Crescent Petroleum sees progress in Iraq gas projects, touts profit-sharing model

ERBIL, Kurdistan Region - Abdullah al-Qadi, executive director of the UAE-based Crescent Petroleum, said his company has made strides in its gas projects across Iraq despite challenges, emphasizing that its profit-sharing contracts with Baghdad offer advantages for both the government and investors.

“Profit-sharing contracts have many more advantages than disadvantages and encourage the investor,” Qadii told Rudaw in an interview last week, explaining that the model incentivizes increased production in shorter timeframes which “aligns perfectly with what the governing party wants.”

Crescent was one of the first upstream private oil and gas companies in the Middle East. With its affiliate, Dana Gas, they struck a deal with the Kurdistan Regional Government (KRG) in 2007 to develop the Region’s gas resources.

In January, Crescent was awarded the exploration rights for the Galabat and Injana oil fields in Diyala province. Earlier in the month, Iraqi Prime Minister Mohammed Shia’ al-Sudani met Crescent representatives to expedite investments in a Diyala oil field and signed a contract to increase gas production to supply power stations.

The following is the transcript of the interview with Abdullah al-Qadi:

Rudaw: In 2024, you obtained several gas fields with the Iraqi government. Have you started work on these projects and in these fields?

Yes. The company initially signed these contracts in 2018, but the signing was delayed until the end of 2023 after the new government took its position. We started operations in one of these fields in Diyala province, which is the Khashm al-Ahmar and Injana field, as well as another field in Basra province. Work is progressing on both contracts, and there are genuine efforts to accelerate work on both contracts. Of course, there are challenges on the ground, but due to our experience and our good relationships with the Central Oil Company and Basra Oil Company, as well as in the Ministry of Oil and the Iraqi government, we have managed to overcome a large part of these difficulties, and we hope to overcome the rest and achieve positive results in the near future.

When will this be implemented on the ground?

We have already started on the ground in both fields, whether in Basra or Diyala, but work in the oil industry sector needs preparation and arrangement.

Especially in the gas sector?

Yes, specifically in the gas sector, it needs operations and studies, and we have now started, for example, in Diyala province in the Khashm al-Ahmar field with seismic survey operations, which is the first step for any development process. We shouldn't forget that these fields are not developed. They are discovered fields but need what is called an evaluation phase and then a production phase. To reach the production phase, we must pass through the evaluation phase, and evaluation means assessing the type of reservoir present in this field, whether oil or gas, its nature and commercial quantities, and then determining the best method for its extraction and production. This is, of course, considered a series of activities that takes time, and this time cannot be shortened by separating this series or making it, for example, more shortened than necessary. It must go through the appropriate progression, but work can be accelerated. Instead of this series taking a year, for example, it could become half a year, instead of five years, it could become three years.

Is there a time ceiling for completing your projects in gas fields in Iraq? Is there a specific timeframe?

Each contract has its specific duration, for example, our contracts with the Ministry of Oil in Diyala and Basra extend to 20 years plus 5 years by agreement between the parties. Our contracts in Kurdistan extend until 2049. So we have twenty-five more years ahead, but during these years, we seek the most appropriate use of natural resources or the most appropriate development of natural resources in these very promising fields.

What type of contracts have you signed with the Iraqi government? Is it a service contract or profit-sharing?

Yes, it's called a profit-sharing contract. Yes, in the first four licensing rounds, the Ministry of Oil in Baghdad signed what are called service contracts. From the fifth round to the supplementary fifth round to the sixth round to other contracts signed separately, like the Mansuriya contract and other contracts, they were signed as profit-sharing contracts, which is a mix between production sharing contracts and service contracts, an Iraqi model developed to suit the situation in Iraq.

Is profit-sharing better than service contracts? Especially in the gas sector?

Better for both parties, better for the government and better for the investor.

Meaning profit for both parties?

Absolutely. Service contracts have advantages and disadvantages. Nothing in the world doesn't have advantages and disadvantages, but profit-sharing contracts have many more advantages than disadvantages and encourage the investor. Here, the main factor makes the investor driven and motivated to accelerate production in larger quantities and during shorter periods, because the economic return, the final economic return for the investor, increases by reducing cost and increasing production rate and reducing the time period, which aligns perfectly with what the governing party wants in this case.

What's the difference between these and your contracts with the Kurdistan Regional Government?

Each contract has its specificity and each contract, as I mentioned, has its pros and cons. No two contracts in the world are identical, meaning contracts always differ, let me give you an example. Our contract for developing Khashm al-Ahmar, for instance, is not 100 percent identical to our contract for developing another field and is not 100 percent identical to our contract for developing Khadr al-Ma', which are contracts signed in the same period.

But generally speaking, it's profit-sharing?

Yes, profit-sharing, that's correct.

If time went back, would you keep your contracts with the Kurdistan Regional Government as they are now or would you sign a different contract?

I cannot speak on behalf of our brothers in the region, you know they are our brothers and partners and we are proud and honored to work with them during these years. Each government has its priorities and vision truly. As investors, we look at an integrative relationship, a true partnership relationship, whatever the contract’s name, what matters is how it's implemented. Here's the thing, some contracts, and I'm not referring to our contracts here in Iraq truly, but some contracts in some countries are considered unfair contracts, where for example the government is heavily dominating or in other areas where the investor is heavily dominating. The contracts here, I think, are balanced contracts and serve the common goals of all parties.

Let's talk about your projects in the Kurdistan Region, let's talk about the KM-250 project, what is the production level and when will this project be completed?

