Thread: Archive Latest News - Dinar Think Tank - 27/08/08 - 15/01/09

Iraq does not suffer from scarcity of liquidity in the financial & has a surplus of up to $60 billion, is now with the Min of Fin & Central Bank of Iraq

According to Oil Minister Hussein Shahrastani that Iraq does not suffer from scarcity of liquidity in the financial and has a surplus of up to 60 billion dollars, is now with the Ministry of Finance and Central Bank of Iraq. Shahrastani said in a press statement today, Sunday, that Iraq does not suffer from scarcity of liquidity in the financial We have never کبير financial surplus of oil revenues and that any investment project in any area of money available. He explained that the Ministry of Oil of Iraq provide what is needed from the budget for the financial development of the country and the fastest pace might find interesting, and added that the fiscal surplus Iraqi المتراکم now exceeds 30 billion dollars in the Central Bank and a similar number in the Ministry of Finance.

He said that the Ministry of Oil will be held in October next conference in London can `Welcome the 35 that have been rehabilitated in the first licensing round announced last June to develop six oil fields is a giant, Rumaila and Zubayr, west of Qurnah, البزرکان and کرکوک and Bai Hassan and the two fields of gas and is عکاس Mansourieh , The purchase of these bags and then submit their bids and that the offer and will achieve the highest return on the country's financial contract is to be adopted and ستکون this round of competitive high transparency.

The Acharnaml the completion of the contract before the middle of next year, after the completion of the portfolios of information and Welcome require six months to equip themselves to provide bids and proposals during this period we will work in the Ministry of Oil to create the second round of licensing and advertising on other fields.

He added that the Oil Ministry is planning to announce its second licensing round before the end of this year and plans to the third round of licensing in the first half of next year, respectively licensing rounds on far تکون six months from one another and over the next year ستکون fields المکتشفه included in the licensing rounds and oil are Welcome To submit their offers to compete for the development of these fields.

Shahrastani said that Iraq was keen يکون signed with a Chinese Studios to develop Al-Ahdab field city of Wasit to prove that Iraq would not allow anyone to manipulate oil wealth.

The oil minister added that the Chinese Welcome conducted negotiations lasted 18 months of the signing of the Al-Ahdab field because the Chinese side Also adhered to the contract Also, China's debts to Iraq amount to 5 t 8 billion dollars.

Translated version of http://www.hewarat.dk/hewarat_data.php?sid=10198

Opinion piece

Iraq Oil Development: Lack Of Direction And Decision-Making

Iraqi oil policy has finally surfaced on the radar screens of local politics, five years after the US-led invasion. However, much confusion and misunderstanding still surrounds the exact process of how the industry would develop and what role would be retained for the proposed National Oil Company (NOC) and its affiliates, and how wide a door would be opened for International Oil Companies (IOCs).

While the Ministry of Oil has strived to retain a clear role for the federal authorities in drawing up an oil policy, it has faced persistent challenges from both the Kurdistan Regional Government (KRG) and from federal institutions in Iraq, including the cabinet, as well as private interests, who point to the fact that the KRG has been able to sign 22 contracts with the IOCs, while the federal Ministry of Oil has not signed a single development agreement so far. Iraqi Oil Minister Husain Shahristani visited Beijing at end-August 2008 to discuss with the Chinese authorities the possibility of a Chinese consortium to develop al-Ahdab oil field in the Misan Governorate (capacity 90,000 b/d), in accordance with a 1997 production-sharing agreement (now revised to a service contract).

There are many problems facing the evolution of a new Iraqi oil policy. First and foremost is the question of security. There is furthermore the constant mayhem among the ruling parties, and the lack of a sufficient number of experienced officials in the Ministry of Oil to carry out the negotiations with the IOCs. There is also the sustained political pressure from the US administration to have parliament pass the draft Hydrocarbon Law, raising much suspicion among the lawmakers and the public about the real reasons behind the launching of the 2003 war. It will be recalled that the draft Hydrocarbon Law defined the oil decision-making process, creating new authorities to ensure checks and balances. Meanwhile, there are many reports afloat in Baghdad about a possible secret oil annex to the Status of Armed Forces Agreement (SAFA) currently being negotiated by Washington and Baghdad, concerning US-Iraqi oil relations and the future role of US oil firms in Iraq.

