Iraq’s Kurdistan works to establish 2 oil firms as Irbil-Baghdad tensions rise

Oil has fueled Kurdistan’s boldness and heightened tensions with Baghdad that have simmered for decades over land and identity. (AP)
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Updated 18 June 2022

Iraq’s Kurdistan works to establish 2 oil firms as Irbil-Baghdad tensions rise

  • Statement follows dispute between Irbil and Baghdad February, with federal court ruling that the legal foundations of the Kurdistan region’s oil and gas sector unconstitutional

IRBIL, Iraq: Iraq’s Kurdistan Regional Government is working to establish two oil firms, the latest move in the battle between Irbil and Baghdad to control the oil sector in the semi-autonomous region.

The KRG’s new oil firm KROC would specialize in oil exploration, while the second — KOMO — would focus on oil exports and marketing from the semi-autonomous region, a spokesperson said in a statement on Friday.

The regional government has presented the idea and discussed it with the federal government in Baghdad recently, the KRG spokesperson said in a statement.

The statement follows months of disputes between Irbil and Baghdad after a February federal court ruling that deemed the legal foundations of the Kurdistan region’s oil and gas sector unconstitutional.

The Oil Ministry in Baghdad has since made fresh attempts to control revenue from the Kurdistan region, including summoning seven firms operating there to a commercial court on May 19. The firms were Addax, DNO, Genel, Gulf Keystone, HKN, Shamaran and WesternZagros.

The commercial court sitting has been postponed twice as some of the representation for these international oil firms did not have power of attorney, several sources told Reuters. The court session is due to resume on June 20.

As well as announcing plans to establish its own oil company in the Kurdistan region, the Iraqi Oil Ministry has ordered international lead contractors and subcontractors through Basrah Oil and Iraq’s national oil firm to pledge not to work on contracts or projects there.

Through letters sent on June 7 and 12, the firms were given three months to terminate existing contracts or projects in the KRG oil sector or face being blacklisted, according to two sources familiar with the matter.

The Oil Ministry is using two law firms — Vincent and Elkins and Cleary Gottlieb Steen and Hamilton — to help with gaining control of the KRG oil sector, according to two sources. Both firms have declined to comment.

The KRG has repeatedly rejected the federal court ruling. On June 5, the KRG’s Ministry of Natural Resources filed a civil suit against the minister of oil in Baghdad, Ihsan Ismael, for sending emails and letters to intimidate oil firms operating in the Kurdistan region and for interfering with the contractual rights of these firms and the KRG, according to a June 13 statement. Also on June 5, the Irbil court of investigation ruled that the commercial court sessions against international oil firms must be brought to the Irbil court.

There have been years of attempts by the federal government to bring KRG revenues under its control, including local court rulings and threats of international arbitration.

The implications of the latest dispute are not fully clear as more than eight months since elections in Iraq, the formation of a government is still underway.


Turkish drone kills 4

In another development, a Turkish drone targeted a vehicle traveling in Iraq’s Kurdistan region on Friday, killing four Kurdish militants, Iraq’s Kurdistan’s counterterrorism service said. In a statement, it said the drone struck the jeep in the town of Kalar in the northern province of Sulaymaniyah. A fifth passenger was wounded and was being treated in hospital.

The militants were from the Kurdistan Workers Party, which is listed as a terrorist organization by Turkey, the US and the EU, and has led an insurgency in southeast Turkey since 1984 which has killed tens of thousands of people.

Turkey regularly carries out airstrikes into northern Iraq and has sent commandos to support its offensives. In April, it launched its latest offensive, named Operation Claw Lock in parts of northern Iraq — part of a series of cross-border operations which it started in 2019 to combat the outlawed PKK who are based in the mountainous regions of northern Iraq.

The Turkish Defense Ministry said in a tweet Friday that 6 PKK “terrorists” were neutralized in Iraq as part of an ongoing military campaign, but did not offer more details.