The KM-250 project or Khor Mor 250 has faced some setbacks during the past period that led to its postponement or postponement of its final completion. We had hoped to start production from it during the past year, but because of what happened, we overcame these matters and are currently working on completing this first expansion project. We are working on completing the project before the end of this year or the beginning of next year so that it becomes possible to obtain additional quantities of gas needed for generating electrical power needed by Iraqi citizens whether in Sulaimani, Erbil, Duhok, Salah al-Din, or any governorate.

The obstacles we faced, we first faced Corona [COVID-19 pandemic] for example. Corona unfortunately delayed us at the beginning, we had arranged the program and in 2020 we signed the contract, and we were about to start, then Corona came.

Was there a time ceiling?

Yes, the timeframe was approximately two and a half years to complete the project, but unfortunately, as I mentioned, Corona delayed us, so we had to partially stop until conditions stabilized. Then the project was subjected to unfortunate attacks that also, sadly, led to work stoppages. We can say that despite these attacks, we continued, and we continued because we see that this project doesn't only serve the company from commercial aspects, but has strategic importance for the country itself. The Iraqi citizen is the one who pays the price, whether the Iraqi citizen, as I mentioned to you, is in Kurdistan or in any part of Iraq because the gas goes to generate electricity that the citizen needs. This is its strategic importance for him. Our belief in this matter made us overcome these difficulties and obstacles that perhaps other companies couldn't overcome, and this is something we're proud of.

Men's determination moves mountains, but can we know in which year this project will end?

As I mentioned, possibly before the end of this year.

The end of this year?

Yes. Or the early beginnings of next year.

What is the current production level?

Currently, we produce about 530 million standard cubic feet of gas, and this is an important quantity that generates about 75 percent of electricity needs in Kurdistan provinces. With production increasing to about 800 million standard cubic feet, we work to reach our production to meet the region's need for gas necessary for electricity generation, which can later expand to other areas in Iraq.

There is a lot of speculation about the existence of some problems that could be large, medium-sized, or small in the Khor Mor field. You dismissed one of the contractors from work, who is now doing the engineering and operational work?

We are currently doing this work.

Directly?

Yes directly, the contracting company, due to what happened and due to matters beyond our control, had to withdraw. This was one of the challenges, we as a company, although we are an extraction company and not a project implementer, took on the role of project implementer to complete this project, believing in its extreme importance, and this is not rare in the oil industry but it's not common.

Regarding the allocation of financial dues, have you faced any delay in receiving your financial dues from the Kurdistan Regional Government?

In the recent period, during the past two years, thank God we reached an agreement with the Ministry of Natural Resources and in the Kurdistan Regional Government for the sustainability of receiving dues periodically and without disruption. The matter has progressed very satisfactorily, there are also some exceptional cases, but we hope to overcome them and that payment operations continue regularly due to their importance in instilling a state of confidence and reassurance among investors and financiers for such costly projects.

To what extent and how did the oil pipeline closure affect your projects? Did it have a direct or indirect impact?

No direct impact, because our gas production goes through the gas pipeline to power stations in Sulaimani and Erbil provinces, and other petroleum products and household gas are transported by trucks from the field and distributed in Iraq's provinces, so it had no direct impact on us, we don't have oil pumped in the pipeline. The indirect impact yes, everyone has it, citizens have experienced an indirect impact and companies have experienced an indirect impact, and everyone has, because the absence of continuous and permanent oil pumping led to some financial problems for the regional government which led at a certain time to instability in receiving dues for companies operating in the region, including us, although we overcame this matter.

How do you deal with liquid gas now? Previously it was mixed with Kurdistan Region's oil to improve its quality, what do you do with this gas now?

These condensates are sold to local contractors in the Kurdistan Region.

What is the current production rate?

About 15 thousand barrels of condensates are produced daily and sold and used in Iraq's provinces. As a company, we sell the product at the field, and the buyer distributes it according to their local policy.

The Iraqi government issued several statements indicating its desire to buy gas from you, what agreements have you made with the federal government in this regard?

There are no agreements between us and the government until now. Between us, there are directions and understandings and talks, but there are no contracts or agreements of any kind. We have a contractual obligation that we are committed to through our contracts, and therefore signing any contracts whether with the federal government represented by the Ministry of Electricity or even private parties, meaning private companies, must pass through the general contract under which we work in the region. Currently, our talk with the Ministry of Electricity relates to buying surplus gas we have in the region and using it to generate electricity in stations near the region's provinces.

You are still unable to supply power stations in Kurdistan Region with the necessary gas, how will you be able to supply Iraq with gas?

There are technical issues that the ordinary citizen might not be aware of, but the Ministry of Natural Resources is aware of them. There are some technical matters that make it difficult to use all the gas we have in the region to pump to power stations. The excess quantities that cannot be used in the region will be used in other places, even possibly used in the region for industrial purposes, but there must be factors that make using these quantities possible.

The carbon dioxide emission rate in Kurdistan Region due to your investments is increasing day by day, is it possible to reduce this gas?

I'm really glad you asked this question, because this question makes me feel proud that our company is the only company that has reached complete carbon neutrality, and we managed, thanks to our gas production, to reduce the carbon emissions rate in Kurdistan Region to a very high degree, approximately exceeding ninety percent. For the remaining small amount, we purchased carbon credits from some other projects in order to have 100 percent complete carbon neutrality, so we are truly proud that through our gas production we were able to control and reduce carbon emissions, we don't have activities in oil production, and we hope in the future if we have activities in oil production whether in Kurdistan Region or in other provinces to follow the best and highest degrees of environmental preservation through reducing environmental impact.

 

• SHARE ON
• Share on Facebook
• Share on Twitter
• Share on Whatsapp
• Share on Telegram
• Share on Viber
• Share on Messenger