Thread: Archive News - Iraqi Dinar Think Tank - 24/01/201 - 23/07/2011

DNO International doubles oil reserves at Tawke field in Kurdistan

Norwegian oil firm DNO International (OSL:DNO) has more than doubled of its reserves for the Tawke oil field in the Kurdistan region of northern Iraq.
Tawke can now be considered a world class oilfield, DNO said.

Last month DNO announced plans to join the London Stock Exchange in the future, after it has concluded a merger with UAE-based Rak Petroleum.

The Norwegian firm currently produces around 15,000 barrels a day, from the Tawke oilfield in the Kurdish region of northern Iraq as well as three oilfields in Yemen.

Notably DNO received a major boost recently with the resumption of oil exports out of Kurdistan, a result of the recent thawing of relationships between Erbil – the administrative centre of Iraqi Kurdistan – and Bagdad.

Today DNO said that an independent assessment has confirmed that the Tawke field's ultimate recoverable reserves (P50) now stand at 636 million barrels of oil, a 107 percent uplift from the 306 million barrels defined in 2010.

"After this third party review by our external auditors, the Tawke oil field is confirmed to be a world class, giant oil field,” said managing director Helge Eide.

“The new reserves numbers far exceed our expectations of even a few months ago and certainly were not envisaged when we made the discovery in 2006.

“But the field's recent performance has proven its exceptional reservoir quality," said Managing director.”


http://www.proactiveinvestors.co.uk/...tan-30541.html

Iraq entering the age of islamic banks

Iraq has approved the construction of a government Islamic bank with capital reaching 250 billion dinars (about $214 million). The new bank will be under the supervision of the Central Bank of Iraqand will be administratively linked to the Finance Ministry.

An Iraqi official confirmed that the Islamic bank will work to attract significant capital and will contribute to the process of integrating governmental and private banks. The Iraqi government also decided to allow the operation of Windows in governmental banks.

The Economic Committee of the Iraqi Council previously announced that Islamic banks, of which there are nine, don't contribute to raising the economic development level, while experts found that the private banks in Iraq, of which there are 36, don't have the tools to promote monetary and economic policies for several reasons, including a missing law organizing operations and the failure to secure the required support from the country. For example, the Rafidain Bank, one of the most important governmental banks in Iraq, doesn't accept transfers from private banks (including Islamic banks) and the Finance Ministry refuses to deal with private banks (including Islamic ones).

The Executive Director of the Association of Iraqi Private Banks, Faiq Nasser Hussain, announced that Iraqi governmental banks shouldn't operate pursuant to the Islamic banking system because Islamic bank budgets are different from the budgets of traditional commercial banks. He noted that the Central Bank of Iraq finally put it to a committee to draft a law for this sector.

The Central Bank of Iraq recently announced that it will grant a number of licenses to establish private banks, confirming that their growth will enhance the economic situation in the country. The total capital of private banks is about $2.7 billion dollars and expected to rise to 100 billion dinars by the end of June, reaching 250 billion by the end of 2012.

http://www.zawya.com/story.cfm/sidZAWYA20110712100750

Iraq Hopes For National Oil Co Law By End 2011

The Iraqi parliament is expected by the end of this year to pass a long-sought law re-establishing the Iraqi National Oil Company, or INOC, which former leader Saddam Hussein's regime invalidated in the 1980s, a top energy advisor to Prime Minister Nouri al-Maliki said.

Thamer al-Ghadhban said that the company would be involved in supervising Iraq's producing oil and gas fields, under-development fields and exploration blocks.

A draft law of the long-awaited new national oil company, which would revive a company established in the 1960s and merged into the Oil Ministry in 1987, was passed in July 2009 but has since been stalled in parliament.

Last week a parliamentary hearing to start debating the INOC law was attended by Oil Minister Abdul Kareem Luaibi, former oil ministers Ibrahim Bahr al-Uloom and Ghadhban, the head and members of the parliament oil and energy committee and several Iraqi oil experts.

INOC, if restored, would act as parent of the existing South Oil Co., Iraq's largest petroleum company, North Oil Co., Missan Oil Co. and Midland Oil Co., Ghadhban told reporters late Tuesday on the sideline of an Iraqi petroleum conference here.

According to the draft law, INOC would spearhead national and local strategy, would carry out operations from exploration to developing fields and would partner with or even compete against foreign companies to develop Iraqi fields, Ghadhban said. Oil and gas marketing could remain a responsibility of the Oil Ministry's State Oil Marketing Organization, he said.