Gas crisis lands LNG cargo market in hands of energy giants

Updated 27 September 2022

Gas crisis lands LNG cargo market in hands of energy giants

  • The global LNG market has more than doubled in size since 2011, ushering in dozens of new entrants
  • But a spike in spot LNG cargo prices to $200 million has had a seismic impact for many smaller players

LONDON/SINGAPORE: Rocketing LNG cargo prices have squeezed out dozens of smaller traders, concentrating the business in the hands of a handful of international energy majors and top global trading houses. 

This grip is not expected to ease until 2026 when more liquefied natural gas (LNG) starts to materialise and lower prices, adding to supply worries for poorer states reliant on it to generate power and driving up costs for big Asia economies. 

The global LNG market has more than doubled in size since 2011, ushering in dozens of new entrants and the expansion of smaller players in Asia. In recent years, smaller traders accounted for 20% of LNG imports in China alone. 

But a spike in spot LNG cargo prices to $175-$200 million, from around $15-$20 million two years ago, has had a seismic impact on physical trading activity for many smaller players. 

The capital needed to trade the market soared after benchmark LNG prices rose from record lows below $2 per million British thermal units (mmBtu) in 2020 to highs of $57 in August. 

In July, Japan's Nippon Steel Corp, the world's second-largest steelmaker, purchased an LNG shipment at $41/mmBtu. LNG spot prices price stood at $40.50/mmBtu then. 

Prices have recently eased, hitting $38/mmBtu on Monday, but analysts say they remain at levels that can be linked with an ongoing energy crisis. 

"The biggest challenge facing every market participant right now is credit," said Ben Sutton, CEO of Six One Commodities, a U.S.-based LNG merchant that had to scale down operations after prices soared in the third quarter of 2021. 

Short term market volatility has heightened risk for traders, with geopolitics rather than fundamentals driving price moves. 

"The ballooning of LNG cargo values, along with the spike in volatility, has ... put quite a strain on those players operating with smaller balance sheets," said Tamir Druz, managing director of Capra Energy, an LNG consultancy. 

In Asia, a trading executive told Reuters some smaller players had left offices "dormant" in Singapore's trading hub, while second-tier Chinese traders and some Korean firms scaled down activity due as finance became harder to secure. 

"LNG has gone back to be the commodity of the rich," Pablo Galante Escobar, Global Head of LNG at energy trader Vitol, told this month's international Gastech conference in Milan. 


Conditions are now heavily skewed in favour of players with large, diversified portfolios and strong balance sheets like oil majors Shell, BP and TotalEnergies along with major trading houses including Vitol, Trafigura, Gunvor, and Glencore. 

BP, Shell, Trafigura and Glencore declined to comment. TotalEnergies, Vitol, and Gunvor did not immediately respond to Reuters request for comment. 

Shell and TotalEnergies are estimated to have a combined portfolio of 110 million tonnes of today's 400 million tonnes (MT) LNG market, global head of business intelligence at energy and shipping consultancy Poten & Partners Jason Feer said. 

Both have built portfolios, with Shell buying BG and TotalEnergies taking on Engie's LNG arm. Both are also partners in Qatar's North Field, one of the biggest LNG projects. 

Adding in Qatar Energy's portfolio of 70 million tonnes and BP's, which is estimated at around 30 million, means that four players account for more than half of the market. 

While rising interest rates are adding to trading costs, these have not yet troubled big players, for whom increased price pressure represents a sweet spot, industry sources said. 

Shell and TotalEnergies have reported record-breaking profit, while Vitol's record first half 2022 profit exceeded its results for the whole of 2021. 

Guy Broggi, an independent LNG consultant said Shell and TotalEnergies were major winners as partners and offtakers at Egyptian plants at Damietta and Idku, along with BP and Italy's ENI, selling LNG far above the government's target price of $5/mmbtu. 

As buyers of U.S. LNG via long term contracts, Shell and TotalEnergies also made massive gains from reselling low priced U.S. cargoes to higher priced European markets, he said. 

"We are entering unchartered territory as far as LNG markets are concerned and the aftermath of the current crisis with Russia is hard to fathom- not only for LNG. One sure thing is prices are here to stay higher and longer," Broggi said. 


High LNG cargo prices are also widening energy poverty globally as some cargoes, initially destined for poorer nations, end up being diverted to European buyers. 

