Thread: Iraq/Dinar News. 09/05 to 01/14/07

Originally Posted by Vipor

Not that I know anything about how things function in Iraq... but this is how I interpreted Piper and Susie.

Today in Iraq:
Headline - Mom and Pop Ice Cream Parlor for sale. Cheap @ 5M Dinar
(at today's exchange rate, this equals to $3,400 USD)

Tomorrow (after reval):
Headline - Mom and Pop Ice Cream Parlor for sale. Cheap @ 5M Dinar
(at tomorrow's exchange rate of 1:1, this equals to $5,000,000 USD)

The Dinar asking price is the same regardless of exchange rate. The target buyer should be an Iraqi who's pocketbook should be irrelevent to the exchange rate.

Like I said, I may be totally off base.

I see it this way as well. With Big Business coming in with almost bottomless pockets I feel Iraq would have to R/V when the FIL enacts on The 9th.

I understand that the FIL has stipulations on how much an outsider can buy but it's still a big piece. Would they want to give up that much that soon?

And it still doesn't give them enough money for all the future projects they have planned and well as paying off the remaining debt. I still think we can see a R/V by Sunday. JMO

Positive Signs for Award of Enhanced Iraqi Oil Contracts Before Controversial Hydrocarbon Law In Place
Iraq's Oil Minister, Hussein al-Shahristani, has said that he believes that some oil and gas deals could be inked ahead of agreement on a framework hydrocarbons law, in the interests of moving forward more quickly on the country's energy-sector development.

Global Insight Perspective


Significance
The proposed use of enhanced contracts would enable Iraq to put less controversial oil and gas projects to the market in a nearer-term time-frame, rather than waiting on the political consensus necessary to conclude the long-awaited hydrocarbons legislation.

Implications
Investors will want assurances that these contracts will be honoured in any future legislation and there are some limits to the types of project that will be suitable for this treatment, particularly if the overall regulatory and security conditions are deemed to fall short.

Outlook
With a number of major issues still to be resolved ahead of the conclusion of a framework hydrocarbons law, enhanced one-off contracts look like an expedient interim solution for the Oil Ministry. However, its tendency towards over-optimism suggests that hopes of rapid development through this approach should be moderated, although some forward progress could certainly be made given the right project choice and assurances.

Individual Contracts

Iraq's Oil Minister Hussein al-Shahristani has given his backing for a proposal to award oil and gas contracts under enhanced individual contracts, ahead of debate on a more controversial hydrocarbons law.

The proposal was previously advanced by influential oil official, Shamkhi Faraj, currently acting as director-general of marketing and economics at the Oil Ministry, after his tenure at the head of the State Oil Marketing Organisation (SOMO, see Iraq: 24 April 2006: Iraq Considers All-in-One Oil Contracts to Overcome Political and Regulatory Uncertainty). In theory, it would enable Iraq to move forward with oil and gas development deals on less controversial projects, without the necessary legal framework in place, on the promise that any future law would not affect contracts awarded in this manner.

Al-Shahristani said on a trip to the United States that some companies had already expressed their willingness to enter into discussions and even conclude agreements on this basis before a more far-reaching hydrocarbon law is enacted by parliament. A framework hydrocarbons law has already been drafted by parliamentary committees, but is expected to be the subject of fierce debate, concerning as it does the division of oil resources, management of existing and new acreage and the distribution of oil wealth.

During his U.S. visit, al-Shahristani met with a number of oil companies and said that initial talks focused on technical assistance, rather than specific oilfields. He added that he hoped for Iraqi production of 3 million b/d by the end of the year, from current figures of 2.5 million b/d, with a target of 4.5 million b/d in the next three to four years.

Outlook and Implications

The idea of enhanced one-off contracts is a good one for Iraq, and one that has already worked well in Libya, which has moved forward with its exploration on this basis in the absence of any up-to-date hydrocarbons legislation.

Nevertheless, the political uncertainty in Iraq, combined with atrocious security conditions in the centre of the country in particular, means that most investors are unlikely to willing to embark too far along this course, until it is clear that an overall hydrocarbons law will meet their requirements and answer outstanding concerns over ownership and management. As yet, al-Shahristani hopes that a hydrocarbons law will be in place by the end of the year, although his warmth towards these enhanced contracts suggests a more realistic streak, given the likelihood of deep-rooted divisions in the debate on an energy law and lack of consensus to date, particularly with the Kurds.

