Thread: Archive Latest News - Think Tank - 15/04/08 - 26/08/08

Austria's OMV plans Iraqi Kurdistan oil blocks work

DUBAI, May 27, (Reuters) - Austrian oil and gas group OMV AG said on Tuesday it planned to drill two wells next year in its northern Iraq exploration blocks.

OMV was awarded two production sharing contracts by the Kurdish Regional Government (KRG) in the Mala Omar and Shorish blocks in November.

"We have two blocks near Erbil near the Taq Taq and Hawla fields," Ashiq Hussain, OMV's senior vice-president for global exploration and reservoir management, told an energy conference in Dubai.

"We plan to shoot seismic in August and drill two wells next year."

Iraq halted oil supplies to OMV in February in protest over the deal between the company and the KRG.

http://www.reuters.com/article/rbssE...080527?rpc=401&

An oil saviour?

Iraq has the potential to supply much more oil

The growing concerns in the world energy market about the risks of a supply crunch have been a critical factor behind the recent surge in oil prices to a new record of US$135/barrel. Speculators are betting huge sums on the assumption that the oil market (and other primary energy markets) will remain tight for many years to come, owing to the inelasticity of demand and to the constraints on long-term supply. Saudi Arabia, the world's largest oil exporter, is doing its bit to allay these concerns, but has acknowledged that once its current crop of oilfield projects is complete in around 2013, there will be little scope for further capacity increases. Similar strains are evident in most of the other major oil-producing countries. One significant exception is Iraq, which holds (at least) 10% of the world's proven reserves, but accounts for only 2.5% of total production. Iraq has the potential to furnish a long-term solution to the oil market's long-term supply problem, but it will need to improve dramatically on its recent performance before buyers of oil futures will be convinced that it can deliver.

All about oil

If history had been kinder, Iraq could now be producing at a comparable level to Saudi Arabia. Instead, three wars, 13 years of sanctions and five years of internal conflict have eroded Iraq's oil infrastructure and human capital. However, Iraq also has a history of recovery. Production peaked at over 3.5m barrels/day (b/d) in 1980 on the eve of the Iran-Iraq war, but then averaged less than half that level during the eight-year war. It had nearly recovered to 3.5m b/d in 1990, after which the invasion of Kuwait and the subsequent UN sanctions severely limited exports, and hence production. In the five years before the US-led invasion of 2003, the sanctions regime gradually permitted greater exports, and production was often above 2.5m b/d. However, it fluctuated considerably due to the impact of years of underinvestment, restrictions on the import of spare parts and isolation from the international oil industry.

This volatility in production has continued in post-Saddam Iraq, although the average level has usually been below 2m b/d, and only exceeded the immediate pre-war level of 2.3m b/d for the first time at the end of 2007. Operations have been frequently disrupted by events ranging from the bombing of pipelines to the murder of oil workers. Moreover, the competition between political factions for influence at every level in the industry—as well as widespread corruption—has not provided suitable conditions for a revival of the industry. There is even concern that damage may have been caused to some fields in order to maintain production at modest levels.

Things may be changing. Iraq's deputy prime minister, Barham Salih, said in April that Iraq's total reserves, could be as high as 350bn barrels, triple the 115bn that has been its officially stated level for many years. The figure is aspirational and should be treated carefully but, given that there has been barely any new exploration of Iraq's promising geology in 30 years, an upward revision of the official reserves figure seems long overdue. This underlines Iraq's uniquely large reserves-to-production (RP) ratio, which was already the world's highest and, based on Mr Salih's estimate and at the expected production level of 2.3m b/d in 2008, would stand at a remarkable 415 years (compared with a world average of about 40 years). If Iraq were able to achieve the average Middle East RP-ratio of 80 years then it would be pumping 4m b/d based on the current reserves, and 12m b/d based on Salih's aspirational estimate. Getting there would take some time, around five years for 4m b/d and probably more than 20 years for the most optimistic level. It would also require Iraq to achieve a sufficient degree of stability. However, if there are promising signs of progress over the next 18 months, then it might be enough to mitigate fears of shortages next decade and dampen the futures market.