U.S. LNG shipments shift toward Europe: 

"Pakistan and Bangladesh emerge as big losers as both had procurement strategies with high percentage of spot purchase and were left to face power crisis this year," said Felix Booth, head of LNG at data analytics firm Vortexa. 

In July, Pakistan LNG Limited (PLL) received no bids in a tender to import 10 cargoes of LNG. 

Indian oil ministry showed India paid 20% more on an annual basis for its July LNG imports, valued at $1.2 billion, while monthly import volumes slid further due to high spot prices. 

"Until we build more infrastructure and put more vessels in the water ... it is going to be difficult to compete with the well established markets," Charlie Riedl, executive director for trade group the Center for Liquefied Natural Gas (CLNG), said. 

Slow project development and a possible return of China from of COVID-related curbs will keep prices elevated, Feer at Poten & Partners said. 

"It could get worse if China comes back into the market in a big way. China has been out of the market this year because of lower demand due to its lockdowns and slower economic growth. That has allowed volume to flow to Europe," Feer added. 

Pak-Iran Pishin border market likely to open next month — commerce minister

Updated 16 September 2022

Pak-Iran Pishin border market likely to open next month — commerce minister

  • Naveed Qamar says the two countries have mutually approved nine out of 12 border markets to enhance trade
  • He informs the two sides will trade with each other through these border markets by using the barter system

ISLAMABAD: Pakistan’s commerce minister Syed Naveed Qamar said on Thursday a border market on his country’s frontier with Iran was expected to be inaugurated in the coming month while hoping it would further strengthen trade relations between the two neighboring states.

The minister issued the statement while holding a meeting with an Iranian parliamentary delegation at his office in Islamabad.

He added that a total of 12 border markets had been proposed by the two countries to increase the volume of bilateral trade, out of which nine had been mutually approved.

Qamar informed trade would take place in these border markets under the barter system.

“Federal Minister for Commerce Syed Naveed Qamar on Thursday said that the opening of Pakistan-Iran ‘Pishin Border Market’ is expected in the coming month, which will increase the trend of free trade between the two countries,” the commerce ministry said in a statement.

The minister maintained there was dire need to increase the trade volume in petroleum and gas, which would also augment mutual trade volume between the two countries.

“We are importing Liquified Petroleum Gas from Iran and its import also needs to be increased,” he said. “There is also a need to increase its production in Pakistan.”

Qamar also said Pakistan should step up its import of electricity from Iran to meet growing demand in Gwadar.

The head of the Iranian delegation, Malek Fazeli, said Pakistan and Iran shared 920-kilometer-long border which helped bilateral trade and movement of people throughout the year.

He said that as a member of the Iranian parliament, he considered cooperation between the two countries in the field of energy essential, adding that work on the Iran-Pakistan gas pipeline should also be completed in soon.

Fazeli maintained his country was willing to fully cooperate with Pakistan to ensure the rehabilitation of flood-affected families in Sindh and Balochistan provinces.

After bailout deal, experts urge asking IMF for fiscal space as floods ravage Pakistan

Updated 25 September 2022

After bailout deal, experts urge asking IMF for fiscal space as floods ravage Pakistan

  • The international lending agency approved an immediate disbursement of $1.1 billion to Pakistan on Monday
  • Experts say the government should seek financial concessions to spend more on rescue and relief activities

KARACHI: Pakistan’s financial experts said on Tuesday the government should discuss the recent floods and their impact with the International Monetary Fund (IMF) to create fiscal space for itself to spend on relief and rehabilitation activities after the global lender approved an immediate disbursement of $1.1 billion to the country.

The IMF decision was taken in an executive board meeting in Washington on Monday, bringing its financial assistance to Pakistan under a bailout package signed in 2019 to about $3.9 billion.

The revival of the loan program has come at a time when Pakistan is witnessing its worst floods triggered by torrential monsoon rains that have killed over 1,100 people and destroyed large infrastructure and farmlands.

