(Bloomberg) -- Iraq is in talks with oil companies about possible changes in production contracts to create incentives for companies if the price of crude rises and shield government revenue if it falls, Oil Minister Adel Abdul Mahdi said. The ministry’s objective is to maintain output in Iraq, OPEC’s second-biggest producer, and settle payments the government owes international companies for pumping crude, Mahdi said late Wednesday in an interview in the northern city of Sulaimaniya. Iraq is also considering another auction of oil and gas rights, he said, without specifying a date or areas to be offered. We are working on amending contracts to include more incentives for companies to benefit when oil prices are up and for Iraq to avoid a heavy loss when prices are down,” Mahdi said. The ministry and its foreign partners are trying to cut expenses for their mutual benefit, he said. Mahdi didn’t identify the companies participating in the talks. The government is trying to protect its main source of income amid a war against Islamic State fighters in northern Iraq and a slump in the price of crude of almost 50 percent in the last year. Iraq produced 3.45 million barrels a day in February, data compiled by Bloomberg show, and is targeting 6 million barrels a day in 2018. The central government reached a deal with Iraq’s semi-autonomous Kurds in December that allowed increased oil exports via Turkey.
Iraq may export more than 3 million barrels a day of oil this month if no bad weather affects tanker terminals in the Persian Gulf or if the landlocked Kurds increase shipments from fields they control, Mahdi said. Iraq exported 2.57 million barrels a day in February, down from 2.74 million in January, according to ship-tracking data compiled by Bloomberg and port agency reports.
Iraqi forces recaptured the Ajeel and Himreen oil fields in Salahuddin province from Islamic State militants last week. Iraq hasn’t been able yet to assess damage to the fields, Mahdi said. A well at the Khabbaz field near the northern oil hub of Kirkuk is still on fire after Kurdish peshmerga forces retook the facility from militants, he said.
Iraq and the Kurdistan Regional Government agreed on Dec. 2 to start shipping oil together, after months of legal action by the central government against the KRG over some sales. The deal allows for crude to flow from northern Iraq to Ceyhan, Turkey, on the Mediterranean Sea via a pipeline operated by the Kurds, Safeen Dizayee, a KRG spokesman, said on Dec. 2.
Kurdish authorities are delivering less crude to the government than the ministry anticipated, Mahdi said. Iraq’s government received 153,000 barrels a day in January, “less than 40 percent of what was agreed upon,” Mahdi said Wednesday at a conference in Sulaimaniya in Iraq’s Kurdish region. The Kurds delivered “only” 306,000 barrels a day to the government in February, he said.
Iraq estimates it owes $18 billion to international oil companies for this year and at least $8 billion for 2014. The government isn’t considering offering new energy licenses on a production-sharing basis, Mahdi said March 2 in an e-mailed statement.
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