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

Iraq Energy Summit closes registration early due to high demand

United Arab Emirates, 29 August 2007 (AME Info FZ LLC)


Iraq Energy Summit closes registration early due to high demand | Iraq Updates

Iraq business conference opens in Dubai

03 September 2007 (Arabian Business)

Businessmen from southern Iraq met with international counterparts yesterday to discuss business and investment opportunities in the war-torn country.

Vice president of Iraq Dr Adel Abdul Mehdi opened the first Iraq Business and Investment Conference in Dubai.

Panel sessions covered the legal environment for conducting business in Iraq, financing private sector business, trade, and commerce and private sector banking.

According to Mehdi ‘Iraq's new investment law will facilitate investment for both Iraqi and non-Iraqi businesses by providing a secure investment environment. Business people know the capacities and resources of Iraq. These delegates are the experts brought together at this conference to present opportunities for investments across a wide range of industries. Iraq is not only oil and gas but also agriculture, infrastructure and tourism, both historic and religious.'

Five Iraqi government ministers are also attending the conference.

Sessions include presentations concerning joint ventures with state owned enterprises, investment in agriculture, free zones, construction and contracting and opportunities in reconstruction and management associated with the port of Basra.

Iraq business conference opens in Dubai | Iraq Updates

Bush hints at withdrawal of troops if 'successes' continue

Tuesday, September 4, 2007

ireland.com - The Irish Times - Tue, Sep 04, 2007 - Bush hints at withdrawal of troops if 'successes' continue

Originally Posted by billknows

Let's not forget that the change we have seen in dinar value is strictly compensation for a weakening US dollar. If this change is helping to lower inflation, I believe it's because of the perception that the CBI is in control.

Normally, a country uses interest rates to control economic outcomes - however, in Iraq there is no such mechanism, so for the time being, adjustments in the dinar value will have to suffice (a bit like the cart pushing the horse).

At this point the CBI is struggling to meet IMF requirements and a revaluation of dinar has not even begun yet!

If the dinar reaches 1000:1 USD it will only be because the US dollar has continued to weaken relative to other currencies.

When IMF concerns have been met - we will see the big reval we have all been anticipating!

Personally, I'm looking at Jan. 1st, 2008.

Bill last year when dinar started to become more valueable,the govnor of the
cbi said it had nothing to do with dollar deperication.

Opinion Piece - Bit long - interesting though

Middle East Economic Survey
Perspectives On Iraqi Oil And Politics

Walid Khadduri

The following is the paper delivered by Walid Khadduri to the Oxford Energy Seminar on 29 August, and published here with the author’s permission. Dr Khadduri was formerly Economics Editor of al-Hayat and Editor-In-Chief of MEES.

During the past quarter of a century, Iraq was devastated by wars and international sanctions, with scant investment in the oil industry during this turbulent period. Iraq today needs a modern oil industry that can increase production capacity to a level commensurate with its huge proven reserves of 115bn barrels distributed over approximately 80 fields that are variously developed, semi-developed, or undeveloped. Production has been limited to around 2mn b/d, with exports averaging 1.5mn b/d in 2007. However, serious security problems continue to haunt the country, with a heavy toll on the economy generally and the oil sector particularly.

As many as 1,001 civilian contractors have been killed since the 2003 invasion, according to a 7 August press release from the US Labor Department. Furthermore, the oil industry is considered a primary target by the insurgents with an approximate average of around one daily attack during 2005 and 2006. The Institute for the Analysis of Global Security (IAGS) estimates that as of the beginning of December 2006, some 374 incidents had targeted the oil/gas industry in 2006, including attacks on oil pipelines, production installations and personnel. A total of 285 incidents were recorded in 2005, and 185 in 2004.

Dominant Oil Issue
Whatever the real reasons for the invasion of Iraq in 2003, oil was considered by Iraqi and international public opinion as one of the main reasons behind the adventure. But the oil issue remained dormant in Iraq, without much public discussion, until 2007, when work started in earnest to draft the oil law. A public debate ensued as to whether the war was because of oil and whether the oil law would serve the best interests of the Iraqi people. The Maliki government tried to draft an oil law that would launch the Iraqi oil industry in new directions. However, the timing was not conducive for a constructive debate. It took place during the height of a civil war, sectarianism, occupation, the failure of the religious parties to govern and administer, and the absence of an effective government, as well as rising corruption, chronic shortages of petroleum products and electric power.