“It is important to ask the IMF for an adjuster to be able to spend on rescue and relief efforts in the wake of the floods,” Dr. Khaqan Najeeb, a former adviser to the ministry of finance, told Arab News. “Pakistan can also seek some money under the rapid financing instrument available with the fund which we also tapped previously [during the COVID-19 pandemic].”

“The IMF is the best anchor for Pakistan, considering the country’s balance of payment challenges and the uncomfortable position of $7.8 billion in the central bank’s reserves which can barely cover over a month of imports,” he continued.

The delayed IMF approval resulted in disorderly movements in Pakistan’s currency and stock markets.

“We can hope that the revival of the IMF program will give confidence to the jittery markets and that the worst dollar credit crunch that Pakistan faced over the last couple of months is now over,” Najeeb said.

Pakistan’s stock market, which recently displayed a bearish trend, gained more than 400 points after opening on Tuesday. The rupee also appreciated against the dollar in the early trade.

“All eyes are now on global oil prices and local political situation,” Muhammad Sohail, chief executive officer of Toplines Securities, told Arab News.

“We believe that after the IMF endorsement, more dollar funding for Pakistan is likely from bilateral and multilateral agencies along with other sources which will support the foreign exchange reserves,” he continued. “This will also bring stability to the national currency which had recently been under pressure due to uncertainty surrounding the IMF program, especially after the differences between federal and provincial administrations.”

The IMF acknowledged on Monday that Pakistan was at a difficult economic juncture, though it continued to insist on the implementation of tough structural reforms.

“Accelerating structural reforms to strengthen governance, including of state-owned enterprises, and improve the business environment would support sustainable growth,” Antoinette Sayeh, deputy managing director and acting chair of the lending agency, said in statement.

“Reforms that create a fair-and-level playing field for business, investment, and trade necessary for job creation and the development of a strong private sector are essential,” she added.

Pakistan central bank holds rates at 15%, to closely watch inflation

Updated 22 August 2022

Pakistan central bank holds rates at 15%, to closely watch inflation

  • The decision came after the bank hiked rates by 125 basis points at its previous policy meeting in July
  • Pakistan is in economic turmoil with fast-depleting foreign reserves, historic depreciation of the rupee

KARACHI: Pakistan’s central bank on Monday held its main policy rate at 15 percent, the bank said in a statement, adding it would closely watch inflation data and global commodity prices.

“Looking ahead, the MPC (monetary policy committee) intends to remain data-dependent, paying close attention to month-on-month inflation ... as well as global commodity prices and interest rate decisions by major central banks,” the State Bank said in a statement.

The decision, which was largely in line with analysts’ expectations, came after the bank hiked rates by 125 basis points at its previous policy meeting in July as the country experienced surging inflation.

Pakistan is in economic turmoil with fast-depleting foreign reserves, a historic depreciation of the rupee against the US dollar and soaring inflation.

The decision comes ahead of a crucial meeting by the International Monetary Fund (IMF) in Washington next week, at which the bank said it was expected to approve a $1.2 billion tranche of lending.

Pakistan’s annual consumer price inflation reached 24.9 percent in July, the highest in 14 years, according to its statistics bureau.

Still, the bank said there were signs that inflationary demand pressures were easing, which justified holding rates steady.

“With recent inflation developments in line with expectations, domestic demand beginning to moderate and the external position showing some improvement, the MPC felt that it was prudent to take a pause at this stage,” the bank said.

It projected headline inflation would peak in the first quarter of the fiscal year — which began in July — before gradually declining through the rest of the year.

The bank also welcomed expected fiscal consolidation to around 3 percent of gross domestic product.

“It envisages a strong fiscal consolidation ... which is appropriate to cool the economy and ensure a reduction in inflation and the current account deficit,” it said.

To help achieve this result and reduce the country’s import bill, it expected government measures to promote markets closing early, reduce electricity use, and to encourage remote work from home and car pooling.

Fiscal consolidation has been a key demand of the IMF. Pakistan’s last loan disbursement from the fund was in February and the next tranche was to follow a review in March, but the government of ousted prime minister Imran Khan introduced costly fuel price caps which threw fiscal targets and the program off track.

