Iraq’s First Oil Transparency Report Fails to Include $2.5 Billion in “Signature Bonuses”

Iraq's Prime Minister Nuri al-Maliki (C) cuts a ribbon during the inauguration of a new Single Point Mooring (SPM) outlet in Iraq's southern province of Basra February 12, 2012. Iraq opened a new Gulf crude export outlet in the southern oil hub of Basra on Sunday, clearing the way for Baghdad to increase exports by around 300,000 barrels per day soon after crude begins loading. REUTERS/Atef Hassan

The missing pieces in Iraq’s first EITI report (Open Oil):

On December 20th, 2011, Iraq published its first EITI Reconciliation report, a report which was heralded as “a historic step toward oil sector transparency” by the international community, as the report outlined in great detail the money received from export sales by the Baghdad government. However, as already noted by Johnny,there were many questions raised by the report itself, and over the past couple of days I’ve been seeing how much information already in the public domain can answer just some of those questions.The sole revenue stream covered in the EITI report is that of export sales. At the time that the terms of reference for the this EITI report were agreed, in 2009, the Iraqi oil industry was entirely state run and without foreign participation. However, with the re-entry of international oil companies in 2009, revenue streams into the Baghdad government are no longer limited to export sales.

The first licensing round, which began proceedings in 2008 and was concluded in 2009, saw only one field- Rumaila- being awarded, although two further fields, Maysan and West Qurna Phase 1, were subsequently awarded in bilateral negotiations.

Under the second licensing round which took place in December 2009, seven of the ten oil fields offered in the round were awarded to various consortia of companies. The technical service contracts (TSCs) signed under this licensing round included a number of clauses that have created multiple revenue streams. These TSCs included clauses for cost recovery mechanisms, signature bonuses, and remuneration fees, none of which were included in the EITI report.

I began looking at the most clear cut of these revenue streams; the signature bonuses. These bonuses, which were widely reported upon in the media, ranged from $100 million, which Sonangol paid for the Qayara field, to $500 million, paid by a consortium led by BP for the Rumaila field.

One point of uncertainty was the form in which these payments were made. Some, such as the $500 million Rumaila field signature bonus, was reportedly paid by the company as a ‘soft loan’, to be paid back in 20 quarterly payments, in either crude oil or cash as decided by the company. Others appeared to have been renegotiated, such as the $300 million paid by Eni and Oxy for the Zubair field, reportedly slashed to $100 million in April 2010.

Bearing in mind these uncertainties, the total of the signature bonuses reported to have been paid by international oil companies to the Baghdad government during the period of November 2009 until January 2010 comes to $2.25 billion, as you can see in the spreadsheet I created. Even taking into account the discrepancy of reducing the Zubair field signature bonus, that still leaves a figure of around $2 billion dollars that is unaccounted for in the EITI first report.

Spreadsheet detailing Iraqi oil contract signature bonuses compiled by Open Oil:

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