hit a record high of 4.775 million bpd in January, ministry spokesman Asim Jihad told Reuters earlier this month. In a statement on the oil ministry’s website, Abdel Mahdi also said Iraq would use all its gas production to supply the electricity grid and industry, requiring investments of $300 billion over the next 15 years. Abdel Mahdi made the comments during a visit to Japan where he discussed opportunities to invest in and finance Iraqi energy infrastructure, the statement said.
