Iraq Belt Tightening

Iraq’s Oil Minister ‘Adil ‘Abd al-Mahdi has again called on oil firms active in the country’s upstream to cut capital spending.

Speaking on 19 January, he said firms should “harness all necessary means” to raise output to “achieve the financial outcome to cover the shortage of the federal budget because of the oil prices drop.”

However “all necessary means” appears to exclude spending money. “The ministry is studying the idea of reducing the financial expenses of the foreign companies whom are working as service contractors,” he says.

This reiterates a theme first aired last June and again in September when Iraq’s Oil Ministry sent a letter to key firms including BP, Lukoil and Eni asking them to cut spending. The ministry’s “sharply reduced available funds” meant it could not afford to stump up its share of development costs (MEES, 18 September 2015). Of course oil prices, and with them revenues have since fallen much further (see graph). (CONTINUED - 354 WORDS)