The US Government Accountability Office report published in early May 2007 said that “between 100,000 and 300,000 b/d of Iraq's declared oil production over the past four years is unaccounted for and could have been siphoned off through corruption or smuggling.” This translates into an average loss of crude oil and petroleum products revenue of around $10mn daily to the Iraqi Treasury. The mid-July 2007 Iraqi Ministry of Oil General Inspector Office report stated that, “Iraq lost around $24.7bn since 2003 because of violence and political instability which have damaged existing projects and delayed new ones.”

With such damaging reports, as well as the turbulent history of oil politics in Iraq, and with the importance of oil to the country’s economy, it is not surprising that the oil law became embroiled in the country's many political problems and encountered much opposition from scores of oil experts and professionals and the oil workers union, as well as various political parties.

Bush Administration Priority
The Bush administration placed the oil law high on its Iraqi priorities for 2007, mainly to address its own domestic agenda and demonstrate to the Democrat-led Congress that was progress being achieved in Iraq, de****e the military and political setbacks, and in order to win support for extending the mandate of the troops. The sudden US high-profile interest and public pressure to hastily pass the oil law raised many questions since it is not possible for international oil companies (IOCs) to invest and operate in Iraq in the absence of the minimum requirements for safety, particularly in the absence of a new Social Contract among the Iraqis, and while Iraq is a major theatre in the world war against terrorism, while its army has been dissolved, and Congress is deliberating an eventual withdrawal of US troops.

The prospects for a more peaceful future also look bleak. The US is discussing with Iran ‘the Security of Iraq’, while the jury is still out on the balance of power among the political parties and militia in the oil-rich south and a decisive referendum is scheduled at end-2007 on the future of the northern oil city of Kirkuk, on whether it should join the Kurdistan Region or not. Meanwhile, Turkey is threatening to invade the north, and the long-discussed confrontation between Washington and Tehran appears to be more serious than in the past, with southern Iraq as a possible battleground for this conflict, if and when it erupts.

The Oil Law
The federal oil law is a package of upstream sector and revenue sharing legislation, as well as legislation to regulate the Ministry of Oil and the Iraq National Oil Company (INOC). In May 2006, Oil Minister Husain al-Shahristani formed a committee of three prominent Iraqi oil experts to draft the oil law: Thamir al-Ghadhban, oil adviser to Mr Maliki and former oil minister; Faruq al-Kassim, expert with the Norwegian oil industry with extensive experience in drafting oil laws for developing countries; and Tariq Shafiq, founding member of the Iraq National Oil Company, now with the London-based consulting firm, Petrolog & Associates. The draft, completed in August 2006, was adopted by the Ministry of Oil and submitted to the prime minister, who in turn appointed a ministerial subcommittee, headed by the Deputy Prime Minister Barham Saleh, to review it. The committee represented a spectrum of interests, including federal representatives and officials from the Kurdistan Regional Government (KRG). The committee’s deliberations, over eight months, focused mainly on the role and status of the provinces versus the federal authorities, finally agreeing unanimously on a draft during 1Q 2007. Nonetheless, the KRG authorities disassociated themselves from this early version, alleging that they did not receive a copy of the four attachments, three of which allocate the discovered fields between the Iraq National Oil Company (INOC), the Ministry of Oil, and the regions, while the fourth defines 65 exploration blocks.

Not surprisingly, the main disagreements were between the KRG representatives and federal officials. The differences were expected since the hydrocarbon articles of the constitution are confusing and ambiguous. Consequently a series of political compromises were made by both sides, at the expense of an efficient management system. The problem is that the 2005 constitution does not specifically define oil policy as one of the functions of the federal authorities, de****e the fact that Iraq earns over 90% of its annual revenue from crude oil exports (around $34bn in 2007). Jurisdiction on drawing up oil policy and monitoring the industry was left purposely vague, leaving the door open for different interpretations of who is responsible for the upstream sector.