Progress on concluding a foreign investment bill in recent weeks gives ongoing hope that foreign companies will be an important factor in Iraq's economy in the future, although on the energy side, some major obstacles remain, most notably on the federal issue, but also on the revival of a state-backed Iraqi NOC, the form of which has still to be agreed (see Iraq: 20 July 2006: Foreign Investment Law Rushed Through in Iraq; Ex-Oil Minister Says Energy Deals Some Way Off).

Originally Posted by cmeshon

WHITE HOUSE: PRESIDENT BUSH WILL MAKE 'SIGNIFICANT ANNOUNCEMENT' AT 1 P.M. PRESS CONFERENCE. WATCH IT ON ABC NEWS NOW

From ABC News: Online news, breaking news, feature stories and more

News will be.....

Rumsfield Out... Baker In

Originally Posted by ccgideon

To all my RolClub family members who offered prayers and positive thoughts during the illness of my husbands daughter, Valeri. Valeri passed away yestereday morning and her battle with the cancer has ended. I know this is not the correct thread to convey such information, but I wanted to make sure the message reached all who were so encouraging to us.
Many thanks and may God bless each of you.
ccgideon

I am so sorry about the loss of your daughter. May God strengthen you and your family during your time of sorrow. God Bless you.

Originally Posted by Offshore-Wealth.com

Interesting,

We will see prices internally adjust to realistic values when a revalue finally happens. Obviously, the example of Ice Cream Parlor would not be worth 5M or $5M, it would be worth the same $3,400. as example as I see it. Of course, with more interest in such businesses, it could go up in value accordingly, so it will be interesting to watch just how values adjust after revalue.

Good luck to all, Mike

If everyone is broke, why ask a million dollars if no one has that kind of cash? You can only ask what the market will bear. If every single person in town was a millionaire, would you sell your ice cream parlor for a lousy $3400.00 bucks? Not to likely. Then I may be tottally off base as this is only my personal opinion.

Thxs, Gloribee

[QUOTE=CharmedPiper;132240]Baghdad Secretariat concluded contracts with European companies to provide

(Voice of Iraq) - 08-11-2006
This issue was sent to a friend

The Republic of Iraq
Council of Ministers-the governmental communications
Media Relations
A press statement / Press Release
Wednesday, 11-8-2006

Baghdad Secretariat concluded contracts with European companies to provide labs
The waste recycling cost 30 billion dinars.


Secretariat of Baghdad and signed contracts with European companies wholesome from Germany to provide labs for waste recycling, which is the first of its kind in Iraq in the way of handling waste recycling and in Baghdad.

Interesting…. contracts being signed without the FIL in place? Or maybe….

A common line of thinking, and I believe the majority view, here at Rolclub is
that if the revaluation comes in at $.34 for example, don't worry because in a relatively short period of time the exchange rate will change dramatically upward.

While I would like to believe this is so and while I think that the improvement in the Iraqi economy over the next few years will certainly justify such appreciation, I am unconvinced. Most of the other Middle Eastern currencies are pegged to the dollar and vary as to exchange rates in very narrow trading ranges, even though a few of these countries (Kuwait, Bahrain, Saudi Arabia, and U.A.E for example), have thriving economies. Once the revaluation hits, why would the Iraqi dinar behave any differently?

After asking this question, I think I may have my own answer. I believe that
Iraq's GDP increases over the next four or five years may all be in double- digit territory - increases that, percentage wise and in real terms, may or would outstrip everyone in the Middle East and everyone in the world for that matter.

Does anyone have a better explanation? Or a substitue explanation?

Iraq: Oil Plans and Policy

By Tariq Shafiq

The following paper was presented by Tariq Shafiq at a conference organized by the Open Society Institute and London School of Economics, “Iraq Oil Wealth: Issues of Governance and Development”, from 29 June to 1 July. Mr Shafiq, a petroleum techno-economic consultant, is a director of Petrolog & Associates, Chair of Fertile Crescent Oil Company and al-Mansour Petroleum Consulting Company, and a former Executive Director and Vice Chairman of Iraq National Oil Company.

