Iraq to adopt production-sharing model
BAGHDAD, March 26, 2015 – Iraq is planning to adopt a production-sharing model for its exploration and production contracts, the Reuters news agency reported on Wednesday.
Iraq has been hit hard by the global oil price slump, as its existing contracts with international oil companies (IOCs) are based on a fixed price set before crude oil began its rapid descent in the last quarter of 2014.
Production-sharing contracts, under which the proceeds of oil production are divided on the basis of a fixed percentage, are unpopular among nationalists because they are perceived as a forfeiting of sovereign wealth to foreign companies. However, the government is paying companies more under its current agreements than it would with production-sharing contracts. The new agreements will be known as revenue-sharing contracts.
“Now it is better for us to have production-sharing contracts. We are in the process of negotiating with all the IOCs,” Finance Minister Hoshyar Zebari told Reuters in an interview. “The federal government has come to reconsider through actual circumstances that revenue-sharing is best.”