Iraq Signs Deal with China’s Zhenhua Oil as Exxon Mobil Agreement Stalls

Iraqi Oil Minister Jabar al-Luaibi. (Reuters)
Iraqi Oil Minister Jabar al-Luaibi. (Reuters)
TT

Iraq Signs Deal with China’s Zhenhua Oil as Exxon Mobil Agreement Stalls

Iraqi Oil Minister Jabar al-Luaibi. (Reuters)
Iraqi Oil Minister Jabar al-Luaibi. (Reuters)

Iraq has not yet reached an agreement with Exxon Mobil on a multibillion-dollar project to boost output from several southern oilfields, Oil Minister Jabar al-Luaibi said on Monday.

If no agreement is reached by February, Luaibi told journalists at a signing ceremony for a separate deal, the project would be offered to other companies.

Luaibi had said in October that Iraq was in final talks with Exxon Mobil on developing the project, which consists of building oil pipelines, storage facilities and a seawater supply project to inject water from the Gulf into reservoirs to improve production.

On Monday, the Iraqi oil ministry signed a deal with China’s state-run Zhenhua Oil to develop the southern portion of the East Baghdad oilfield.

The oil ministry expects the costs needed to develop the oilfield could reach $3 billion, said Abdul Mahdi al-Ameedi, who heads the oil ministry’s licensing and contracts office.

Iraq has made significant changes to the new service contract with the Chinese company that links global oil prices and the cost of development, he said.

“It’s a new contract with new amendments which we made to overcome the chokes and lapses in our previous service contracts,” Luaibi told journalists.

The new contact will allow Zhenhua to receive a $3.5 fee for each barrel of crude produced from the oilfield, Ameedi said, and will serve as a model for all upcoming contracts with international companies.

“The East Baghdad contract was drafted in a way to significantly minimize the cost of oilfield developments. This contract will be a model for the following oil deals,” he said.

Iraq plans to utilize 20 million cubic feet of gas produced as a by-product of oil production from the East Baghdad oilfield to supply a nearby power station, Ameedi said.

He said he expects the signing of the East Baghdad final deal to take place in March.

The head of the state-run Midland Oil Company, Jalal Ahmed, told reporters that the increase of crude output from East Baghdad oilfield, which he said was now producing 10,000 barrels per day, will be used to feed a nearby major electricity station near Baghdad.

Jalal also said his company has plans to upgrade production from the Neft Khana oilfield near the Iranian border to 8,000 barrels per day from the current 2,000.

In addition, Luaibi said he was optimistic there would be a balance between supply and demand by the first quarter of 2018, leading to a boost in oil prices.

Global oil inventories have decreased to an acceptable level and there were positive signs that oil market prices would improve significantly in 2018, Luaibi told journalists.

“I am optimistic, and during the first quarter of next year there will be more balance between supply and demand, which will reflect positively on improving global oil prices,” he said.



Saudi Non-Oil Exports Hit Two-Year High

The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
TT

Saudi Non-Oil Exports Hit Two-Year High

The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)

Saudi Arabia’s non-oil exports soared to a two-year high in May, reaching SAR 28.89 billion (USD 7.70 billion), marking an 8.2% year-on-year increase compared to May 2023.

On a monthly basis, non-oil exports surged by 26.93% from April.

This growth contributed to Saudi Arabia’s trade surplus, which recorded a year-on-year increase of 12.8%, reaching SAR 34.5 billion (USD 9.1 billion) in May, following 18 months of decline.

The enhancement of the non-oil private sector remains a key focus for Saudi Arabia as it continues its efforts to diversify its economy and reduce reliance on oil revenues.

In 2023, non-oil activities in Saudi Arabia contributed 50% to the country’s real GDP, the highest level ever recorded, according to the Ministry of Economy and Planning’s analysis of data from the General Authority for Statistics.

Saudi Finance Minister Mohammed Al-Jadaan emphasized at the “Future Investment Initiative” in October that the Kingdom is now prioritizing the development of the non-oil sector over GDP figures, in line with its Vision 2030 economic diversification plan.

A report by Moody’s highlighted Saudi Arabia’s extensive efforts to transform its economic structure, reduce dependency on oil, and boost non-oil sectors such as industry, tourism, and real estate.

The Saudi General Authority for Statistics’ monthly report on international trade noted a 5.8% growth in merchandise exports in May compared to the same period last year, driven by a 4.9% increase in oil exports, which totaled SAR 75.9 billion in May 2024.

The change reflects movements in global oil prices, while production levels remained steady at under 9 million barrels per day since the OPEC+ alliance began a voluntary reduction in crude supply to maintain prices. Production is set to gradually increase starting in early October.

On a monthly basis, merchandise exports rose by 3.3% from April to May, supported by a 26.9% increase in non-oil exports. This rise was bolstered by a surge in re-exports, which reached SAR 10.2 billion, the highest level for this category since 2017.

The share of oil exports in total exports declined to 72.4% in May from 73% in the same month last year.

Moreover, the value of re-exported goods increased by 33.9% during the same period.