Fair share

The issue on which everything hinges is the basis on which Iraq's oil will be developed. Although at its height in the 1970s, Iraq's national oil industry would have had the capacity to implement a significant part of the exploration and development needed, it has been severely eroded since then. Therefore, it is widely recognised that foreign expertise will be needed, but Iraqis are split on two important issues which have so far held back progress. The first is whether the development and operation of the oil sector will be managed entirely from Baghdad or also at a regional level, particularly in the Kurdish region. The second is the terms under which international oil companies (IOCs) will be invited to participate. In particular, the idea of production-sharing contracts (PSCs) has aroused such considerable opposition—from parliamentarians and oil workers' unions who believe that Iraq should fund the development itself (particularly now that there is a large budget surplus)—that the government has apparently backtracked. These controversies have blocked the ratification in parliament of a national hydrocarbons law which was first approved by the cabinet in February 2007. Although no draft has so far emerged that elicits a majority of support, it may yet pass this summer as part of a bundle of laws.

Stop-gaps

In the meantime, the oil minister, Hussein Shahristani, announced plans in January for a series of two-year technical service agreements to upgrade five existing fields by 100,000 b/d each. This is a relatively uncontroversial first step, simply paying IOCs for their services without granting them any claims on revenues or reserves—but none of the contracts have yet been finalised. Then, in mid-April, Iraq released a long-delayed list of 35 IOCs initially approved to bid for more substantial long-term contracts covering exploration, development and production. Theoretically, bidding on the first round of contracts could be complete by the end of the year, and if Iraq—or at least the regions containing the respective oil fields—is sufficiently stable, then work could begin soon afterwards. However, there is a significant risk that this timeline could slip due to bureaucracy and possibly to political shifts following the provincial elections in October.

Kurdish exception

In contrast to delays at the national level, there has been a great deal of activity in the Iraqi Kurdistan region. The Iraqi Kurds had long felt that their region had been deliberately deprived of an oil industry by successive governments in Baghdad, and therefore pressed ahead with development in their essentially autonomous region. The Kurdistan Regional Government (KRG) began drawing in IOCs both because it had little capacity itself and also to provide some international leverage in the inevitable confrontation with Baghdad. Given their weak position and limited finances, the KRG has been happy to sign PSCs, and the first oil well was drilled by Norwegian company DNO in 2006 and now produces about 7,000 b/d. It has signed PSCs with other IOCs including Canada's Western Oil Sands, the UK's Sterling Energy and most recently with Niko Resources of Canada in May. Also, in frustration at the failure to agree a national hydrocarbons law, the KRG passed its own in August 2007. Until now most oil majors have avoided the KRG because of the potential backlash from Baghdad, demonstrated by the fact that companies such as the Korea National Oil Corp that have signed contracts with the Kurds were explicitly excluded from the list of 35 approved IOCs.

Hurdles

Although there is some way to go, 2008 may be seen as the year in which Iraq's oil industry began to recover and, when the markets recognise this, it may take some of the edge off the oil price. However, given Iraq's history of dashed expectations, it would be unwise to factor major production increases into oil supply projections until Iraq has passed a series of important tests. One of these is whether the Iraqi army will be able to maintain security as the US draws down its troops. Another is whether the rival Shia movements led by Muqtada al-Sadr and Abdel-Aziz al Hakim can make the transition from street fighting to purely political competition—an issue that will probably not be resolved until the next general election in December 2009. Finally, the KRG and the rest of Iraq will need to conclude that it is worth reaching a compromise on Kirkuk (the disputed northern province that contains Iraq's largest oilfield) and regional autonomy in order to share in the benefits that a major expansion in the oil industry will bring.

http://www.economist.com/agenda/disp...41149&fsrc=RSS

Iraq’s PM Heads Delegation to Sweden

An Iraqi delegation headed to Sweden in order to participate in the conference of the International Commitment with Iraq.

