Protection of contractual rights for international oil companies in the Kurdistan Region of Iraq
13 August 2023
APIKUR, the Association of the Petroleum Industry of Kurdistan, calls upon both the Government of Iraq and the Kurdistan Regional Government to conclude negotiations to ensure that international oil companies’ (IOCs’) internationally recognized contractual rights are honored and incorporated into Iraq’s budget implementation and any future laws governing oil and gas in the Republic of Iraq and the Kurdistan Region. It is essential to the future of the industry in these regions, and the many jobs it supports, that the outcome of the negotiations include the cost recovery and profit to which the IOCs are entitled under existing Production Sharing Contracts (PSCs).
The PSC model used in the Kurdistan Region has a competitive investment structure that is widely used in petroleum provinces around the world. Under the Kurdistan Region PSCs, the IOCs take all the financial risk and, in the case of success, the Kurdistan Region keeps the majority share of the reward. The success of the PSC model for Kurdistan is clear.
To provide IOCs with the confidence that their contractual right to recover costs and receive profit payments from successful projects, the Kurdistan PSC model is governed by English law with dispute resolution via international arbitration at the London Court of International Arbitration.
Despite the political, security, and geological challenges of the region, the IOC managed sector has developed from almost nothing 15 years ago to current production capacity of around 250,000 barrels of oil per day.
As Kurdistan’s most important industry by far, the oil and gas sector now provides tens of thousands of high quality jobs directly through the IOCs themselves as well as indirectly through service companies, contractors and in the communities neighboring our operations, homes and offices. However, this success has not come easily, with hundreds of millions of dollars spent by IOCs on exploration projects that proved to be non-commercial, all at no cost or risk to the Kurdistan Region.
Federal Iraq’s new budget requires the Kurdistan Region to produce and handover to Federal Iraq, 400,000 barrels of oil per day. To achieve this, the Kurdistan Region will be reliant upon production from the IOC operated fields.
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APIKUR’s objective and purpose is to promote the KRI as an attractive destination for international oil and gas companies, service providers and investors. In addition, APIKUR aims to advocate for and represent the common interests of its members, function as a joint and effective voice for its Members towards all relevant stakeholders whether in the KRI, or elsewhere, and provide a forum for the Members to share relevant industry information and best practices. APIKUR is a Company Limited by Guarantee established under English law.
For more information, visit www.apikur.uk