Articles 110 And 109
Article 110 of the constitution refers to the joint formulation of various economic activities, but does not mention oil policy: “The following competencies shall be shared between the federal and regional authorities: First: To administer customs in coordination with the government of the regions and governorates that are not organized in a region. This will be organized by law. Second: To administer the main sources of electric energy and its distribution. Third: To formulate the environmental policy to ensure the protection of the environment from pollution and to preserve its cleanness in cooperation with the regions and governorates that are not organized in a region. Fourth: To formulate the development and general planning policies. Fifth: To formulate the public health policy in cooperation with the regions and governorates that are organized in a region. Sixth: To formulate the public educational and institutional policy in consultation with the regions and governorates that are not organized in a region. Seventh: To formulate and organize the main internal water sources policy in a way that guarantees fair distribution. This will be organized by law.”

Article 109 calls for federal and regional cooperation of already producing fields, but there is purposely no mention of jurisdiction over newly discovered fields: “First, The federal government with the producing governorates and regional governments shall undertake the management of oil and gas extracted from current fields provided that it distributes oil and gas revenues in a fair manner in proportion to the population distribution in all parts of the country with a set allotment for a set time for the damaged regions that were unjustly deprived by the former regime and the regions that were damaged later on, and in a way that assures balanced development in different areas of the country, and this will be regulated by law. Second: The federal government with the producing regional and governorate governments shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of the market principles and encourages investment.”

KRG Oil Minister Ashti Hawrami was clear in his own mind about who is responsible for managing the oil industry, stating in a speech in Irbil on 6 August 2007, following the passage by the local parliament of the Kurdish oil and gas law, that “under the Constitution of Iraq, oil and gas management is primarily a regional right, and our success depends upon us exercising that right.”

Articles 111 And 112
There was also contradiction between articles 111 and 112. Article 111 stipulates that “all powers not stipulated in the exclusive authorities of the federal government shall be the powers of the regions and governorates that are not organized in a region. The priority goes to the regional law in case of conflict between other powers shared between the federal government and regional governments.” Article 112 states that “the federal system in the Republic of Iraq is made up of a decentralized capital, regions and governorates, and local administrations.”

The final draft of the federal oil law basically represents a series of political compromises that overlaps federal and regional roles in the oil decision-making process. Two of the authors of the original federal oil law have spoken publicly against the final draft, as did the State Consultative Council, which reviews all bills sent by the cabinet to the federal parliament. In a memo addressed to the cabinet on 31 May 2007, the Council stated, among other things, that: “The Council is of the opinion that the authority to issue permits for drilling, development, and production and the permits for development and production should be the sole authority of the central authority (federal) because oil and gas are the property of the Iraqi people, and the government represents the Iraqi people, moreover, the regions and the governorates do not have experience in this field.”

These differences over the interpretation of the hydrocarbon articles in the constitution do not bode well for a dynamic and modern Iraqi oil industry. What could happen in the future under these ambiguous allocations of responsibility is a delayed oil decision-making process in the Federal Petroleum Committee, to be headed by the prime minister. It will be responsible, among other functions, for establishing regional production quotas within Iraq’s overall OPEC quota. The constitution and the oil law also ignore other issues, such as the fact that there are already around 415 structural surface and subsurface anomalies that straddle provincial boundaries, hence it is important for the sake of an efficient resource management of the country’s oil and gas potential to administer the industry in a unitized manner, and with unified plans.

Kurds’ Oil Law
The Kurdistan parliament, as if to challenge the federal authorities and to hurry them to deliberate on the federal draft, passed on 6 August, 2007 its local oil and gas law. This is based primarily on the KRG interpretation of articles 109-115 of the constitution, which omit petroleum from the list of exclusive powers of the federal authorities and view the role of the federal government as merely administrative, ie, responsible for exports and marketing. These articles give the regional government the right to initiate contacts and negotiate with IOCs. A model contract was published and posted on the KRG website.

