Iraq Moves to Take Control of Kurdistan's Finances

Politics, Geopolitics & Conflict

The Federal Supreme Court in Baghdad has ordered the Kurdistan Regional Government (KRG) to relinquish all oil and non-oil revenue to the Iraqi Federal government, amid the ongoing dispute between Baghdad and Erbil over the latter's unilateral oil operations and separate contracts with foreign oil companies. Baghdad has invalidated oil company contracts with the KRG and is not honoring them in the "transfer" to federal hands. In other words, Baghdad is trying to renegotiate these contracts in its favor and from a clear position of leverage. But the latest move this week is the most significant one yet, with Baghdad effectively seeking to take control of the KRG's finances completely-not just oil revenue.

The Baghdad-Erbil dispute is also happening right now against the backdrop of a dangerous cocktail of pro-Iranian and pro-U.S. forces that threaten to destabilize Iraq. In January, Iran's Islamic Revolutionary Guard Corps launched missiles on Erbil, striking what they claimed to be Israeli spy headquarters there. This week, KRG Prime Minister Barzani warned that the pro-Iranian militias are more dangerous than ISIS. At the same time, though, pro-Iranian militias in Iraq have paused attacks on U.S. troops under orders from Iran, which is meant to signal that Iran does not want the conflict to expand.

After targeting a British ship earlier this week, forcing its crew to flee, and launching a drone attack on a U.S. destroyer, the Houthis have threatened to step up attacks using underwater drones.

Washington was gearing up on Friday to slap sanctions on another 500+ targets related to Russia's invasion of Ukraine, with a focus on the military-industrial complex and associated entities in other countries.

Discovery & Development

Greece's FSRU-based terminal-the Alexandroupolis is readying to receive its first cargo of LNG, which arrived in Green earlier this week. Commissioning tests will commence as soon as the LNG carrier is unloaded. The Alexandroupolis-a former LNG carrier converted into an FSRU, arrived in Greek waters in December. The FSRU is now anchored and set to be connected to a subsea and onshore gas transmission pipeline. From there, gas will be delivered into the Greek Transmission System, where it will ultimately make its way to customers in Greece, Bulgaria, Romania, Macedonia, Moldova, Ukraine, Serbia, Hungary, and Slovakia. The terminal is expected to be commercially operational this quarter and realize a maximum sustainable regasification capacity of 5.5 billion cubic meters per year. Greece has aspirations of becoming an energy security provider to other European countries.

BP will finish drilling its first production well from its Azeri Central East platform offshore Azerbaijan this quarter, with first oil expected yet this year from the three wells that will be drilled this year.

Petrobras has begun to drill its second exploration well in Brazil's Potiguar basin Block POT-M-762, after the first well proved disappointing. Petrobras acquired the block in the 15th ANP Bidding Round in 2018. The block lies along the Equatorial Margin off the coast of Rio Grande do Norte and lies in an environmentally sensitive area.

Equinor's 35/11-28 S Harden sor exploration well in the North Sea has come up dry. The well is the sixth well drilled in production license 248 C, for which Equinor is the operator. The well was a wildcat well drilled west of the Fram field. The well has been plugged and abandoned.

A consortium involving Chevron has made FID for the Phase 2 expansion of the Tamar gas project in Israel. The consortium includes Chevron Mediterranean LImited, Isramco, Tamar Petroleum, Mubadala Energy, Tamar Investment 2, Dor Gas, and Everest. The expansion project is expected to boost gas production capacity in Tamar by as much as 1.6 billion cubic feet per day.

Deals, Mergers & Acquisitions

Saudi Aramco will issue a bond in 2024 in a move not seen in years as it tries to optimize its capital structure. Aramco will focus on maturities of up to 50 years. Selling debt with a 50-year maturation would be an affirmation for the oil company that it will still be needed 50 years from now despite the push to transition to greener forms of energy.

France's Veolia utility will purchase a 430MW gas-fired power plant in Hungary from Uniper, which must rid itself of some assets to comply with EU mandates as part of a 2022 bailout. The terms of the deal have yet to be disclosed.

Enerplus will be sold-but not to Devon Energy. In a new agreement reached this week, Enerplus will now be sold to U.S. shale oil driller Chord Energy Group for $3.7 billion in cash and stock. The deal will include Chord Energy Group taking on Enerplus debt. The combined company should be valued at around $11 billion.