The delegation includes Nuri al-Maliki, Iraqi Prime Minister, Dr. Barham Salih, Deputy PM, Hoshiyar Zebari, Minister of Foreign Affairs, Bayan Jabir al-Zubaidi, Minister of Finance, along with the ministers of Planning, Electricity, Industry, Human Rights.The Minister of State for National Dialogue and the National Security Adviser are also within the delegation.

Ban Ki-moon, the Secretary General of the United Nations, Amir Musa, the Secretary General of the Arab States League and Condoleezza Rice, the US Secretary of State will also attend the conference which will be attended by 90 of Arab and European States.

PUKmedia :: English - Iraq’s PM Heads Delegation to Sweden

Iraq's Sunni bloc suspends talks over its return to cabinet

Iraq's alliance of major Sunni political parties, the Iraqi Accord Front, suspended its talks with the government over disagreements on candidates for cabinet posts, front members told Deutsche-Presse Agentur dpa. "Talks have been suspended. We have shown a great deal of flexibility to rejoin the cabinet in the spirit of reconciliation," the front member, Harith al-Ubaydi, told dpa.

"The main disagreement is over names of candidates for cabinet posts," al-Ubaydi said.

The front pulled out its six ministers from the national unity cabinet of Shiite Prime Minister Nuri al-Maliki in August to voice its frustration with what many Sunni Arabs perceive as their marginalization in Iraq's Shiite-dominated politics.

But the front, which has 44 of the 275 parliament seats, has reconsidered its position since the government agreed to one of its demands: the release of Sunni Arabs detained without charges.

The Sunni bloc has put forward a list of candidates for six cabinets posts.

The front is concerned that the deadline to reach a deal has not been met and assurances it has received from the government have not been honoured," Selim al-Juburi, the front's spokesman, told dpa.

"The front has indicated that its return to cabinet is not an objective in itself but we seek to make a real and effective contribution," al-Juburi said.
"If its return to cabinet is weak and bounded by restrictions and conditions, which have not been previously agreed, then the front will have to reconsider the whole matter," the spokesman explained.

The Sunni Arab politicians are eyeing one of the main cabinet portfolios: the foreign ministry, defence or interior ministries.

"We have submitted a big list of candidates with high qualifications but the problem lies in which cabinet posts we are to get," the front member, Abdel-Karim al-Samarrai, told dpa.

"Sadly, the government is not willing to give us cabinet posts we are worthy of," al-Samarrai said.

National reconciliation and the integration of Iraq's Sunni Arabs in the political process are among the main criteria set by the US for al-Maliki's government to meet.

The Prime Minister has repeatedly said he wanted Sunni Arabs to have a role in politics but also signalled his readiness to bring in other Sunni players if the front refuses to rejoin his cabinet.

Al-Maliki has been eyeing his new allies in Sunni-dominated provinces in western Iraq. Tribal chiefs in those provinces have been fighting al-Qaeda insurgency in their areas.

Iraq's Sunni bloc suspends talks over its return to cabinet : Middle East World

Kurdish PM: KRG Gives Priority to Economic Development

Kurdistan Regional Government (KRG) has given priority to the economic development in the region, KRG Prime Minister, Nechirvan Barzani, said today as he attended the Conference on Consultancy Engineering and Design Organisations (CEDOs) in Erbil.

During the conference, which was attended by a large number of the KRG officials and other foreign representatives, several statement were made, calling for promoting Kurdish engineers’ competence.

“This conference was seen as a first step taken to get the Kurdish engineers into the process, and consequently identifying their concerns in the context of construction engineering,” Dilshad Kaka, member of the preparation committee for the conference, said.

Later, Prime Minister Barzani said in a statement that his government allocated a very large amount of financial sources to promote the engineering projects in the region, urging the engineers to come forward and accelerate their competence to contribute to the public projects.

