Iraq to resume Gulf War compensation for Kuwait next year

Iraq to resume Gulf War compensation for Kuwait next year

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In August-2017, the Iraqi government discussed with Kuwait officials the sale of gas instead of paying money as part of Iraq’s remaining financial compensation to Kuwait due to Iraq’s 1990 invasion of Kuwait, estimated at $ 4.6 billion, out of a total of more than $ 170 billion Dollar, according to Anatolia.
Iraq has chosen Japan’s Toyo Engineering Co. to build a gas pipeline and a petrochemical plant to Kuwait. Sources in the sector said Toyo proposed to build a gas pipeline and start delivery of gas to Kuwait in 2019.
In February 2012, Japan’s Toyo Engineering Co. entered into an agreement to provide technical and engineering services to the South Oil Company of Iraq, along with its multiple partnerships under agreements, with projects of Saudi Aramco and Kuwait Oil, according to the company’s website.
Iraqi Oil Minister Jabbar al-Luaibi said that Iraq will supply Kuwait with 200 million cubic feet of liquefied natural gas (LNG) per day.
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He added the state hopes to stop the burning of gas in mid-2021, which increases the federal treasury revenues of more than 6 billion dollars annually.
Iraq needs an immediate cut to burn gas; a commitment to the terms of the World Bank in exchange for lending to Baghdad
Kuwait’s oil minister, Issam al-Marzouq, said that it was agreed with Iraq to import 50 million feet of gas per day, a guarantee of sovereignty of up to 80% of the cost of the project, which will enable it to diversify sources of gas import and fill the growing domestic demand of gas.
The two sides did not specify whether the gas destined for Kuwait would come from the fields of West Qurna 2 managed by Russian Lukoil, or from Rumaila, which is run by British Petroleum.
“Iraq needs urgent reduction of gas burning and achieving the goals it has committed to the World Bank. The Kuwaiti gas project is a quick solution and an easy way to make a profit from gas resources,” the sources said.
The United Nations said it had accepted a proposal from Iraq to allocate 0.5 percent of its oil revenues to pay $ 4.6 billion in compensation for Kuwait’s destruction of its oil facilities during the Gulf War in 1990 and 1991.
Kuwaiti Oil Minister Essam al-Marzouq said earlier that the talks between Kuwait and Iraq focused on a proposal to use gas to help Baghdad pay the remaining war compensation of 4.6 billion dollars, but disagreements were on the price. Asim Jihad, spokesman for the Iraqi Oil Ministry said the talks focused on price. The Kuwaiti side wants a price below $ 3 per million British thermal units, a price that is compatible with prices of Henry Happ Co. In the United States, but less than half of what Iraq pays in the north when it imports gas from its neighbor Iran.
“The price of gas is still a major sticking point so far,” sources close to the talks said, adding that both countries wanted to set up a petrochemical plant at home to maximize the use of gas deliveries.
A senior Kuwaiti official in the oil sector said discussions with Iraq were still going on, adding that it was not yet clear whether the gas would come from the West Qurna 2 field run by Russia’s Lukoil or Rumaila, run by BP.
Iraq was used to supply gas to Kuwait from Rumaila before 1990, about 400 million cubic feet per day.
In the context of the compensation bill, Iraq pays more than one million victim in Kuwait, valued at $ 52.4 billion, but because of the fall in oil prices in 2014 and its war against the terrorist organization of “Da’ash”, Iraq is affected and asked to postpone the payment of the last and major tranche of compensation to be paid this year to Kuwait.
Kuwait is an OPEC member and oil producers, but it has a gas shortage of 500 million cubic meters per day and is trying to meet growing domestic demand by importing liquefied natural gas from countries including Qatar.
Kuwait seeks to find alternatives to the supply of natural gas, it was agreed that Iraq will build pipelines to transport gas to Kuwait, at a time when Baghdad is trying to reduce the burning of gas associated with the production of oil, and pay the financial compensation.
Ten years ago, Kuwait tried to build a pipeline from Qatar, but Saudi Arabia blocked the plan. With deteriorating ties between Riyadh and Doha this year, Kuwait is looking to diversify its sources of gas imports.
The project, which has not yet been announced, will allow Kuwait to diversify its gas importation in the wake of a political crisis between Gulf states and Qatar, the main supplier of gas,
Kuwait has confirmed its willingness to support the project and has offered sovereign guarantees for up to 80 percent of the cost, although the total cost has not been announced and is ready to buy up to 200 million cubic feet per day of gas from Baghdad.
Iraq ranks 12th in the world in terms of its own gas reserves of about 3.7 trillion cubic meters, but this figure is equivalent to 10 of what Iran holds the largest reserves in the world.
Iraq’s oil ministry plans to develop projects in the gas sector, including the Basrah Gas Company, a 25-year project worth $ 17 billion, with 51 percent of Iraq’s shareholding. Shell holds 44 percent and Japan’s Meisubishi Corp has a 5 percent stake.
The project aims to collect gas from fields in southern Iraq, including West Qurna 1 operated by ExxonMobil, Zubair, run by Eni, and Rumaila, run by BP.

Shatha Khalil
Economic unity
Rawabet Center for Research and Strategic Studies