The government of Iraqi Kurdistan hopes to resume talks with Baghdad to restart crude exports from the semi-autonomous region, as a power struggle to form Iraq's next government puts development of the country's biggest oilfields in limbo.
The Kurdistan regional government (KRG) plans to send a delegation to Baghdad this week to discuss the resumption of exports from new oilfields in north-east Iraq, Barham Saleh, the Kurdish prime minister, said in remarks published on the KRG website.
"The delegation would discuss oil exports from the region as well as the contracts signed by the KRG with oil companies," the statement said.
The KRG also said it had sent two of its oil contracts to Baghdad in an unusual move for a regional government that had steadfastly resisted giving up control over natural resources.
The contracts were signed with Norway's DNO International and Turkey's Genel Enerji, which pump oil from the Tawke and Taq Taq oilfields, respectively.
The more than two dozen contracts the KRG has signed with foreign oil and gas companies have been contentious with Baghdad, which has declared the deals illegal.
The Kurds have argued they conform to Iraq's constitution that, according to legal experts, is loosely worded and subject to varying interpretations.
The spat over the Kurdish oil contracts led to the suspension last October of between 40,000 and 60,000 barrels per day (bpd) of crude exports from Tawke and Taq Taq.
"We hope that the new talks would solve the problem," Mr Saleh said.
But it is unclear whether the Kurds in pursuing a resolution are now ready to give in to Iraqi oil ministry demands that it review and ratify the Kurds' oil and gas contracts before recognising them.
That would be tantamount to handing Baghdad jurisdiction over the region's natural resources and would be a huge concession by the KRG.
"I don't think they sent the contracts asking for ratification," said Samuel Ciszuk, the Middle East oil analyst with the consulting company IHS Global Insight. "There will be talks on how to deal with the contracts. How they go about reaching a compromise remains to be seen."
Hussain al Shahristani, the Iraqi oil minister, has been a harsh critic of the Kurdish oil deals, which are production-sharing contracts rather than the technical services agreements favoured by Baghdad.
"He thinks the Kurdish exports should be put on-stream immediately, and it should be up to the Kurds to find a way to wriggle out of the deals they have signed," Mr Ciszuk said. "The KRG takes a different view."
Despite having the world's third-biggest proved oil reserves and ambitious plans to boost crude output capacity to as much as 12 million bpd, rivalling that of Saudi Arabia, Iraq pumps only 2.4 million bpd, or less than Kuwait or the UAE. It has recently exported between 1.9 million and 2 million bpd of crude.
The Kurdish fields hold the best immediate opportunity for Baghdad to boost oil exports and foreign revenue: some of Iraq's big oil deals are running into trouble; sectarian violence is threatening output from the country's biggest northern oilfield, Kirkuk; and upgrades are urgently needed to the southern export terminal at Basra.
The national government's finances are in such poor shape that it is unable to fund its 51 per cent share of a proposed joint venture with Royal Dutch Shell to gather and market 700,000 cubic feet per day (cfd) of gas that is being burnt as waste at Iraq's main southern oilfields, Mr Ciszuk said.
In total, Iraq flares at least 1 billion cfd of gas associated with its oil production, causing air pollution, boosting greenhouse gas emissions and wasting potential fuel for power generation.
The much-needed project to reduce flaring is being held up by the financing problem, by Iraq's slow progress on refurbishing and developing gas and electricity infrastructure, and by opposition to the deal from certain parliamentarians and oil companies.
Foreign oil companies that recently signed oil development deals with Baghdad are not ready to commit to providing the Shell joint venture with large gas volumes when they may need the gas themselves to reinject into oil reservoirs if they are to meet their crude production targets, Mr Ciszuk said.
That points to further delays to a final agreement on Shell's gas contract, which has already been under negotiation for a year and recently received a six-month extension.
Last month, Iraq failed to reach a deal with a Japanese consortium over the development of its Nasiriyah oilfield and said it would develop the field alone.
tcarlisle@thenational.ae
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Top tips
Create and maintain a strong bond between yourself and your child, through sensitivity, responsiveness, touch, talk and play. “The bond you have with your kids is the blueprint for the relationships they will have later on in life,” says Dr Sarah Rasmi, a psychologist.
Set a good example. Practise what you preach, so if you want to raise kind children, they need to see you being kind and hear you explaining to them what kindness is. So, “narrate your behaviour”.
Praise the positive rather than focusing on the negative. Catch them when they’re being good and acknowledge it.
Show empathy towards your child’s needs as well as your own. Take care of yourself so that you can be calm, loving and respectful, rather than angry and frustrated.
Be open to communication, goal-setting and problem-solving, says Dr Thoraiya Kanafani. “It is important to recognise that there is a fine line between positive parenting and becoming parents who overanalyse their children and provide more emotional context than what is in the child’s emotional development to understand.”
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Power: 310hp
Torque: 583Nm
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
Company%20Profile
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Blackpink World Tour [Born Pink] In Cinemas
Starring: Rose, Jisoo, Jennie, Lisa
Directors: Min Geun, Oh Yoon-Dong
Rating: 3/5
A Cat, A Man, and Two Women
Junichiro Tamizaki
Translated by Paul McCarthy
Daunt Books
Martin Sabbagh profile
Job: CEO JCDecaux Middle East
In the role: Since January 2015
Lives: In the UAE
Background: M&A, investment banking
Studied: Corporate finance
Arsenal's pre-season fixtures
Thursday Beat Sydney 2-0 in Sydney
Saturday v Western Sydney Wanderers in Sydney
Wednesday v Bayern Munich in Shanghai
July 22 v Chelsea in Beijing
July 29 v Benfica in London
July 30 v Sevilla in London