The KRG has also preempted the issuance of the federal law and signed production-sharing contracts with IOCs, and announced that it will hold a large-scale licensing round based on production-sharing agreements (PSA), now that the local law is passed, even though the federal law does not specify PSA as a model contract. Contracts have already been signed with a number of IOCs. KRG officials put preliminary estimate of the oil reserves in their region at 45bn barrels, some 25bn barrels of them proven, compared to Iraq’s proven reserves of around 115bn barrels. They also expect oil production from their region to exceed 200,000 b/d by 2008.
The Ministerial Economic Subcommittee also witnessed differences over the “oil-revenue distribution system”, the second item in the “oil law package”. It was finally agreed between the representatives of the federal authorities and the KRG to establish two “regulated and monitored” accounts into which external and internal revenues would be deposited. The external account would include items such as oil export earnings and foreign assistance funds. The internal fund consists of taxes and customs. The federal government would deduct first what is required for the federal budget and the remainder would be automatically distributed monthly to the KRG, which would receive 17% of the net revenue, and to the other provinces “according to their entitlement”. A Fund for Future Generations was also established without specifying what percentage of the oil revenue would be appropriated to it annually, nor how funds would be withdrawn from it and for what purpose.

The federal government plans, once the federal law is approved, to auction up to 15% of the nation’s oil and gas land resources. The emphasis on exploration so soon, when there are already scores of discovered fields awaiting development has raised questions concerning the priority that should be allotted for exploration at this stage. Prioritizing discovered fields would raise production capacity to around 5mn b/d early in the next decade, and would be of much financial benefit for the country in the near future.

Also a matter of concern are reports circulating widely among the IOCs that half-a-dozen discovered giant fields would be awarded to major US firms, without a bidding process, to compensate for the $2 trillion cost of the war and the occupation, and to reward Washington for overthrowing the previous regime. The oil law provides for production-sharing contracts and development-production agreements; but it does not state clearly what kind of contracts apply to the already discovered fields, leaving the door open for awarding production-sharing contracts for this category of oil-bearing regions, without any geological risk being undertaken by the operator.

Political Stability/New Oil Industry
The challenge of building a modern oil industry in Iraq, with the cooperation of IOCs, lies not only with soothing the political fears of the public as a result of past experiences, but also assuring the presence of a credible and transparent political system, with the minimum assurances of security and stability. Today over 4mn Iraqis, around 2% of the population, have been displaced domestically because of ethnic cleansing or forced immigration. Approximately 70,000 civilians have been killed since 2003 and are more are losing their lives daily. Al-Qa΄ida terrorists control several entry routes to Baghdad (west, east and south) and major districts of the capital. Armed militias and gangsters operate without due process of law. The weakening of state institutions and dissolution of the armed forces have provided an opportunity for neighboring countries to spread their influence and increase their interference in Iraqi affairs. This is especially the case with Iran, which has wide and diversified contacts with the militias.

The decline of the influence of Baghdad has also provided for unhealthy and dangerous relations between some of the provinces and neighboring countries. There is fear that the Turkish army may invade northern Iraq because of allegations that PKK fighters are attacking Turkish targets from bases there, and with the aim of deterring the establishment of a Kurdish state. Iranian influence is rising in Basra, which has around 90% of the country’s oil reserves. The bottom line is that Iraqis have to agree on what kind of a political and social system they want for their country. This necessitates the drawing up of a new Social Contract, with broad popular support, rather than one conceived on the basis of the majority rule of a single religious sect. The experience since 2002 has proven to be a total failure.

A modern oil industry, with the help of the IOCs, could assist in invigorating the country with more financial resources and opportunities, provided it is done in a credible and transparent manner after the end of the occupation. But it is not easy to build a modern oil industry in Iraq under the current unstable conditions. After establishing the rule of law across the country will come the challenge of turning a new page in relations with IOCs, given Iraq’s checkered history with them in the past.

Finally, the Iraqi oil law model should also be of concern to neighboring oil producing countries. For if this model takes hold, and Washington adopts it as an example to be followed by other countries in the region, with greater power and authority given to the provinces at the expense of the oil ministries and national oil companies, then it will mean a radical change in the way Middle Eastern oil industries are managed, which would cause much dislocation and setbacks for steady and secure supplies of oil.

Perspectives On Iraqi Oil And Politics

Lack of Iraqi Oil Law “Keeps Investors Away”

Iraqi government officials have presented detailed plans for exploiting the country’s vast oil reserves at the “Iraq Oil, Gas, Petrochemicals and Electricity Summit” held in Dubai.