The cabinet sent the draft Hydrocarbon Law to parliament in February 2007. It has not been deliberated on yet. The draft bill has been revised several times, due to much bickering between the federal authorities and the KRG.

Efforts To Award Upstream Contracts

On 30 June 2008, Dr Shahristani announced at a press conference in Baghdad that six oil and gas fields have been offered to IOCs, this being the first licensing round since the 2003 invasion. Baghdad's goal is to increase production capacity to 4.3mn b/d, compared with the current level of 2.5mn b/d. The minister emphasized that the contracts would be awarded on a production-service basis, and refused categorically to award any production sharing agreements (PSAs). This means, in effect, that the IOCs would be paid fees for their services and not allowed any equity in the reserves, as they prefer. In the second phase of the production-service contract, and after three years, the IOCs would be expected to introduce Enhanced Oil Recovery (EOR).

Around 40 IOCs pre-qualified for this licensing round. The fields included are: Kirkuk and Bai Hasan in the north; Rumaila and West Qurna 1 in the Basra Governorate; Buzurgan, Fauqa and Abu Ghirab in the Misan Governorate; and the ?Akkaz and Mansuriya gas fields in the far west and central areas, respectively. The minister explained in his press conference that the oil producing fields constitute the bulk of Iraqi oil production today (around 2.1mn b/d out of 2.5mn b/d in June 2008). He also noted that some of those fields have matured, with declining production, hence technical assistance and enhanced recovery are needed to increase their production levels and stop the decline process. He added that the contracts would be signed by June 2009, and that the IOCs, must take a local partner with up to 25% interest, and open offices in Iraq.

Meanwhile, the Ministry of Oil had been negotiating, and was scheduled to sign in summer 2008, Technical Service Agreement (TSA) contracts for six fields. The companies involved include: BP (Rumaila), ExxonMobil (Zubair), Chevron/Total (West Qurna 1), Shell/BHP(Misan), and a consortium consisting of Anadarko/Vitol/Dome (Luhais). Each contract requires an investment of around $500mn and aims to increase production by 100,000 b/d from each field over a period of two years.

The Iraqi oil authorities adopted the TSA process as a stop-gap measure to buy time and to increase production over a short period of time (a total of approximately 500,000 b/ d over 48 months), as well as to ensure that it has sufficient public and parliamentary support to sign upstream contracts with IOCs and also to silence the critics among the politicians in Baghdad who accuse them of not moving fast enough to reach agreements with IOCs and increase production.

Uncertain Future Of Upstream Contracts

The future of the TSAs is now uncertain. The Ministry of Oil has changed the terms of reference of the TSAs on several occasions. Even after assigning a date for signature at Baghdad airport in early June, the ministry changed its mind at the last minute, telling the companies that they should reach the production targets within one year, instead of two years. The IOCs are not clear whether the ministry is still seriously considering the TSAs, having been told that any further negotiations would require cabinet approval. There have been reports, subsequently denied by the IOCs, that the TSA talks have collapsed. Moreover, the general consensus is that the delay in signing the TSAs has made them redundant since the production-service agreements are scheduled to be signed in 2009.

Meanwhile the cabinet, showing its frustration with the lack of new oil development, decided in early July 2008 to establish a National Council for Reconstruction and Development to accelerate, among other things, the approval of oil upstream contracts. No information was provided as to the procedure that the cabinet would take to negotiate with the IOCs, nor which areas it would focus on. To confuse matters even further, the oil minister was quoted as saying that, “his view was that the new Council would not deal with oil field contracts, but would possibly be required to make speedy decisions on strategic pipelines or refineries.” 1

petroleumworld

Fragile Peace Hampers Oil Operations

The cabinet proposal to establish a Council for Reconstruction was introduced after a series of military victories achieved by the Iraqi army against al-Qa?ida terrorists and sectarian militias in the capital Baghdad, the southern city of Basra and Mosul in the north.