PUKmedia :: English - Kurdish PM: KRG Gives Priority to Economic Development

Demand for the dollar down at daily auction

Demand for the dollar was down in the Iraqi Central Bank's auction on Wednesday, reaching $ 83.980 million compared to $119.630 million on Tuesday.

"The demand hit $3.630 million in cash and $80.350 million in foreign transfers outside the country, all covered by the bank at a stable exchange rate of 1,198 Iraqi dinars per dollar," according to the central bank's daily bulletin which was received by Aswat al-Iraq - Voices of Iraq - (VOI).

None of the 12 banks that participated in the auction offered to sell dollars.

The Iraqi Central Bank runs a daily auction from Sunday to Thursday.

Aswat Aliraq

Iraq heads toward reconstruction - VP

Iraq's Sunni Vice President Tareq al-Hashemi on Wednesday said that the country is heading toward a reconstruction campaign and a stage of new investments.

Al-Hashemi discussed with Jordanian Prime Minister Nader al-Dhahabi mutual relations and economic cooperation, according to a presidential statement that was received by Aswat al-Iraq - Voices of Iraq - (VOI), quoting al-Hashemi during his meeting with the Jordanian premier.

Al-Hashemi invited Arab countries, particularly Iraq's neighbors, to invest in Iraq, the statement added.

"Today we are trying to dispel any Arab misunderstanding of the Iraqi issue and we call on Arab states to help us pass this stage…," al-Hashemi noted.

On Tuesday, al-Hashimi arrived in the Jordanian capital Amman on a four-day visit for talks with King Abdullah II of Jordan on boosting bilateral relations.

"Hashimi is scheduled to discuss some pending issues and is expected to meet with the Jordanian monarch and Prime Minister Nader al-Dhahabi," a media source from al-Hashemi's office told VOI yesterday.

Aswat Aliraq

Hashimi calls South Korea to participate in Iraq reconstruction

Iraq Vice President Tarek Al Hashimi called South Korea to seriously participate in Iraq reconstruction and to encourage South Korean companies to enter Iraq market. He also called it to work on training and developing Iraqi employees in all Iraq institutions.

http://www.alsumaria.tv/en/Economics...struction.html

Ministry of Transportation looks at plans for Iraq Grand Port

Iraq's Ministry of Transportation has announced that it is looking again at proposals for the Iraq Grand Port in Basra governorate.

Abdul-Hussain Ayish, general director of the legal affairs in the ministry, has told Al-Sabah that, "The ministry, within its outlooks towards the coming phase, and through new visions submitted for the project to build the Iraq Grand Port in Basra governorate, has reconsidered the studies relevant to the building of this port."

The Ministry and eleven private companies have competed studies of the site, which have all been submitted to the ministerial council for consideration, but any decisions have been postponed until the investment law becomes active.

Ayish said that the council will look at all proposals for a second time before choosing a winner, stressing the significance of the project wich aims to turn Basra into a major shipping destination.

http://www.iraqdevelopmentprogram.or...ws/new1982.htm

$160 Million to develop General Company for Fertilisers

According to the General Director of the Chemical Industries Department in the Iraqi Ministry of Industry and Minerals, the Ministry has allocated USD$160 million from a Japanese funded loan to the rebuilding of the factories of the General Company for Fertilisers in southern Iraq.

The General Company for Fertilisers has continued its production during the past five years, operating only one of two production lines. It is now trying to rehabilitate the second line, despite facing numerous obstacles.

Insufficient quantities of natural gas reaching its plant from the oil fields and the unstable electrical supplies as well as unrest in the country are among the factors that make the rehabilitation process a challenging task.

In a statement released by the Ministry, the General Director said that it is hoped that the plant's production capacity will rise to more than 600,000 tons per year once the 2-year rehabilitation process is completed. Meetings have already taken place between the Iraqi and Japanese sides to determine the mechanisms for bringing in the necessary equipment and machines.

http://www.iraqdevelopmentprogram.or...ws/new1984.htm