But they have admitted that the absence of the controversial oil law regulating the industry is a bigger obstacle than security to attracting foreign investment.

“Security is not stopping investors coming to Iraq, (it is because) they have no laws to protect their investment,” Ali al-Dabbagh, said the Iraqi government spokesman.

al-Dabbagh hopes the contrvoversial oil law will be adopted by the end of the month. “The majority of politicians are aware that we cannot go on without it,” he said. “The oil law is the future of Iraq.”

Talks have already been held with Shell, Texaco and Dow Chemical companies on possible investments in various proposed projects, said Fawzi al-Hariri, Iraq’s Minister of Industry and Minerals. Al-Hariri hoped that the negotiations would be concluded by the end of the year.

Lack of Iraqi Oil Law “Keeps Investors Away” at Oil Change

Iraq's Sunni Leader Calls for National Reconciliation

2007-09-04 04:01:24 Xinhua

A visiting Sunni leader of Iraq called Monday on his fellow countrymen, including Sunnis and Shiites, to close ranks and realize national reconciliation in the war-torn country.

Adnan al-Dulaimi, the leader of Iraq's National Accord Front (NAF), made the appeal following his meeting with Cairo-based Arab League (AL) Secretary General Amr Moussa, Egypt's official news agency MENA reported.

Sunnis and Shiites should work together to tackle all the problems of Iraq and to reach security and stability in the country, Dulaimi said, while hailing efforts exerted by the AL to help realize Iraq's national reconciliation.

Commenting on the meeting with Dulaimi, Moussa said there are big prospects for realizing national reconciliation in Iraq but foreign interference should be avoided.

Moussa stressed the importance for the AL, the United Nations, the Iraqi leadership and Iraq's neighbors to enhance coordination to solve the crises in Iraq, saying "we all should work for building a new Iraq that is based on citizenship and reconciliation."

Meanwhile, talks between Iraq's Shiite and Sunni Muslim groups concluded in Finland on Monday without a major breakthrough, according to Finnish media report.

The four-day talks, aimed at ending violence between Iraqi groups, started in secret on Aug. 31 at an undisclosed location in Finland under the auspices of the Crisis Management Initiative ( CMI) headed by former Finnish President Martti Ahtisaari.

Iraq's Sunni Leader Calls for National Reconciliation

Iraq talks end without breakthrough in Finland


HELSINKI, Sept. 3 (Xinhua) -- Talks between Iraq's Shiite and Sunni Muslim groups concluded in Finland on Monday without a major breakthrough, Finnish media reported.

The four-day talks, aimed at ending violence between Iraqi groups, started in secret on Aug. 31 at an undisclosed location in Finland under the auspices of the Crisis Management Initiative (CMI) headed by former Finnish President Martti Ahtisaari.

Meeri-Maria Jaarva, a CMI spokeswoman, said the meeting was over but declined to comment further.

CMI told the Finnish News Agency that the two sides had not agreed on a follow-up meeting.

CMI didn't reveal who took part in the closed-door talks nor the venue of the meeting citing security concerns. It only described the talks as a seminar that will look at lessons learned from the South Africa and Northern Ireland peace processes and study how these processes could benefit Iraq.

According to Finnish media reports, the participants included Minister of State for National Dialogue Akram al-Hakim, who is a senior official of Iraq's Supreme Islamic Council, as well as representatives of radical Shiite cleric Moqtada al-Sadr, Sunni politician Saleh al-Mutlaq and a senior figure from Prime MinisterNuri al-Maliki's Shiite Dawa party.

The leader of the largest Sunni Arab political group, Adnan al-Dulaimi, and Humam Hammoudi, the Shiite chairman of the Iraqi parliament's foreign affairs committee, were reported to have attended the talks.

In addition, representatives from the peace processes in South Africa and Northern Ireland also took part in the seminar and spoke about their experiences of conflict resolution.

The CMI was founded by Ahtisaari in 2000. In 2005, the group mediated a peace accord between the Indonesian government and rebels in the province of Aceh.