The history of Iraq’s oil and its industry is an interesting one, though sad in some respects. The oil concession agreements were the product of the First World War and the invitations for the return of the IOCs to work in partnership with a government establishment, though a healthy road to pursue, were the product of the Gulf war and the UN sanctions. In the post-Saddam era, new plans and policies for a democratic market-based society are in the making. Oil plans and policy guidelines prepared by the previous transition government of Ayad 'Alawi were not implemented and are expected to be taken up by the present government. Tentative plans and policies have been converted into non-binding memoranda of understanding (MOUs) with international oil companies (IOCs). But there is a fear that oil and gas agreements based on such MOUs could have latent prejudicial effects unless strict and transparent tendering processes, deriving their legitimacy from a petroleum law, are eventually adapted and applied. However, it is expected that an oil policy and hydrocarbon law will be subject to due democratic processes. Two years have passed in a turbulent warlike atmosphere during which senior officials in the Ministry of Oil have issued statements indicating oil plans and policy. This paper suggests oil plans and policy guidelines – intended as suggestions for deliberation and discussion.



1. Iraq Oil In A Global Context

The following table uses generally accepted reserves and cumulative production figures for January 2004; but potential reserves were estimated at 20% of proven oil reserves, while allowing Petrolog & Associates’ studied estimate of 216bn barrels for Iraq’s potential discoverable reserves. The table provides a conceptual example of Iraq’s oil reserves in a global context for the case where world proven reserves have been upgraded from the assumed 35% average recovery to 50%, which is well within the grasp of today’s oilfield management technology. However, the conceptual conclusions derived herein remain valid in other scenarios where such proven reserves are not upgraded.



Table

Proven Oil Resource Base At Recovery Assumed 50% + Potential

(Bn Barrels)



Country
Produced
Produced % Total
Proven + 15% & Potential
Total

UAE
22.1
15
132.7
149.0

Kuwait
34.2
21
133.2
159.5

Iran
55.5
32
173.6
171.3

Iraq
29.1
8
349.3
368.4

Saudi Arabia
99.8
23
358.0
432.5

ME Majors
240.7
22
1,146.8
1,087.2

World
957.0
36
1,677.0
2,634.0




The conceptual conclusions derived from the Table may be summarized as follows:

Iraq’s cumulative oil production to-date is only a small fraction, some 8%, of its oil resource base, which puts Iraq, whose oil production started seven decades ago, behind the UAE, where oil production started some three decades ago.


Iraq’s oil reserve is on a par with world leader Saudi Arabia, and its oil resource base is not far behind.


Iraq’s oil resource base may constitute 30% of the total Middle East major five producers and some 21% of world total reserves.


Iraq and the ME majors, whose production thus far is only 22% of their total reserve resource, will be able to sustain upward production rates for many years to come.


With Iraq’s total production at 8% of proven reserves it can continue its upward production rate to10mn b/d and beyond to12mn b/d, plowing in part of its potential reserves, when other ME majors will have passed their reserve midpoint and started to decline.


Iraq, however, is a founding member of OPEC and rightly adopts its policy of crude oil price stabilization and conservation through control of its production and export. Thus far and perhaps until its production reaches its post maximum of 3.5mn b/d, it may remain outside OPEC production quota. Thereafter, Iraq will have to choose between price and volume. OPEC quota could then be a limiting factor against an open production policy, especially when there are IOCs which need to produce to optimum capacity to enhance the return on their investment. Iraq’s oil reserves are of the order of 330bn barrels. It would take 300 years to exhaust its rehabilitated production of 3mn b/d, 180 years at 5mn b/d and 90 years at 10mn b/d.

2. Iraq’s Oil Policy

Iraq’s oil industry is the most efficient wealth-creating instrument. Its low discovery and development costs, in the order of $0.5/B and $0.5-1.0/B respectively, according to Petrolog & Associates studies, provide high income at all levels of oil prices and especially from those in the bracket of $22-28/B and above into $50-60/B today.



Thus, with the near total dependence of the state on oil income, simple logic dictates the requirement for a pivotal state-owned oil industry, with the Iraq National Oil Company (INOC) as its commercial and technical operating arm, especially in view of its highly successful past. INOC accomplished capacity build-up from 1.5mn b/d in the early 1960s to 3.5mn b/d by 1979 and a discovery rate in excess of 6bn barrels/year (over 1972-77), matching global records.



However, in view of Iraq’s desperate need for fast-track oil development, up-to-date technology transfer, personnel training, and large capital investment, at a time when the country is in dire need of capital income, it is logical to permit a wise degree of IOC involvement, working jointly with INOC. IOCs could work independently from INOC on risky exploration if this is in the best interest of the state; but always with a ‘local content’. The latter case may well be very limited as Iraq’s need first is production capacity growth rather than oil exploration due to the availability of ample proven reserves which can support up to 10mn b/d. Capacity growth, in turn, would be limited to the country’s economic and social capital development requirement and the Ministry of Oil’s capability for regulatory and supervisory duties.