However, while security has improved during the past few months, there is still a fragile peace prevailing, with scores of daily casualties among civilians and security personnel. Iraqis and Iraqi firms still find it difficult to carry out their work normally in certain parts of the country. Hence, it is still difficult for IOCs to open offices in Iraq, or to send their engineers and workers to the fields. The government still cannot provide international and local firms with the necessary protection. Iraq remains far away from the normal peace enjoyed by other states.

While al-Qa?ida and sectarian militias have lost battles during the past several months, they remain capable of carrying out their terrorist and destructive activities throughout the country, as they continue to demonstrate, but at a lesser pace and with lesser frequency than before.

The city of Kirkuk remains a flashpoint, witnessing daily armed conflicts, and awaiting a referendum as to whether it should remain within Iraq or annexed to the Kurdistan region.

The new Iraqi army and police have been established on a sectarian and ethnic basis, not as integrated forces, and as long as this is the case, it will be difficult for them to ensure peace and security throughout the country.

Meanwhile, a crucial factor that would determine the security of the country will be the details of the Status of Armed Forces Agreement (SAFA) security agreement with the US, and what policy the next US President will adopt towards the country. How will the future President perceive the threat to the US, and what priorities will he assign to Iraq as against other challenges facing US policy? How will Washington and Baghdad react to the expected opposition to the SAFA security agreement among the Iraqi public?

Finally, would the US and Iran reach a diplomatic or a military solution to the latter's nuclear program, and what kind of an understanding would be reached between them over Iranian influence and interests in Iraq? The outcome of the conflict, between Washington and Tehran, would impact the security and peace of Iraq. Iranian influence in Iraq since the 2003 invasion has grown too strong to be ignored any longer in future settlements.

Long Term Impact Of Occupation

Upstream contracts are long term in nature, extending to around 20-25 years. Iraqi society has serious polarized political and sectarian conflicts, which spill over onto the oil scene. It is conceivable during the duration of these contracts that they would be reviewed, if not even annulled at some time in the future. Such moves would not be novel to Iraq. The recent history of Russia and Venezuela is full of such examples.

Another challenge facing agreements with IOCs is the unprecedented corruption throughout the country. Non-governmental organizations specializing in transparency have placed Iraq among the most corrupt in the world. Several investigative reports by the US and Iraqi authorities have revealed similar conclusions, whether corruption in the award of infrastructure contracts or oil smuggling, with estimates of as much as $10mn worth of crude oil and/or petroleum products being smuggled daily over the past few years. The billions of dollars involved has led to the rise of local interests, criminal gangs and local political parties that would want to see the corruption continue. One would also presume that they would do their best to sabotage any reform movements.

Constitutional Problems For Oil

Another problem facing the oil industry is the vague hydrocarbon articles in the constitution that open the door to different interpretations – in fact they already have – as to who is responsible for negotiations and the signing of exploration and development contracts with IOCs, whether it be the federal Ministry of Oil, the National Oil Company, or the provinces. The KRG has already set the precedent and example for other provinces. The question is how will the Ministry of Oil deal with future upstream contracts between the Governorates and IOCs outside the Kurdish region.

Whether the constitution would be amended or not, it is doubtful that the federal authorities would challenge the sanctity of the contracts signed with the KRG. The decision-making process in Iraq today is such that Kurdish acquiescence is necessary to retain national political alliances, whether in the cabinet or parliament.

The KRG agreements have all been of the production sharing type, which has put pressure on the Ministry of Oil to sign similar contracts, but which it has refused to do so far. The oil authorities know that they need the assistance of IOCs to enhance production and stop the decline from some of the mature fields, as well as to raise the recovery rate from the current low level of around 15-20% to approximately 40-50%. The question is how to entice the IOCs to invest in Iraq with a service contract – a model which they do not find enticing – rather than the production sharing model which they prefer. The oil authorities argue that the major IOCs want a foothold in the Iraqi oil industry, and that they recognize that the road ahead is long and difficult, but nonetheless they want to be there for the long haul and definitely not be left out at the beginning of the race. Hence the oil authorities believe they can set their terms. The question is, would the local politicians, the security situation and special interest groups give the Ministry of Oil the space and time to achieve its goals?

