Thread: Archive Latest News - Think Tank - 16/08/07 - 03/11/07

Inflation rate down by 3.4 percent in July – ministry

Inflation decreased by 3.4 percent in July 2007 compared to the previous month, the Iraqi Ministry of Planning and Development Cooperation said on Monday.

"The Central Organization for Statistics and Information Technology has made its inflation report for July 2007, which is based on field data of retail prices for products and services in Iraqi markets," according to a ministerial statement received by the independent news agency Voices of Iraq (VOI).

The report revealed a 3.4 percent decrease in the inflation rate for July 2007, which it linked to a reduction in the consumer price index (CPI).
Prices of foodstuffs, apparel, furniture, fuel and transport services, which form 83 percent of household expenditure, have decreased by 5.2, 1.0., 1.0, 9.1 and 0.5 percent respectively, the report indicated.

Meanwhile, prices of tobacco, medicines, rent and other services, which form only 17 percent of household expenditure, have increased by 1.0, 1.6, 1.7 and 1.4 percent respectively, the report explained.

Inflation rate down by 3.4 percent in July – ministry | Iraq Updates

Iraq needs $100-150 bln for reconstruction: Finance minister

Iraq needs at least $100 billion to rebuild its shattered infrastructure after four years of violence and lawlessness following the U.S.-led invasion of 2003, Finance Minister Bayan Jabor said on Monday.

"The country is devastated and we are in need of at least $100 billion to $150 billion to restore infrastructure -- from sewerage to water to electricity to bridges and basic needs of the country," he told Reuters in Amman.

He said about $4 billion had been spent on infrastructure projects so far this year, more than in all of 2006, when internal violence and the limited capacity of the Iraqi private sector meant only about 40 percent of $6 billion allocated in the budget was used.

"What happened last year was ... a failure in the government's ability to execute," Jabor said.

Iraq's 2007 budget allocated $14 billion for capital investment and Jabor said the government had withdrawn $7.4 billion from the Development Fund for Iraq (DFI), where Iraq's oil income is deposited and audited by the United Nations.

"There is much better execution of projects (this year), with some ministries and governors spending over 60 percent of their 2007 budget allocations so far. This is almost double last year," Jabor said.

More than $10 billion of oil revenues deposited in the DFI's account at the Federal Reserve Bank of New York were last year left unspent because projects could not be executed, he said.

A report in July by the U.S. special inspector general for Iraq reconstruction blamed the government for failing to take responsibility for reconstruction projects. It said it had spent only 22 percent of its capital budget in 2006 but predicted that figure could reach 50 percent in 2007.
Jabor said next year's draft budget was expected to total about $36 billion, depending on oil production estimates, against $41 billion in 2007.

OIL PRODUCTION RISES

The finance minister said oil production had risen to 1.6 million barrels per day (bpd) in July from an average 1.5 million bpd in the first half of 2007, when output was affected by the sabotage of a pipeline to Ceyhan in Turkey from fields around Kirkuk in northern Iraq.

"We hope it will go to 1.7 million bpd soon and our plans in the ministry of finance are based on Iraq returning to exporting 3.4 million bpd which is its OPEC quota. The economy will recuperate when it reaches this level," Jabor said.

Iraq sits on the world's third-largest proven oil reserves and depends on oil sales for almost all its foreign currency earnings. These funds will be vital for rebuilding its infrastructure and public services, badly degraded by the war and years of international sanctions that preceded it.

Jabor said he expected economic growth to accelerate from 3.4 percent in 2006, fuelled partly by reconstruction spending.

"We expect 7 percent growth this year ... The economic outlook is much better this year," he added.

Jabor said inflation, which has added to the hardships facing Iraq's population, was 46 percent in the period to June 2007, down from 57 percent in the first half of last year. Core inflation, excluding fuel and transportation, fell to 19 percent from 32 percent.

To keep inflation in check, Iraq will not hike official fuel prices further de****e a commitment to phase out fuel subsidies under a $715 million economic program agreed with the International Monetary Fund, Jabor said.

"I used to implement previous agreements but this time I will sign a new standby arrangement with the IMF that will be free of any rise in petroleum products," he said.

Jabor said the $3.75 billion sale of three 15-year mobile phone licenses to mainly Gulf Arab operators on Friday signaled investor confidence in Iraq's long-term economic prospects.

Iraq will tap cheap donor funds for development projects, Jabor said, including a $1 billion soft loan from Iran to be signed soon. The loan will be repayable over 40 years with 10 years' grace, he said. Japan has also offered up to $3.5 billion of soft loans, Jabor added.

Iraq needs $100-150 bln for reconstruction: Finance minister | Iraq Updates

Iraqi Government Should be Voted Out: U.S. Senator

Iraqi Prime Minister Nuri al-Maliki's government should be voted out because it has failed to use the U.S. military buildup in that country to reach a political solution to end the war, a key U.S. lawmaker said on Monday.