Analysts call Pakistan’s currency, stocks international ‘top performers’ in August

Updated 15 August 2022

Analysts call Pakistan’s currency, stocks international ‘top performers’ in August

  • Stocks surge by 22 percent while rupee appreciated by 11 percent since the beginning of this month
  • The change in market sentiment owes to expected revival of IMF program, financing from other nations

KARACHI: Local traders and analysts on Monday described Pakistan’s currency and stocks as global ‘top performers,’ saying they had recovered much of their value since the beginning of August after months of depressed trading against the backdrop of political and economic uncertainty in the country.

Pakistan’s main stock index rose by 764.25 points to close at 43,621 while the currency appreciated by 0.71 percent to close at Rs 213.98 against the US dollar in the interbank market on Monday.

The stocks and the Pakistani rupee have appreciated by 22 and 11 percent, respectively, during the ongoing month in a consistently bullish spell.

“After months of economic and political uncertainty, the rupee and stock market have emerged as top performers in August so far, beating all other countries,” Muhammad Sohail, chief executive officer of Topline Securities, a Karachi-based brokerage firm, said while referring to Bloomberg data. “The rupee is up 11 percent while KSE100 Index has surged by 22 percent in dollar terms.”

The rupee has appreciated by 11.58 percent, or Rs25.97, against the greenback in the last ten trading sessions that remained bullish.

Prior to that, Pakistan’s national currency lost its value by 17.51 percent since January due to economic concerns related to the revival of the support program of the International Monetary Fund (IMF) and the political situation that led to the ouster of former prime Minister Imran Khan in April.

The recent appreciation of the rupee is mainly due to the revival of the IMF program after Pakistani authorities and officials of the global lending agency reached a staff-level agreement for the seventh and eighth review of the loan program on July 13.

The agreement has paved the way for the disbursement of $1.2 billion by the IMF at the end of August after the approval of its executive board.

Pakistan is also expected to get some financial assistance from friendly countries, including Saudi Arabia and the United Arab Emirates (UAE), which is desperately required to bridge the financing gap recently mentioned by senior IMF officials.

These developments have also had a positive impact on the country’s equity market which had a bullish close on Monday, said analysts.

“The bullish market sentiment owes to the strengthening of the national currency along with the IMF’s letter of intent for the revival of the bailout program,” Ahsan Mehanti, chief executive officer of Arif Habib Corporation, said. “Reports of additional financial support from Saudi Arabia after the finance minister hinted at $1 billion UAE investment through Pakistan Stock Exchange [PSX] have also helped the situation.”

He added that other factors that benefitted the market included a positive sentiment in global equities and renewed foreign interest in PSX ahead of the IMF bailout receipt expected this month.

Pakistani analysts expect the rupee to stabilize between Rs200 and Rs210 against the US dollar.

“The Pakistani rupee was undervalued against the greenback which is expected to stabilize at around Rs210 after recent prospects of inflows from the IMF and friendly countries,” Samiullah Tariq, director research at the Pakistan-Kuwait Investment Company, told Arab News.

However, currency dealers said the rupee was likely to find support somewhere around Rs200 after the revival of the IMF program and expected import cuts.

“The rupee was depreciating due to the uncertainties surrounding the IMF program, though the fundamentals were sound and now the national currency is appreciating on mere promises since we have not received the funds so far,” Zafar Sultan Paracha, general secretary of the Exchange Companies Association of Pakistan (ECAP), said.

“The pressure on the Pak rupee will further ease off in the coming days due to the reduction in global commodity prices, including oil and other energy products along with freight cost cuts,” he added.

Fitch Ratings in its latest Economics Dashboard released on Monday said global supply chain disruptions were beginning to unwind as shipping rates were gradually declining while the time taken to deliver goods was also falling quickly.

It added that port congestion had eased and the backlog of orders was getting cleared, raising the prospect of lower core goods inflation ahead.

“The cost of shipping freight has declined by as much as 70 percent on some routes since September 2021 while transporting cargo now takes around 90 days instead of 122 days in April 2022,” the international rating agency said. “Congestion at US ports has dropped significantly, falling by close to 80 percent since last November.”