Walid Khadduri is MEES Consultant and former Editor-in-Chief of MEES. Petroleumworld does not necessarily share these views.

petroleumworld

Petraeus to hand over Iraq command on Sept 16

US General David Petraeus, the man credited with curbing sectarian violence in Iraq, will hand the command of US-led forces in Iraq to General Raymond Odierno on September 16, his spokesman said Sunday.

"He will hand over the command on September 16 in Baghdad," Colonel Steven Boylan told AFP.

Petraeus will take over as the new chief of Central Command in late October, with responsibility for US troops from the Horn of Africa to Central Asia, including live conflicts in Afghanistan and Iraq, Boylan said

The expected shift will come at a time when pressure is growing to beef up the US troop presence in Afghanistan, where the level of violence is now higher than in Iraq.

In July, Petraeus was approved by the US Senate to head Central Command after Admiral William Fallon abruptly stepped down from the post in March, saying that reports describing him as at odds with the White House over how to deal with Iran had become "a distraction."

About 144,000 US soldiers are currently on the ground in Iraq but that number could decrease in coming months.

Before leaving Iraq, Petraeus will offer to US President George W. Bush his recommendations on troop cuts in Iraq amid a drop in violence which is currently at a four-year low.

Petraeus, the architect of the troop surge strategy credited by the Bush administration with improving security in Iraq, arrived here in February last year with the launch of a surge of 30,000 US troops.

Aside from having more troops at his disposal, Petraeus also embarked on a counter-insurgency strategy that underscored the importance of winning Iraqi hearts and minds.

His strategy demanded that US soldiers engage with and respect citizens while relentlessly pursuing Al-Qaeda and other extremist groups blamed for destabilising the nation of more than 26 million people.

The gains made since late last year have already allowed Washington to withdraw five combat brigades that were deployed as part of the surge.

On Thursday, in an interview with the Financial Times, Petraeus said US combat troops could be out of Baghdad by July 2009 "conditions permitting."

"The number of attacks in Baghdad lately has been, gosh, I think it's probably less than five (a day) on average, and that's a city of seven million people," he said.

He told the London-based business daily that Iraq was a "dramatically changed country" since he took over in February 2007, pointing to a "degree of hope that was not present 19 months ago."

Petraeus insisted, however, that "innumerable challenges" still remain, particularly the unresolved status of the northern oil city of Kirkuk, persistent sectarian tensions, and the continuing if diminished capabilities of Al-Qaeda.

PUKmedia :: English - Petraeus to hand over Iraq command on Sept 16

Iraq says historic Kuwait visit delayed

Kuwaiti Prime Minister Sheikh Nasser al-Mohammad al-Sabah will visit Iraq after Ramadan, the Muslim holy month, an Iraqi government official said on Sunday.

Sabah and Nuri al-Maliki, his Iraqi counterpart, will discuss reparations for Iraq's invasion of Kuwait in 1990, debts, and efforts to improve relations between the one-time enemies, said Yasin Majid, media advisor to Maliki.

The visit, which would mark the first high-level Kuwaiti delegation in Baghdad since Iraq under former president Saddam Hussein invaded the tiny Gulf state, had been planned for this week, but was delayed on Sunday, Majid said.

This year, Ramadan concludes around the end of September.

A source in Sabah's office had earlier said the Kuwaiti prime minister was not planning a trip to Iraq, but no officials were able to confirm if a trip would take place after Ramadan.

As Iraq seeks to rebuild after five years of bloodshed, its government is hoping for reconsideration of the percentage of its oil exports earmarked for a Geneva-based fund set up to settle post-conflict damage claims from the invasion of Kuwait.

Iraq was driven out of Kuwait in 1991 by a U.S.-led coalition. Under U.N.-imposed peace terms, Iraq must pay 5 percent of oil income in reparation to Kuwait and other nations.

Some $24.4 billion in compensation claims had been paid from the U.N. fund as of April, but more than $28 billion remains to be paid, according to the fund's website.

Yet Kuwait has said that any changes to the reparations scheme must be decided by the U.N. Security Council.

The Iraqi government also announced on Sunday that Finance Minister Bayan Jabor had left for Kuwait for a visit that would include discussion of debt and reparations.