"I hope that the Iraqi assembly, when it reconvenes in a few weeks, will vote the Maliki government out of office and will have the wisdom to replace it with a less sectarian and a more unifying prime minister and government," said Sen. Carl Levin, chairman of the U.S. Senate Armed Services Committee.

Levin and Sen. John Warner of Virginia, the top Republican on the Armed Services Committee, just completed a two-day visit to Iraq.

The two senior lawmakers issued a joint statement saying that while the U.S. military "surge" in Iraq has given Iraqi politicians some breathing room, they have failed to make the compromises needed to bring peace to that war-torn nation.

"We are not optimistic about the prospects for those compromises," the Levin and Warner said in their joint statement.

Levin in a teleconference with reporters went a step further, suggesting the Iraqi parliament have a vote of no confidence and replace the Maliki government, which he said is built too much upon sectarian allegiances and connections.

"There's a consensus that there is no military solution and there is only a political solution, and that's truer now than it has ever been, and the gridlock has got to end in that government if there's going to be a political solution," Levin said.

White House spokesman Gordon Johndroe said Iraqi leaders were currently meeting to try to reach a political settlement.

We believe that Prime Minister Maliki and the Presidency Council will be able to get this important work done, work that is being done on the local level where we see bottom-up reconciliation taking hold," Johndroe said.

Levin said he and Warner met with Gen. David Petraeus, who is to make a report on progress in Iraq in September. The White House said on Monday, the general will likely testify to Congress around September 11 or September 12.

Johndroe said the hearing date was not related to the anniversary of the 2001 attacks. The September 15 deadline for the report falls on a Saturday, making it necessary to testify earlier in the week, he said.

The September progress report is seen in Washington as a pivotal milestone in assessing whether the Pentagon's so-called "surge" strategy has worked. That strategy has aimed to establish enough security to allow Iraqi politicians to move toward reconciliation.

Iraqi Government Should be Voted Out: U.S. Senator | Iraq Updates

Cement firm to invest $450m in Iraq projects

Cement producer Lafarge is planning two projects worth about $450 million in the Iraqi city of Karbala, according to an investment bank working with the French company on both deals.

The world's largest cement maker by market value is bidding for $150 million contract to rehabilitate a cement plant in Karbala with a capacity of 2m tonnes a year, said Basil Al Rahim, managing partner of Merchant Bridge said.

Lafarge and Merchant Bridge have a licence to build another 2m tonne-a-year plant in the city, Rahim said, estimating that project was worth about $300m.

"We are working on the cement plant licences in a joint venture with Lafarge and all the permits are in place," he said.

The Iraqi government has opened up the cement sector to foreign firms, hoping they will be keen to join in the reconstruction under way after years of war and sanctions.

The ministry of industry and minerals sold 19 licences for greenfield cement plants in 2005 as part of plans to raise Iraq's capacity to 25m tonnes a year from about 17m.

"Only three or four of those licensees have made progress like us," Rahim said.

Egypt's Orascom Construction Industries operates one cement plant in Iraq and is due to complete a second by the end of this year, according to its website.

Rahim said the Lafarge venture would find out next week whether it had been shortlisted to negotiate the rehabilitation of the second Karbala plant.

Cement firm to invest $450m in Iraq projects | Iraq Updates

US 'frustrated' at situation in southern Iraq: general

The United States is frustrated at the deteriorating security situation in southern Iraq, a retired senior US general said Wednesday amid continued talk about a British pull-out from the region.

In an interview on BBC radio, General Jack Keane, a former vice-chief of staff of the US Army, agreed with recent media reports that Washington was dissatisfied at the increased violence in and around the port city of Basra.

"There is some frustration with the troops being out at the airport primarily training the Iraqi 10th division and not as engaged as they had been in the past in what is taking place in central Basra and the surrounding communities," said Keane, who was an adviser to the US Iraq Study Group.

"They have never had enough forces to truly protect the people, a mission similar to what the coalition forces are taking on in Baghdad. But I think there is a general disengagement from what the key issues are around Basra.

"I would imagine that's where the source of frustration is."

Britain has about 5,500 troops currently based at Basra Airport and Basra Palace, although the small contingent at the latter is due to move out within weeks.

There are plans to reduce numbers by 500 in the coming months but Prime Minister Gordon Brown has resisted calls for an immediate withdrawal.

Brown is expected to make a statement on British involvement in Iraq when parliament returns in October and after a report by US General David Petraeus to Congress in Washington on the progress of this year's US troop "surge".

The surge saw 30,000 extra US troops sent to Iraq from January to quell bloody sectarian violence in and around Baghdad.

