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The gas produced by the Siba and Mansuriya fields is expected to mainly be used to supply power stations being
constructed to meet the growing demand for electricity in Iraq.
Fiscal regimes
Two of the Group’s licences in Iraq, namely Siba and Mansuriya, are governed by Gas Development and Production
Service Contracts (“
GDPSC
”), while the third licence, Block 9, is governed by an Exploration, Development and
Production Service Contract (“
EDPSC
”).
Under the service contracts the JV partners must perform certain minimum work obligations, as described above for each
asset. A Group company is the operator under two of the Group’s service contracts, Siba and Block 9, and performs
those obligations on behalf of the JV partners in those areas.
The fiscal regime under the service contracts operates on a cost recovery/remuneration fee basis. The JV partners are
entitled to apply for the recovery of a proportion of their costs, with cost recovery entitlement capped at 50% of “deemed
revenue” in each year (“deemed revenue” being calculated by multiplying the amount of gas and condensate produced
by the provisional export oil price for the quarter, as defined). Unrecovered costs in any quarter can be carried forward to
the next quarter until complete recovery is achieved (or, if sooner, until the contract terminates or finally expires).
In addition to the cost recovery amounts, a remuneration fee is paid to the JV partners (and shared between the JV
partners in proportion to their revenue interest) for each boe of dry gas or condensate produced. The remuneration fee is
capped at 50% of the “deemed revenue” once cost recovery has been deducted. This remuneration fee is paid on a sliding
scale based on revenue and expenditure, in accordance with the table below. The Group believes that the remuneration
fee rates that the Group has for its service contracts are among the highest in Iraq. The below table, which has been
compiled on the basis of publicly available information, compares Group’s remuneration fees for its Iraq contracts with
remuneration fees under service contracts entered into by third parties (fees are presented as $/boe).
Source: Al-Nasiriya Integrated Project, Petroleum Contracts and Licensing Directorate of the Ministry of Oil.
R
(1)
for Mansuriya
and Siba
Mansuriya
Remuneration Fee
($/boe)
Siba Remuneration
Fee ($/boe)
R
(1)
for Block 9
Block 9
Remuneration Fee
($/boe)
Below 1.0
7.00
7.50
Below 1.0
6.24
1.0-1.25
5.60
6.00
1.0-1.5
4.99
1.25-1.5
4.20
4.50
1.5-2.0
3.74
1.5-2.0
3.50
3.75
2.0-2.5
2.50
2.0 and above
2.10
2.25
2.5 and above
1.25
(1) “R” is the ratio of aggregate JV partner annual revenue to annual exploration, development and operating expenditures. As a result, the
higher the Group’s level of production and revenue from a given field in relation to its expenditures on that field, the lower its per boe
remuneration fee will be.