Since the U.S.-led invasion of Iraq in 2003 which toppled Saddam, Washington has been pressing its Arab allies to forgive Iraqi debts and to restore high-level diplomatic ties.

In August, Jordan's King Abdullah became the first Arab leader to visit Iraq since 2003, and other regional countries are taking steps to resume full relations.

Even as violence drops sharply in Iraq, state visits are still usually shrouded in secrecy for security reasons.

On Sunday, Iraq's national media centre reported that Saudi Arabia would soon open an embassy in Iraq, but did not say when.

Baghdad is also seeking forgiveness of loans Kuwait made to Iraq during its war with Iran in the 1980s -- but many in Kuwait are still bitter about the 1990 invasion.

The United Arab Emirates recently waived all of Iraq's almost $7 billion obligations.

PUKmedia :: English - Iraq says historic Kuwait visit delayed

Surge in dollar demand in daily auction

Demand for the dollar was significantly higher in the Central Bank of Iraq's (CBI) auction on Monday, registering at $130.57 million compared to $20.905 million on Sunday.

"The demand hit $14.59 million in cash and $115.98 million in foreign transfers outside the country, all covered by the bank at an exchange rate of 1,181 Iraqi dinars per dollar, one tick lower than yesterday," an official source from the bank told Aswat al-Iraq - Voices of Iraq - (VOI).

None of the 13 banks that participated in the session offered to sell dollars.

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

http://www.aswataliraq.info/look/english/article.tpl?IdLanguage=1&IdPublication=4&NrArticle =92240&NrIssue=2&NrSection=2

Al-Dabbagh: Baghdad-Washington Pact is completed

The spokesperson of the Iraqi government Dr. Ali al-Dabbagh in a statement to al-Hyatt newspaper said that the draft of the security agreement between Washington and Baghdad is completed and the negotiations reached to their final stages.

Both sides should settle the crucial sections relating the foreign forces withdrawal from Iraq, immunity and other issues.

PUKmedia :: English - Al-Dabbagh: Baghdad-Washington Pact is completed

First flight between Mosul and Baghdad since 2003

Daham Hassan, the Director of Mosul airport exclusively stated to PUKmedia “yesterday, at 4:00pm, an airplane carrying a number of passengers departed Mosul airport to Baghdad. This is the first flight from Mosul airport since 2003 due to its destruction.”

PUKmedia :: English - First flight between Mosul and Baghdad since 2003

Supplies Banking Reform Government (2.2)

In the new environment of banks will be no competition between banks and other governmental organizations. It follows that some banks are government (or some branches) in the distinct performance than others. Here will be available some of the options:

A. Body banking encouraging private sector participation in the management or ownership of banks to become mixed ownership of banks. The consequences of this action more intense competition between banks and thus greater profitability and productivity.

B. Encourages the banks the freedom to decide on the merger between the branches, more privatization, and the consequences of this stage growth or decay of some banks.

Phase III:

At this stage be more clearly the performance of banks and most appropriate ways to deal with them. And be able to identify the bank or banks that remain under the ownership (or under joint ownership) and then issuing instructions privatization of the rest of the banking sector.

It is clear from the foregoing that the banking reform, all banks granted full freedom in decision-making (including branches) against the banks are responsible for good economic performance or financial. Banks or branches Learn affairs and circumstances of others, and thus better able to take appropriate decisions. The adoption of the central hamper the pace of movement in line with the policy of free market economy which relies on quick response to market signals. The adoption of the principle of economic freedom in decision-making provides the necessary framework to put the right person where appropriate, thereby changing the prevailing customs of work. Thus, banks are free to choose and to provide the type of banking services and free pricing their services. In light of economic freedom banks attracting citizens through the provision and provide better services and competitive prices to the market.

