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April 1, 2020

Iraq asks foreign oil firms to cut budgets

By MEED   

Iraq’s state-run Basrah Oil Company (BOC) has asked four international oil companies to cut budgets by 30% and postpone payments to subcontractors due to the oil price crash.

Ihsan Ismaeel, BOC’s director general, sent a letter to UK-based BP, Italy’s Eni, US-based ExxonMobil and Russia’s Lukoil on 22 March, according to a report by S&P Global.

BP is the lead operator of Iraq’s Rumaila oil field, Eni works at the Zubair field, ExxonMobil is the operator of West Qurna 1, and Lukoil works at West Qurna 2.

The fields have a total production capacity of about three million barrels a day (b/d), well above more than half of the country’s total output.

The letter requests that the companies reconsider work programmes and reduce budgets by 30%.

It also asks them to inform BOC of their ability to postpone or reduce payments by half in the first and second quarters of 2020, and amend contracts with subcontractors to include ‘deferred payment plans’.

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BOC did not respond to requests for comment.

Iraq’s economy has been significantly disrupted by the Covid-19 pandemic.

On 22 March, the Iraqi Government declared that the ongoing Covid-19 crisis constituted an event of force majeure for ‘all projects and contracts’.

In a statement, the Iraqi Government’s Crisis Cell said that the period of force majeure would be effective from 20 February 2020.

The total value of all major active projects currently under execution in Iraq stands at $291bn, according to regional projects tracker MEED Projects. These could all be impacted by the government declaration.

On 30 March, Iraq announced two more deaths due to Covid-19, bringing the total number of deaths due to the virus to 43.

Iraq has recorded more than 380 confirmed cases of Covid-19, but there are fears that the true number of cases is much higher.

Earlier this month, Iraq’s crisis task force ordered schools and universities to be shut, and the working hours of government institutions to be reduced.

It also imposed a curfew from 17 March. The curfew is expected to stay in place until 11 April.

This article is published by MEED, the world’s leading source of business intelligence about the Middle East. MEED provides exclusive news, data and analysis on the Middle East every day. For access to MEED’s Middle East business intelligence, subscribe here.

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