Erbil, Kurdistan Region, Iraq (mnr.krg.org) - As from January 1, 2016, the Kurdistan Regional Government (KRG)’s monthly payments to the producing international oil companies (IOCs) will be based on the contractual entitlements under the Production Sharing Contract governing each license, replacing the interim payment arrangements in place since last September.
The 2016 payments will reflect the revenue derived from each producing field on a netback basis, adjusting for crude quality differentials compared to Brent prices plus deduction of applicable transportation charges.
In addition to the abovementioned entitlements, the KRG will make a further payment, equivalent to five percent of the respective monthly netback revenue derived from each field, to the IOCs towards the recovery of their outstanding entitlements.
Once again, the KRG acknowledges and appreciates the economic contribution made by the producing IOCs and their success in raising the volume of oil export from the Kurdistan Region. They have demonstrated their commitment to the people of Kurdistan at a time when the Kurdistan Region has been fighting terrorism and shouldering the social, political and economic burden of an influx of 1.8 million refugees.
These payments will cover the IOCs’ ongoing operating expenses and provide additional incentives and rewards for new capital investments to maintain and increase field production levels. The new arrangement will provide greater clarity as to the fiscal status of each of the fields.
The KRG aims to process each of the monthly payments to the IOCs within 10 working days of the following month. As world oil prices rebound from their historically low levels, the KRG envisages raising the allocation of netback revenues to the IOCs to permit accelerated recovery of their outstanding receivables balances.