3 - the reform procedures in place: for the completion of banking reform, in the December 6, 2006 signing of the Memorandum of Understanding between the Ministry of Finance and Central Bank of Iraq, which is the restructuring of the Rafidain and Rasheed, then signed with the World Bank and IMF to assist in efforts Reform. Under the previous conventions had been formed "Committee supervising the reform: composed of the Minister of Finance, Governor of Central Bank of Iraq, and President of the Court of financial control for the purpose of review and ratify or not ratify the recommendations made by the Commission leadership, composed of agents and members of the" Committee supervises the re - Restructuring. "

Contract was signed between the two banks and international financial independent auditor (Ernst & Young) for the purpose of scrutinizing the financial and operational activities (which hopefully including the completion of a full budget statement and strategic plan for reform of operational activities). Contract was signed between the company and the Rafidain Bank (Misys / B Plan) to apply " Comprehensive banking system "by making banking operation automatically. The bank is still good in the role of selecting equipped. Currently based on the reform of State banks:

(1) the reform of operational activities:
The reform of the operational aspects of business planning, organization policy and procedures, and a description of the functions, develop the administrative organizational structure, which includes special sections: human resources, accounting, information technology, business management and operational special sections.

(2) reform of financial affairs: includes bank debt deal, the classification of assets and settlement of accounts of creditors, maintain bank assets (physical, financial, and privileges) during the period of restructuring, recapitalization and linking the settlement of external obligations under the Convention on Iraq with the International Monetary Fund (hand ) And progress in restructuring the operational on the other.

In addition, the company (Ernst & Young) financial auditing process for both banks, and expected to be completed in the summer of 2008. The results of audits of financial and operational strategic operational plan of reform. And to work with the Rafidain Bank and Rasheed to reformulate the balance sheet of them in 2007, support for banks to determine the external debt, and losses inherited and the necessary reserve funds, assets, debts and assets of creditors (credit balances).
From our perspective, all these actions is very important but not sufficient (Necessary but not sufficient) and therefore there:

First: the need to build mechanisms that have become school decentralization and competition ...Etc.

Second: the need for a supportive institution of credit (Credit Bureau) independent of the banking system is responsible for collecting financial information for the general citizens and corporations to contribute to assess the seriousness of the financial engagements of the persons and companies.

Third: the need for an advisory committee independent Iraqi (contracted with the Ministry of Finance) to monitor and follow up the implementation of the reform process and enrich the proposals are necessary. Or rather should be on the parliamentary economic committee follow up the reform process with the assistance of a special advisory committee.

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Zubaidi in Kuwait to discuss compensation, debt & detained Kuwaitis Iraqi aircraft

Directed Finance Minister Baqir Jabr Al-Zubaidi yesterday, Sunday, the State of Kuwait to discuss a number of files of common interest between the two countries. According to the statement Zubaidi, the Iraqi government will discuss with Kuwaiti officials file debts between Iraq and Kuwait and the file of compensation. An Iraqi government official confirmed yesterday Sunday, , the Prime Minister of Kuwait Sheikh Nasser Mohammad Al-Sabah will visit Iraq after the Ramadan in the first visit by a high-ranking Kuwaiti official to Iraq since the invasion of the late Iraqi President Saddam Hussein of Kuwait in 1990. Maged said Yassin, the information advisor to Iraqi Prime Minister Nuri al-Maliki said Sheikh Nasser al-Maliki will discuss and Compensation for the Iraqi invasion of Kuwait in 1990, debt and efforts to improve relations between the two countries.

And one of the most prominent cases to be considered by Zubaidi also the subject of detention of Kuwait to Iraq two contracted to buy civilian aircraft as part of a deal with a Canadian company, as well as to discuss bilateral relations and ways of development. It is expected to start Kuwaiti Prime Minister Sheikh Nasser Mohammad Al-Ahmad Al-Sabah's visit to Baghdad soon to discuss a number of outstanding issues between the two countries in the forefront the issue of reparations for the Iraqi invasion of $ 17 billion dollars.

As Iraq seeks to rebuild after five years of bloodshed hopes his government to reconsider the proportion of oil exports for the Geneva-based fund established to settle the case claim damages after the invasion of Kuwait. The international coalition defeated the United States-led Iraqi forces from Kuwait in 1991. Under the terms of a peace imposed by the United Nations after the war must pay five percent of Iraq's oil revenues as compensation to Kuwait and other countries. Kuwait says that any changes for the awards to be decided by the Security Council.

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