Many British newspapers in recent weeks have focused on the increasing number of daily mortar attacks on Basra airport, amid concern at mounting British death and casualty rates.

They have also carried anonymous quotes attributed to US officials expressing concern at the situation in the south.

Keane, who recently returned from Iraq, suggested that there was a case to say that neither the British nor the Americans have had sufficient troops in the troubled Gulf state to be effective.

Asked whether that was a military or political failure, he said it was a combination of both as well as a general lack of ground troops to face the challenges of the 21st century.

US military commanders were keen to avoid sending reinforcements to Basra but that was a possibility if the security situation did not improve if and when the British pulled out, he added.

US 'frustrated' at situation in southern Iraq: general | Iraq Updates

Maliki puts forth Assad Iraqi vision to boost cooperation

PM Noori Maliki going on his discussions with Syrian officials through meeting with the Syrian president Bashar Asad after first round marked by frankness and high transparency during his meeting with Syrian PM Mohamed Atari.

Atari described the visit as important and historic, added that his comply with Iraq's unity and supports national reconciliation.

The Iraqi delegation Ministers of Interior, Oil, Trade and Water resources besides some of officials.

Maliki puts forth Assad Iraqi vision to boost cooperation | Iraq Updates

Syria and Iraq to rehabilitate oil transport pipelines

Minister of Petroleum and Mineral Resources Sufian al-Alaw on Tuesday said Syria and Iraq agreed to take necessary procedures to rehabilitate a crude petroleum transport pipelines between Iraqi city of Kirkuk and Syrian coastal city of Banyas.

"The two states agreed to develop the exchange of oil products to a maximum degree in the interest of both countries," Alaw said during a visit to a Gas station south Damascus along with Iraqi counterpart Hussein Shahrstani.

The Iraqi Minister expressed his country's readiness to cooperate with Syria and develop available capabilities in the interest to both peoples, pointing out to new opportunities and horizons of cooperation in the oil and gas fields.

The two ministers listened to an explanation to the Arab Gas Pipelines project which stretches from north Egypt to the Syrian-Turkish borders through Jordan with 1231 KM length.

Syria and Iraq to rehabilitate oil transport pipelines | Iraq Updates

Syria and Iraq to boost gas and oil cooperation

Minister of Petroleum and Mineral Resources Sufian Allou discussed Monday with his Iraqi counterpart Hussain Al-Shahristani means of boosting cooperation between both countries in the oil and gas domains.

Allou stressed the importance of studying the agreements signed between the two countries in different fields of oil, pointing out to the existence of wide prospects for further cooperation as to achieve the common benefit of the two brotherly peoples.

The two sides reviewed the possibility of activating the cooperation agreements signed between them, particularly agreement of the joint cooperation in the oil and gas industry, the agreement of establishing a pipeline to transport crude oil and the principles agreement to link gas networks.

They also discussed agreement to exchange petroleum products, in addition to Iraq joining to Arab Gas Pipeline Agreement.

Syria and Iraq to boost gas and oil cooperation | Iraq Updates

Oil Majors to meet with the Iraq Government at the World’s Leading Energy Summit for Iraq

The world’s pre-eminent operators within the global oil, petrochemical, electricity and security sectors will descend on Dubai early next month for the forthcoming Iraq Oil, Gas, Petrochemical & Electricity Summit, the worlds first event organised to consider the future of Iraq’s abundant energy resources through direct consultation with the international private sector.

The summit, which will take place in Dubai on 2-4 September, will welcome a delegation of Ministers and Director Generals from the Iraq Government and the Kurdistan Regional Government (KRG). These will include representatives from the Ministries of Oil, Industry, Electricity and National Security Affairs.

These key decision makers will be participating at the landmark summit, the first of its kind to bring ministers and other officials to establish relationships and enter into contractual negotiations with international energy operators.

The official Iraqi delegation will include some of the most important figures from Iraq’s energy sector, including Minister of Industry & Minerals H.E. Fawzi Al-Hariri, Minister of Electricity H.E. Kareem Wahid and KRG Minister of Oil H.E. Ashti Hawrami. It will also include Thamer Ghadbhan, a former oil minister and Chairman of the Iraq Oil Commission, Bahr Alolom, former oil minister and Chairman of the Official Summit Steering Committee, Mohamed Al-Waili, Governor of Basra and Abdulrahman Mustafa, Governor of Kirkuk, who will be headlining a special session on Iraq’s oil strategy and the key requirements for the sector.

H.E. Fawzi Al-Hariri will be leading a strong delegation from the Ministry of Industry & Minerals including the Director General for Petrochemicals, the Director General for Petrochemical Industries and the Director General for Petrochemical Investments, all of whom will be outlining requirements for the petrochemical sector, covering issues such as refinery and petrochemical integration, feedstock flexibility and production availability for petrochemical production.