At this juncture, it would be appropriate to review the history of oil concessions in Iraq to gain insight into successes and lessons from the past. The history of the Iraq Petroleum Company’s (IPC’s) formation and the way that shares were distributed between the British, French, Dutch and American companies, are evidence of the role of politics in the Middle East in acquiring oil concession rights during and after the First World War. The major oil concessions had common ownership, which permitted effective control and common features. Examples of the latter are: extended periods of exploration and exploitation – IPC in Iraq had 75 years, KOC in Kuwait 92 years, Aramco in Saudi Arabia 66 years; frozen terms over the long life of the concession; large concessionary areas without relinquishment – most of Iran, almost all of Iraq and Saudi Arabia and all of Kuwait, Bahrain and Qatar; and exclusive rights for the concessionaire to carry out operations without sufficient obligations governing the exercise of these rights, at the expense of basic government rights in vital matters such as tax and royalty, company plans and application of best oil industry practices.



Most of these features changed during the 1950s, 60s and 70s, under new circumstances and collective pressure from the host countries through OPEC. Nationalization was achieved by the late 60s and early 70s as a result of collective bargaining under OPEC’s umbrella. Iraq alone negotiated outside of OPEC, with nationalization in the early 70s resulting from an accumulation of unresolved disputes and consequences of law No 80 of 1961. Middle East concessionary agreements could not live out their term, since from the start they were not balanced, and some clauses (Iraq’s 20% participation as an example) were written so as to make their application impossible.



In most countries there was a state monopoly over the oil industry, and only a few have permitted partnerships with IOCs. The return of the IOCs in Saudi Arabia is limited to the E&D of gas, in Iran only under service contracts of buyback terms and conditions, while in Iraq invitations to IOCs since the mid-1990s have fluctuated between production-sharing agreements (PSAs) and buybacks. IOCs, including many majors, flocked to Baghdad at the invitation of the government after the Gulf War and until the end of the Saddam regime in March 2003. Only the Chinese and the Soviets signed agreements, while the remainder had draft accords; but none carried out operations on the ground due to UN-enforced sanctions. A further ‘legacy’ of Saddam’s regime is the potential of disputes over these agreements.

In the present turbulent circumstances in Iraq there is consensus amongst Iraqis, the government and most IOCs, against entering into long-term oil exploration or production agreements until there is a legally and democratically elected government, recognized by the international community, with a constitution and a petroleum law in place.

Below are suggested plans and oil policies:

The Ministry of Oil, in the absence of due democratic processes in making policy, should consult an Iraqi think-tank, made up of competent national oil technocrats, in an atmosphere of constructive debate. Rules and procedures for incorporating advice and consultation from the think-tank must be worked out and selection should be based solely on merit and without conflicts of interest.


It is important in such an exercise that constructive dialogue is encouraged, and opinions expressed without discrimination or incrimination, in order to arrive at an optimal oil policy.


Oil policy and plans must ensure optimum benefits to the nation, which is the rightful proprietor of this depleting asset. They should be prepared with the utmost care and diligence over a sufficient period of time in order to allow for constructive debate.


‘The hydrocarbon resources are inalienable and imperceptible property of the state,’ to quote from the old INOC Charter. In other words, petroleum is a non-renewable depleting asset, meriting conservation, optimum fiscal reward, as well as among other things, participation of INOC and inclusion of the ‘national content’, which should be built into every contract, with IOCs limited to the extent of the competitiveness of Iraq oil exploration and development.


Such ‘national content’ should promote and/or build: participation of national private oil companies, services and manufacturing industries; transfer of knowledge, management and technology; and local research and technical institutions. The above elements of national content have already been applied in major national oil industries such as those of Norway, Iran and Russia to the extent of 51%.


For the above reasons and in order to compensate for petroleum depletion as a source of income, investment in other economic endeavors should be made to ensure continuity of income from other resources. Once this is achieved, there is room for lesser dependence on a state upstream oil monopoly.


Ensure oil and gas conservation practices and give due regard to health, safety and environment protection throughout the exploration and exploitation and related operations.


Encourage gas development and give it a prominent role in meeting at least the domestic energy consumption needs.


Partnership of the national oil industry with IOCs is the best option to expedite building Iraq’s oil industry to dimensions commensurate with its huge resource base, catching up with the latest state-of-the-art technology and management, acquiring the necessary investment capital, and speeding up the realization of benefits through efficiency and healthy co-operation.