INOC will be a cabinet-level organization led by a president with ministerial rank. The company's board will include officials from the ministries of oil, finance and planning and the Central Bank of Iraq.

http://www.foxbusiness.com/markets/2...end-2011-aide/

Finance Committee: Opening new doors of Revenue from 2012 through the budget

Announced that the Finance Committee in the Iraqi Council of Representatives, the budget of 2012 will open new doors of revenue in addition to oil.

A member of the Committee MP for a coalition of state law, Haitham al-Jubouri in a statement "of the Agency news", was formed a special committee to draw the economic policies of the budget 2012.

and that Finance Committee is seeking to open new doors for revenue to support the budget, in addition to oil, pointing out that these doors are activating the work of Customs and the addition of revenue to the budget, as well as tax and customs tariff, noting that the committee called the Council of cabinets to the need to speed up the application of law, the latter due to enter the new revenue for Iraq , and will increase the percentage of the investment budget.

http://ar.radionawa.com/Detail.aspx?id=10561&LinkID=197

Parliamentary Committee on Economics, expects to increase per capita income in Iraq (2012)

Expressed member of the Committee of Economy and Investment parliamentary deputy for the National Alliance Amer Alfayzan hope to increase the per capita income of Iraq in the year (2012).

said Fayez in a press statement: "I expect to increase per capita income of Iraq in 2012," noting that "This increase is inevitable because the standard of living of individual future on the improvement and prosperity, especially after the relative political stability, which will be fully during the next phase will encourage investors and all economists to work in Iraq."

He added, Fayez, "There are many requests from investors and global corporations and international banks to finance economic and participate in the reconstruction, which will lead to recovery the economic reality of Iraq."

http://www.radiodijla.com/cgi-bin/ne...-13%2011:10:22

Shell-BGC Contracts: Inked but not yet approved!

Ahmed Mousa Jiyad is an independent development consultant, scholar and Associate with Centre for Global Energy Studies (CGES). He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN. He is now based in Norway.

Media sources provide today (12th July 2011) conflicting reports on the deal with Shell regarding Basra Gas Company (BGC): some say it has been signed today others say the ministry has postponed the signing. However, signed or not, the BGC contracts according to the ministry’s known procedure is subject to the approval by the Council of Ministers.

Industry sources keep stating that Iraq produces 1.5 billion cubic feet per day (cftd) or so, out of which about 700 million cftd is flared for lack of infrastructure. Flared gas is both a waste of valuable finite energy source, and also damaging to the environment. This problem is not a new phenomenon; rather it has been a feature of the oil industry start from the beginning of the industry in the country.

But this must come to an end. Accordingly, there are two camps: a pro Shell-BGC on one side and inquisitive critics on the other.

The ministry of oil, few politicians and oil technocrats are among the pro Shell-BGC camp, while the majority of expressed professional opinions, officials and politicians are on the other camp.

The first camp argues in support of signing the BGC contracts and approving them by the executive branch and authority. The inquisitive critics, on the other hand, argue that any decision regarding such contracts could only be made after the said contracts have been thoroughly analysed and assessed by competent and professional bodies in an open and transparent way, and the federal parliament should be the ultimate authority to accept or reject these contracts.

Many oil technocrats, professional and experts hold the opinion that rehabilitating the South Gas Project (began operating by July 1990) was and still is within the technical and financial capacity of South Gas Company, and if needs be with technical support from specialised international construction companies. And this could be the best option Iraq has since even funding was available to do so after 2003. It is worth recalling that Law 84 of 1985 on Preservation of Hydrocarbon Wealth (still valid) prohibits gas flaring unless it is absolutely not possible to utilise it economically and many of its provisions call for the necessity to prepare feasibility studies for any projects pertaining to gas utilisation.

Instead of rehabilitating the South Gas Project and utilising available funding, the ministry of oil signed with Shell a Heads of Agreement (HoA), which entered into force upon signing on 22 September 2008. HOA has one-year duration extendable automatically by additional six months to complete the requirement for the Joint Venture envisaged by the agreement. In March 2010 HoA was extended for six months, and on 29 June 2010 the cabinet approved Shell-led initiative by creating Basra Gas Company (BGC). However, the final approval of this joint venture would be considered by the [new] government after all legal matters pertaining to the establishment of BGC have been met. BGC shares are divided as follows: 51% for the state-owned South Gas Company, 44% for Shell and 5% for Mitsubishi;

Very limited details regarding economics, fiscal and legal frameworks governing this new joint venture are available so far. But many, including myself*, had critically assessed the deal from economic, technical, legal and structural aspects on the basis of HOA contents. The Legal Advisor to the Prime Minister delivered on 28th October 2010 a legal opinion in a “confidential and private” letter to PM Office, comprising many of the views and assessment we have been saying since September 2008, pertaining to the draft contracts (which, as he writes, are voluminous and diverse) establishing the Basra Gas Company.