The summit will also feature a special security briefing, featuring director generals from Iraq’s Ministry for National Security Affairs, complemented by the Head of Facilities Protection, who will be attending as part of the Ministry of Electricity delegation led by Minister H.E. Karim Waheed. The briefing will be held on Day 3 of the summit, focusing on the protection of power stations, pipelines, refineries and other associated energy facilities and the various security provisions required.

All attending Iraqi Ministries will be outlining the requirements for their relevant sectors in front of the senior corporate audience, before holding private consultations with some of the pre-eminent operators within the global energy sector.

These best-in-breed operators and companies will be represented at board level in order to build the relationships that will be crucial to the future of the Iraqi energy sector and include the likes of BP, Exxon, ConocoPhillips, Chevron, Lukoil, Statoil, Marathon Oil, Total, Shell, Kuwait National Petroleum, Annadarko, Schlumberger, ABB, ONGC, General Electric, Cummins Power, Mitsui, Aegis, ArmorGroup, Janussian, Control Risks Group, Unity, Hart, Olive Security, GardaWorld and Triple Canopy.

Oil Majors to meet with the Iraq Government at the World’s Leading Energy Summit for Iraq | Iraq Updates

Small oil firms in Iraq becoming buyout targets
Canadian firm WesternZagros up for grabs

When Iraq approves a new oil law, the smaller firms that took the risk to start up early de****e insecurity and the lack of a legal framework will become buyout targets and are already being sized up by larger competitors.

The most attractive targets are those in the semi-autonomous Kurdish region, where relative stability and a government hungry for development has allowed foreign companies a foothold.

"It was a high risk strategy for some of these small companies to get involved in Iraq," said one London-based energy analyst at a private investment bank.

"But that's what they do -- go where nobody else will go and get the head start. If the legal issues are sorted out, they will look quite attractive."
The Kurdish Regional Government (KRG) signed five production sharing agreements (PSAs) from 2004-2006, which it claims will not violate the new federal law.

Iraq's Oil Minister Hussain al-Shahristani said on Tuesday the new law will stipulate a review of all oil and gas deals struck by the Kurdistan government. Shahristani said he expected parliament to pass the oil law next month.

Larger companies were already circling the operators in the Kurdish region with a view to acquisition once the legal issues are ironed out, industry sources said.

"There are rumours that some of the majors are already working deals to back into existing licenses and it seems likely that some will see acquisition as a potential route in," said one industry executive.

Initially, mid-sized firms were more likely to get involved in buyouts and new contracts in the Kurdish region than majors.

The majors would be more cautious as they have their eyes on potentially much bigger prize of Iraq's largest oilfields in the south.

Corporate security policies ban majors from sending personnel into Iraq, including the Kurdish region. Until security improves, they can't do more than sign deals.

With big oil potentially sidelined for years due to security, a similar pattern could emerge in the south as in the Kurdish region with smaller companies moving in first and becoming buyout targets later.

Norway's DNO, the first foreign oil company to drill in post-war Iraq, holds one of the PSAs in the Kurdish region and is already producing from the Tawke field.

DNO has for months been seen as a potential takeover target. In January, its leading shareholder said the company faced possible unsolicited takeover attempts.

"There's been a lot of talk about DNO as a possible acquisition target," said Alex Munton, analyst at global consultancy Wood Mackenzie. "The assets that they have in Iraq look extremely valuable."

Another PSA holder and potential target is WesternZagros, a unit of Canada's Western Oil Sands Inc.

U.S. Marathon Oil Corp is buying Western Oil Sands, but the Iraqi unit is not part of the deal and is being spun off to Western shareholders.
Western said last week that the oilfields covered in its deal with the KRG could yield a billion barrels of oil over their lifetimes.

Addax Petroleum, together with Turkish partner Genel Enerji, is developing the Taq Taq field in the Kurdish region, which it says could produce 200,000 barrels per day.

Addax, which also has operations in West Africa, was more likely to be a future buyer than a seller, industry sources said.

Turkey's Petoil holds two PSAs as part of joint ventures. The KRG has also signed memorandums of understanding with Heritage Oil and Sterling Energy. Sterling said last week it was hoping to sign a deal with the KRG.

The pace should pick up quickly in the Kurdish region once the federal legislation comes into effect, Munton said.

"The legal framework being in place could really kick start quite a lot of activity," he said. The KRG has finalised several other PSAs and has said it wants agreements for all of its exploration blocks by the end of the year.

The region has high exploration potential, Munton said. Iraq holds the world's third-largest oil reserves, but the Kurdish region is relatively unexplored.

"It's very much a frontier region," he said. "There's very little geological data available."

Small oil firms in Iraq becoming buyout targets | Iraq Updates