IOCs and foreign contractors require stability and security, law and order, assurance for the safety of their personnel and capital investment, and a fair return on investment, among other legitimate requirements.


‘Managing the hydrocarbon resource of Iraq, which belongs to all the people of all the regions and governorates of Iraq, in consultation with the governments of the regions and administrations of the governorates, and distributing the revenues resulting from their sale through the national budget in an equitable manner proportional to population throughout the country, and with due regard for areas that were unjustly deprived of these revenues by the previous regime, for dealing with their situation in a positive way, for their needs, and for the degree of development of the different areas of the country,’ in accordance with the law for administration during the transition period. While a reasonable degree of devolution of power will be necessary when issuing licenses, tendering and negotiating agreements should remain the prerogative of the central organization.


Oil and gas laws, in a hydrocarbon law, and regulations should derive their legitimacy from a constitution enacted through due international, democratic and legal processes. However, in the interim period, there is consensus of opinion that rehabilitation of the petroleum production system and its restoration to past levels, and ongoing production and development operations of short term consequence by the Ministry of Oil and its contractors, should proceed.


Contractual modes can be one of many suitable forms which include: buyback, other forms of service contracts and PSAs which preserve the ownership for the state of the petroleum resource in the ground. One may be more suitable than another for particular circumstances. Production-sharing, though, appears to have wider and more favorable acceptance by IOCs and host countries. The most important criteria, however, in all forms remains: the fiscal return to both parties, the share to each party, the extent of national content and degree of other economic and fringe benefits to the nation, the degree of control of the government to exercise and maintain administration and supervision without infringing on the company’s rights to carry out its operation effectively and efficiently.


Tendering should be the only process for selecting companies interested in working on E&D and related projects. Tenders should be comprehensive and announced to a well defined time schedule. This should involve general information and meetings with interested parties. Interested bidders should submit pre-qualifications, as only pre-qualified parties should be invited to bid. They should be given equal opportunity to access comprehensive databases. Bids should be evaluated, and shortlisted bidders be given a fair chance for discussions leading to selection of the winner. The procedure, evaluation, discussions and decision-making should be fair and transparent. Assigning a payable fee to the bids and access to database is advisable to eliminate the less serious parties and improve the quality of the bids.


Agreements between the state organization and IOCs must be written and applied in good faith, and balanced and fair in order to reduce potential disputes and endure the test of time. They may permit reviews in the light of justified changes in circumstances governing taxation, royalty, and profitability and market conditions amongst others.


No member of a consortium should have incompatible interests with the other members or with the host country’s vital oil industry’s objectives, which could curtail its investment and retard the consortium’s E&D obligations.


Iraq, with its high proven oil reserves, is capable of building up to 10mn b/d; but this may require almost two decades to achieve. Given its urgent need for production growth while the country is in dire need of capital investment, output expansion should be based on existing proven reserves, with risky exploration taking second place. While IOCs’ involvement is desirable, their insistence on high-reward and long-duration contracts may necessitate their presence being deferred, given current circumstances in Iraq.


Production capacity growth is most economically achieved in the medium term from developed oilfields which have multiple producing formations beside the main pays – the only developed formations – and through the use of enhanced oil industry management to optimize the recovery from the main pays and to correct their damage, wherever possible.


Last but not least, oil policy, plans and organizations ought to be as dynamic as the technical and marketing nature of the industry. They ought to be depoliticized and appointments should be solely on merit. Transparency and accountability must be paramount.

Privatization?

I have excluded privatization of the oil upstream as a means to raise capital or provide benefits, for the following reasons:

Privatization is equated today with denationalization, whether partially or 100%. Iraq’s economy is almost totally dependent on its oil income. With decision-making for exploration, production and exports in the hands of the multinationals, Iraq’s economy and its government’s decisions would be at their mercy – and their interests are naturally first to their shareholders. Also there are numerous disadvantages of the kind discussed earlier: possible incompatibility with the national interest under future conditions; and potential use of their power to slow activities or switch supply to other countries when it best serves their interests.


There is no advantage gained from privatization by way of investment capital, technology, or efficiency that cannot be obtained from other contractual arrangements.


Decisions made over the characteristics of the deposits and their source-base depends not only on economic or technological criteria, but also on political, historical and cultural considerations. The overwhelming majority of Iraqi oil technocrats are against privatization of the upstream.


Finally, denationalization runs against the grain of almost every Iraqi – a significant consideration in any future democratic Iraq.

The last Prime Minister, Ayad 'Alawi, tried to formulate an oil policy which appears to have been abandoned.