Between 22nd September 2008 and today many rounds of discussions took place between the Ministry and Shell. Few improvements on HoA are done such as limiting the scope of BGC to associated gas from three oilfields only: Rumaila, Zubair and West Qurna 1, and the role of SOMO.

However, many very significant issues are not known unless and until the related contracts are provided and examined thoroughly. Among these critical issues are briefly listed hereunder:

1- The role of the Parliament. Oil and Energy Committee of the parliament had recently requested the Ministry to submit BGC contracts before signing them. Earlier and during the “Symposium for Reviewing Iraq Oil Policy” held in Baghdad 27 Feb-1 March 2009, the Ministry stated that it would present the final draft of the BGC contracts to the parliament before signing it.

2- The “Economic Model”, HoA proposes an economic model to be used in deciding the compensation for Raw Gas, which the BGC Joint Venture has the monopoly to off-take and purchase from the producers. There are many important issues regarding the economic model remain very ambiguous such as: “fixed percentage” , “a time lag between realised revenues (to the Joint Venture) and actual payment of compensation” , “adjustment in certain economic parameters”, “appropriate audit rights,.., on the realized revenues.”, “who has the responsibility of formulating the economic model” , “The inclusion of “taxes” and “the fiscal regime” among the factors affecting the compensation for raw gas is an indication of an approach that eventually reduce government revenues.” The economic model has vital impacts on the comparative advantages of the associated gas as source of energy, as feedstock for industrial purposes and for households uses. Thus it is important to know exactly what economic model would be used in these contracts.

3- Abusive Transfer Pricing. Indications on possible occurrence of abusive transfer pricing are detected from provisions related, among others, to Shell’s strategic alliances (Clause 3), Shell’s Obligations (Clause 5), Cost and Expenses (Clause 8), Quick Win Assets (Clause 9). The possibility is further enhanced by the way the JMC decision making is formulated and the apparent weak auditing role given to MoO under the agreement.

4- Assets Evaluation for SGC’s Equity Shareholding. According to HoA the South Gas Company-SGC “will contribute its equity shareholding [a 51 %] as a combination of existing assets (based on a jointly agreed evaluation) and the balance (if any) by cash”. But what was mentioned in HoA, the reference points for such evaluation are namely Shell’s “verification surveys”, “initial assessment”, “refurbishment requirements” etc of the existing related assets such as “compression stations and field gas treatment units”, “pipelines and LPG storage and loading terminals”, “North Rumaila and Khor-Al-Zubair gas processing plans”, etc. There is an obvious conflict of interest here on the part of Shell: It has an interest to reduce the value of SGC’s assets in order to increase the “cash” component of SGC in the equity share. That cash component will be used to finance the Joint Venture requirements from various equipments, installations, services, etc in accordance with the “project development/framework agreement(s)” prepared by Shell!. And when the Joint Venture “will procure technology, technical support and related matters from Shell and/or its affiliate(s) who will be the lead provider of technical and operational support to the Joint Venture”, then conflict of interest becomes crystal clear. Iraqi Private Company Law No 21 of 1997 under which the Joint Venture Company will be formed and operate, stipulates, regarding assets evaluation to be made by a Committee, agreed upon by the Company Registrar, composed of experts in Law, Accountancy and the related working field. The assets evaluation has to be comprehensive, professional and objective.

5- The Joint Management Committee- JMC. The JMC is the fundamental organ in the implementation of HoA and prepare all the necessary requirements for the Joint Venture. To do so HoA vests JMC with enormous and powerful authority, which could supersedes those of MoO and Shell as well. HoA contains and provides many provisions related to JMC, which are controversial and confound and thus need further scrutiny, from structural, organisational, functional and procedural aspects.

6- Investment requirements. Different estimates for initial investment requirements were reported ranging from $8 billion to $17.5 billion. Since the evaluation of the Iraqi assets was fixed (at $1.5 billion when investment requirements was estimated at $8 billion!), the Iraqi side would pay in cash its proportionate share of any escalation in investment requirements. Needless to say that even before BGC has started the initial cost more doubled by one estimate, or 50% if one considers a $12 billion. Are we heading towards a black hole?

