Iraq emerges as OPEC's top laggard by lowering production record: report

BAGHDAD/LONDON: Iraq has not yet informed its regular oil buyers of cuts in its exports, suggesting that it is struggling to fully implement a OPEC Deal with Russia and other producers in a record supply cut, traders and industry sources said.

Less than full compliance by Iraq, as well as by smaller producers such as Nigeria and Angola, could hurt the OPEC + group's efforts to cut output by 9.7 million barrels per day from May 1, equivalent to about 10% of world demand before the coronavirus crisis led to a slide in consumption and prices.

Iraq, OPEC 's second largest oil producer, has instructed its biggest company, Basra Oil Co (BOC), to cut output from May as part of its efforts to reduce its output by 1 million bpd, or 1% of global supply, an oil ministry source said.

But it has yet to agree on an action plan with other oil companies like BP, Exxon, Eni or Lukoil, which operate the country's largest fields, a BOC spokesman said.

Talks with international oil companies are still continuing to discuss ways to cut production that serve all parties and ensure that mutual interests are observed, the BOC spokesman said.

We cannot say that the talks came to a standstill. We hope that progress will be made soon.

Iraq's oil ministry could not immediately be reached for comment. BP, Exxon, Eni and Lukoil declined to comment.

An industry source active in Iraq said the companies rejected the cut and that delays in forming a new government in Iraq complicated discussions.

It is a disaster right now, the source said.

OPEC Gulf states, including Saudi Arabia, Kuwait and the United Arab Emirates, have informed their customers of cuts to exports. Kuwait, Oman and the UAE have also officially informed OPEC .

Three commercial sources said Iraq has yet to issue any such statement to its regular oil buyers.

Two of the sources said Iraq's export plans from southern May were in line with April's at around 3.3 million bpd.

There is no requirement for participating countries to tell OPEC how they will make their cut, but informing customers about their oil allocations is standard practice.

OPEC 's secretary general Mohammad Barkindo declined to discuss individual country compliance: "We are now focused on the full and timely implementation of this historic agreement," he told Reuters.

'Deadpoint'

The challenge for many OPEC + countries arises from how much they are asking international oil companies (IOCs) to cut, said Amrita Sen of analyst firm Energy Aspects.

Beyond the logistical closings, some of the necessary cuts from Iraq, Nigeria and others when they have barely met the previous cuts are simply not going to happen, he said.

Companies that produce in the oil fields of southern Iraq operate service contracts that pay them a flat rate in dollars for their production and are also compensated in crude loads.

This type of contract protects oil companies against sharp falls in oil prices. But it also means that with the OPEC cuts, Iraq ends up with less crude to trade.

Most operators have told Iraq that they are glad they cut but want their rates to be paid in full. It's basically a standstill, said a source from one of the four companies.

Nigeria and Angola's current export schedules show they are currently not cutting as much as required under the OPEC + deal, but will go further than they did under the previous OPEC + agreement that ended on March 31.

Under the latest agreement, Nigeria should limit production to 1.41 million bpd in May and June. But data from price reporting agency Argus Media shows it plans to export 1.56 million bpd in May and 1.65 million bpd in June, excluding the Akpo stream of condensate.

Una fuente de comercio que ha visto los últimos programas de carga de Nigeria dijo que si bien Nigeria hizo un corte significativo en sus planes de exportación en mayo, todavía no alcanzarán el corte prometido de la OPEC +.

Nigeria's oil resources ministry did not immediately respond to a request for comment from Reuters.

Export plans for May and June from Africa's second biggest exporter, Angola, may also fall short of its OPEC obligations.

Angola's oil ministry and its oil regulator did not immediately respond to a request for comment from Reuters.

May volumes were retroactively reduced to around 1.27 million bpd, and June export volumes are expected to be around 1.25 million bpd, loading programs showed.

These are both higher than the 1.18 million bpd production level Angola has agreed to under the OPEC + deal for the initial two months.

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