Iraq to emerge as OPEC’s main output cuts laggard

Work at the Nahr Bin Omar natural gas field in Iraq, where major oil production cutbacks are expected. (AFP)
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Updated 07 May 2020

Iraq to emerge as OPEC’s main output cuts laggard

BAGHDAD: Iraq has yet to inform its regular oil buyers of cuts to its exports, suggesting it is struggling to fully implement an OPEC deal with Russia and other producers on 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 percent 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 percent of global supply, an oil ministry source said.

But it has yet to agree an action plan with other oil companies such as BP, Exxon, Eni or Lukoil, which operate the biggest fields in the country, a BOC spokesman said.

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

“We can’t say talks hit deadlock. We expect a breakthrough to be reached soon.”

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

One industry source active in Iraq said the companies were refusing the cut and that delays in forming a new government in Iraq were complicating the discussions.

“It’s a mess at the moment,” 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 trading sources said Iraq has not issued any such statements to its regular oil buyers yet.

Two of the sources said Iraq’s May export plans from the south were broadly 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 country compliance: “We are now focused on the full and timely implementation of this.”

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 logistical shut-ins, some of the cuts needed from Iraq, Nigeria and others when they have barely complied with previous cuts are not going to happen,” she said.

Companies producing in Iraq’s southern oilfields operate service contracts that pay them a fixed dollar fee for their output and are also compensated in
crude cargoes.

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

Emirates and Etihad ready to resume transit flights

Updated 10 min 1 sec ago

Emirates and Etihad ready to resume transit flights

  • UAE’s two largest carriers lead the way as hard-hit aviation sector struggles to shake off pandemic paralysis

DUBAI: Emirates and Etihad Airways, the UAE’s two largest carriers, said they will resume transit flights as the country’s key aviation sector slowly emerges from pandemic paralysis.

Dubai-based Emirates said on Thursday it will operate transit flights to 29 destinations by June 15, while Abu Dhabi’s Etihad said it would transit passengers to 20 destinations from June 10.

Dubai and Abu Dhabi have become key global layover hubs for passengers moving between Asia, Europe and the Americas and the resumption of transit services is an important step toward returning the cities’ two vast and modern airports to normal operations.

It comes more than two months after the UAE stopped all passenger flights in response to the coronavirus pandemic. Foreign citizens without UAE residency remain banned from flying to the country.

Emirates said it would also offer flights to Bahrain, Manchester, Zurich, Vienna, Amsterdam, Copenhagen, Dublin, New York JFK, Seoul, Kuala Lumpur, Singapore, Jakarta, Taipei, Hong Kong, Perth and Brisbane.

“Customers can book to fly between destinations in the Asia Pacific and Europe or the Americas, with a convenient connection in Dubai, as long as they meet travel and immigration entry requirements of their destination country,” Emirates said.

Meanwhile, Etihad said transfer connections via Abu Dhabi will now be available from Jakarta, Karachi, Kuala Lumpur,
Manila, Melbourne, Seoul, Singapore, Sydney, and Tokyo to
major cities across Europe — including Amsterdam, Barcelona, Brussels, Dublin, Frankfurt, Geneva, London Heathrow, Madrid, Milan, Paris Charles de Gaulle, and Zurich.

Other major carriers are also slowly resuming services as some governments discuss the possibility of opening limited “air bridges” to allow for the possibility of overseas vacations.

Virgin Atlantic said on Thursday it would restart some flights that had been grounded with further services planned for August. It said that flights to Orlando and Hong Kong from London Heathrow would resume on July 20. New York JFK, Los Angeles, and Shanghai are set to restart on July 21.

Global aviation body IATA has warned that post-coronavirus fare discounting was delivering an added financial blow to carriers.

“Airlines need cash because of the crisis and they’re seeking to encourage passengers into seats by offering low fares,” said IATA Chief Economist Brian Pearce.

Carriers reduced domestic fares by an average 23 percent last month according to IATA.