Iraq talks end without breakthrough in Finland

Inflation in Iraq slumps says central bank chief

Gulf Daily News - [9/3/2007]

Iraq's core rate of inflation has been driven down by monetary policy and the central bank is ready to take further action if needed, Iraq Central Bank Governor Sinan Al Shabibi said yesterday.

"Inflation is our over-riding concern," he said in an interview on the sidelines of an annual central bankers retreat in the Grand Teton mountains organised by the Federal Reserve Bank of Kansas City.

Bitter sectarian violence has greatly damaged economic activity by driving up prices and inflicting terrible hardship on the country's millions of poor and unemployed.

Shabibi has raised interest rates to 20 per cent and lifted the value of the dinar against the dollar, reducing monthly inflation, excluding food and energy prices, to 17pc in July from 35pc in June.

"Our monetary policy is functioning well," he said, adding that future action "depends on developments in inflation, taking into account developments in the economy and investment."

Shabibi said the dinar had taken back its rightful role as the currency of choice for Iraqis.

The Iraq dinar has appreciated to around 1,240 against the dollar from as low as 2,200 in the aftermath of the war.

Business is booming in the semi-autonomous region of Kurdistan in northern Iraq, but is much more subdued in the rest of the country, which relies almost exclusively on oil revenues for the foreign currency it needs to pay for imports.

Shabibi conceded that the poor security conditions were a big constraint on business, but argued there was a great deal of activity quietly taking place that was hard to spot but remained a source of reassurance.

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Lack of legal framework keeps oil investors out of Iraq

iht - [9/3/2007]

Iraqi government officials and energy experts presented detailed plans for exploiting the wartorn country's vast petroleum wealth but admitted that the absence of a law regulating the industry is a bigger obstacle than security to attracting foreign investment.

Government officials at the three-day "Iraq Oil, Gas, Petrochemicals and Electricity Summit" held in Dubai tempered their grandiose projects for exploiting the country's massive oil reserves by admitting that the vital, but contentious, law still needed to be passed.

"Security is not stopping investors coming to Iraq, (it is because) they have no laws to protect their investment," Ali al-Dabbagh, the Iraqi government spokesman, told the Associated Press at the start of the conference.

After months of acrimonious debate, a new draft oil law will be discussed in parliament in the coming weeks, which al-Dabbagh hoped would be adopted by the end of the month.

"The majority of politicians are aware that we cannot go on without it," he said. "The oil law is the future of Iraq."

De****e being some of the largest in the world, Iraq's oil reserves are also some of the least exploited with the worst infrastructure — something Iraq is hoping foreign investors can change.

Talks have been held with Shell, Texaco and Dow Chemical companies on possible investments in various proposed projects, said Fawzi al-Hariri, Iraq's Minister of Industry and Minerals. He said the Saudi Basic Industries Corporation has also expressed interest.

Al-Hariri hoped that the negotiations would be concluded by the end of the year.

He described a plan for a US$120 million (€87.56 million) upgrade of a Basra petrochemical plant, that could be developed further with another US$1 billion (€0.75 billion).

"We are also considering a second, completely new facility, maybe in the north or central region," he told Dow Jones Newswires at the conference, putting the cost at over US$2 billion (€1.5 billion).

He said that the plant's final location would depend on the security situation.

Even more than new projects, however, it is the country's creaking oil infrastructure that has to be fixed, preferably with foreign investment, said Thamir Ghadban, chairman of Iraq Oil Commission.

Several times over the last three decades, complete overhauls were planned only to be shelved as the country was wracked by devastating wars and then U.N. sanctions.

"We think Iraq needs to bring up the oil production, but it also needs to go into oil exploration," Ghadban said, adding that the government plans to "convert 25 to 30 percent of probable reserves into proven reserves. "

If it succeeds, Iraq could raise production to 6 million of barrels of oil a day, up from an average of around 2 million barrels.

"Four million with national efforts and additional two million in cooperation with foreign oil companies," Ghadban said.

The country's former oil minister, Ibrahim Bahr al-Olom, called for additional domestic involvement in the sector as well, stressing the need for a "balance between national and foreign investment."

"Iraqis deserve a better standard of living," al-Olom said. "The only way they will get it, is by developing oil and gas resources."

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