Considering the above I would suggest the following:

1- The ministry of oil may, in the name of transparency, either make the fundamental components of the BGC contracts known by posting them on its website, or call for “expert hearing” to discuss this vital joint venture to assess its viability and merits for the Iraqi economy;

2- The ministry of oil is obliged to honour its commitment to the Parliament by sending copy of the said contracts for review, debate and make decision regarding enacting them by law(s);

3- Failure to do the above by the ministry, the Parliament have the obligation to enforce the special motion banning the ministry from signing these specific contracts, and consider them null and void;

4- Finally, each one of us has the moral obligation to express opinion individually and collectively, and disseminate views among the public, the national media, government officials and the parliamentarians regarding these contracts, as they surely would have direct implications for the best interest of the Iraqi people that are enshrined in the constitution.

Ahmed Mousa Jiyad,
Iraq/ Development Consultancy and Research (I/DC&R)
Norway.

http://www.iraq-businessnews.com/201...-yet-approved/

Iraq Abandons Plan to Buy F-16 Fighters

Iraq has postponed plans to buy U.S.-built Lockheed Martin F-16 fighter jets because it lacks the funds to rebuild its air force, government spokesman Ali al-Dabbagh told Bloomberg.

“Iraq is determined to rebuild its air power capabilities, but the plan is postponed … There are no new negotiations by the Iraqi government or the defense ministry,” he said.

The defense portfolio is held by Prime Minister Nuri al-Maliki. The Wall Street Journal reported earlier on Tuesday that Iraq has started negotiations to buy U.S. fighter jets.
The Iraqi government was close to signing an agreement on the purchase last year before plans were delayed when funds were diverted for food rations and other urgent items.

“The plan was postponed, but not canceled as we will rebuild our armed forces in the next few years when there will be more liquidity,” the spokesman said.

http://www.iraq-businessnews.com/201...f-16-fighters/

The allocation of only 10% of new appointments in the North Oil Company of the Kurds

A source at the North Oil Company, Sun announced the appointment of 315 new in the company by a letter from the Iraqi Oil Ministry, noting that 31 of them only a Kurdish nationalism.

official said the Division technical company, Riaz Mohammad, for "The News Agency of Kurdistan", the number of workers who are working for the company two years ago and the form of contracts, of 315 people, is being appointed on a permanent basis and in accordance with the proportion of each nation, after a decision by the Iraqi Oil Ministry, adding that the Kurds did wrong this time also were given the lowest percentage of those appointments.

He explained that the new appointments included identifying 40% of Arab nationalism, and 40% of the national Turkmen, 10% of Kurdish nationalism, and 10% of the Faili.

He noted that these appointments include graduates of universities and the Institute of oil and some other people who hold high school certificate and worked for two years in the form of contracts, which will be transferred to permanent staff.

http://ar.radionawa.com/Detail.aspx?id=10361&LinkID=197

New Iraqi Oil Prices for August

Iraq’s State Oil Marketing Organisation (SOMO) has adjusted its official selling prices on Sunday for its Basra Light and Kirkuk crude grades for August.
In common with some other countries, Iraq’s oil is priced relative to regional benchmark prices:

• For shipments to US, contracts are priced are relative to the Argus Sour Crude Index (ASCI);
• Shipments to Europe are priced relative the North Sea Spot BFOE; and
• Asian shipmentas are priced relative to the Dubai-Oman crude benchmark, published by Platts, the energy-information division of McGraw-Hill.

The new prices to Europe are as follows:

• Kirkuk crude to Europe will sell at a discount of $2.75 a barrel relative to the North Sea (Dated Brent) benchmark, up 80 cents from July;
• Basra Light to Europe will sell at a discount of $4.55 a barrel to Dated Brent, an increase of 70 cents.

And to the US:

• Basrah Light will sell at a $1.75 discount to the U.S. benchmark, up 25 cents from July
• Kirkuk will sell at the benchmark, as it did in July.

To Asia:

• Basrah Light to Asia will continue to sell at the benchmark.

http://www.iraq-businessnews.com/201...es-for-august/

Iraqi Banks Too Small for Major Projects

Iraqi banks are too small to be useful to international companies, resulting in major investment projects being impeded, Iraqi Electricity Ministry Spokesman Musab al-Mudarres told AKnews on Tuesday.

“Iraqi banks cannot provide financial guarantees to foreign companies because their capital is below the guarantees expected by corporations”, he said.

“The Ministry of Electricity has submitted a request to the Council of Ministers about the need to facilitate banking transactions involving well-known foreign banks in the guarantees.”

http://www.iraq-businessnews.com/201...ajor-projects/