[size=38]Analysis: Advantages of Fifth Round Contracts[/size]
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February 21, 2023[You must be registered and logged in to see this link.]
Baghdad / Obelisk: The licensing round for the fields and border patches in general has a specificity and differs from the previous rounds as it targets border structures and patches, part of which is transboundary in order to optimally invest the oil and gas resources in those areas and achieve maximum benefit from those fields and exploration patches for the country as Most of the regions included in this round are poor regions, and it is necessary to invest oil wealth to improve the living situation by employing the labor force and improving the infrastructure in those regions, in addition to strengthening oil and gas reserves and increasing production capacities, especially in the central and southern regions, which contributes to increasing the country's financial imports By increasing the export capacities of crude oil and reducing or eliminating the need to import gas to operate gas power stations.
The fifth round contract is nothing but a service contract model that has been improved, developed and upgraded from the previous four licensing rounds contract models by strengthening and supporting the contractual and legal aspects that are primarily in the interest of the Iraqi side, as well as adopting a financial system that guarantees the protection of the Iraqi side’s revenues from risks Economic by adopting the principle of profit as a percentage and not as a fixed number (which was adopted in the previous four rounds), in compliance with the budget laws for the years (2016, 2017 and 2018) which stipulate that the contracts include an equation linking the recovery of costs and the price of oil. The most important amendments made to the contracts of this round compared to the service contracts of the previous licensing rounds can be summarized as follows:
a. This model takes advantage of the advantages of an effective financial system to share risks with operators, while emphasizing the Iraqi people's ownership of all oil and gas, whether stored underground, extracted, or source, as well as not mortgaging any quantities or ownership rights to any party other than the Iraqi government.
B. Linking the recovery of petroleum costs with international oil prices in order to ensure a profitable return for the government in conditions of low oil prices, as the government’s share reaches (70%) of the total revenue when the price of a barrel reaches the current (22) dollars.
T. Compelling contracting companies to rationalize and limit their expenditures for the necessary petroleum operations requirements by linking their profits to rationalizing expenditures, controlling development costs, and achieving the planned production rates for each field with maximum efficiency.
w. Introducing the idea of royalty in the commercial model of contracts at a rate of (25%). This will achieve stability for the minimum direct revenues of the Iraqi government during the period of recovering the oil costs of the field.
c. All transactions of transferring and selling shares between qualified companies shall be subject to a fee of (35%) of the total value of the transaction, provided that it is amended in the event of the issuance of the Capital Gain Tax Law.
h. Giving preference to Iraqi subcontractors in obtaining subcontracts, even if the prices of their offers are higher than foreign subcontractors, at a rate determined by the instructions.
x. Canceling administrative overhead charges amounting to (1%) of petroleum costs, and this saves considerable amounts for the government.
Dr. The total financial returns for the government are the proceeds + tax + the remainder of the net financial returns remaining after paying the profitability to the contractor, in addition to the ownership of the assets (facilities, equipment, wells…).
y. Not allowing the contracting company to transfer or assign its share of participation in the contract to another company unless this company is qualified by the Ministry of Oil.
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