He intended to remove the E&D and related operations from the ministry and allocate them to a newly established INOC, whose operations, however, would be limited to existing oil producing fields, with the prospect of its partial privatization with shares.


He emphasized expediting the entry of IOCs to start developing undeveloped fields on a modified type of PSA that bars a state entity becoming a party in it, resulting in transferring decision making on oilfield development and consequently Iraq’s future income to IOCs or private companies, thus forfeiting control of price stabilization and production, at a time when Iraq would still be depending mainly on oil income.


He called for cutting the negotiating period needed to optimize contract terms and conditions, assuming that what may not be gained but given to other countries can be extracted later on the basis of the most favored nation clause. But this clause existed during the concessionary contracts era when the majors dominated the concession agreements, in an oligarchic market which had common terms and conditions, so that improvement in any one country was passed on to the others. Today’s agreements in different countries are not necessarily similar, and the players and host countries have multiplied in number. After all, the terms and conditions of each contract are unique to the country and to particular exploration and development, and rewards reflect associated costs and risks, amongst others.


To his credit, however, he appreciated and promoted the requirement for a vital policy issue: ‘Local content’ is to be encouraged in order to develop Iraqi private enterprise where he even suggested preferential treatment to Iraqi service companies.


However, his vital policy lines would have run counter to the terms of the Transitional Administrative Law (TAL) annex that governs the transitional governments, since it prohibits contracts that impact the long-term development of the country, with the exception of negotiating debt reduction.

3. INOC

INOC was established by law No11 of 1964 with the objective of:

‘Establishing a national oil industry that would serve as basis for future oil exploitation activities in the areas of which the rights of exploitation have been restored to the State by Law No 80 of 1961.’


‘Laying down of the ground work necessary for the growth and development of the industry so as to create an advanced oil economy not limited in scope to exploration of crude oil but extending to effective engagement in the various phases of the oil industry.’

Its Law stipulated that:

In view of the importance of the oil reserves of which the rights of exploitation are expected to be granted to INOC, the law has stipulated that the company’s capital shall be purely governmental, in keeping with the principle of sovereignty over mineral resources of the state that are natural monopolies. This, however, shall not preclude the company, acting within a statuary framework, from making use of other capital, domestic or foreign, through loans or through partnership of various forms of business cooperation with concerns or organizations concerned with oil development, should this be warranted by the magnitude of capital needed, marketing exigencies or the technological requirement of construction.


Further, since it is necessary that the company enjoys financial and administrative independence for it to be able to perform most efficiently its diverse and steadily-growing task so as to achieve the purposes for which it is established, the law has stressed the company’s independence in those spheres.

However, since the early 1970s the oil industry has been nationalized and all the country has come under the jurisdiction of INOC. These are objectives and stipulations which remain as valid today as they were then, albeit with some modification in line with the country’s market-oriented policy. Accordingly, the following principles are suggested for a future INOC charter:

INOC should be a fully state-owned independent company (administratively and financially), entrusted with the task of managing and developing Iraq’s upstream and downstream petroleum industry in all its phases inside and outside the country, but not including the manufacturing and petrochemical industry.


INOC should perform its duties and obligations in accordance with the state petroleum policy. Proper interpretation of adherence to government policy should remain the prerogative of the minister of oil. However, when in difference the matter should be resolved by the Higher Petroleum Council of Ministers.


The present operating oil and refining companies should be detached from the Ministry of Oil and attached to INOC.


INOC should have an independent board of directors made up of members from among the heads of the North and South oil companies, and the refining directorate, plus top petroleum technocrats and other qualified personnel. The chairman and managing director should have ministerial status.


The government should allocate INOC a capital budget and authorize it to borrow from domestic or foreign markets. The first budget should be commensurate with one year’s operation, plus the capital investment required for its first year of operation (as is the case normally). It may then be taxed in such a way as to leave it a return commensurate with a commonly acceptable management fee, or be allowed a fixed fee on each barrel produced during a transition period (say five years). Thereafter, it should be taxed on the same basis as IOCs operating in the country.


The company, for the purpose of achieving its objectives, should have the right to establish companies inside and outside the country, singly or jointly with other parties, or participate in existing companies.


The company should be granted exemptions from all taxes and duties in respect of the performance of its functions, which are customarily granted to IOCs in host countries.

However, petroleum resources shall continue to be the inalienable and imperceptible property of the state.

In line with the country’s market-based economy, INOC and the Ministry of Oil should examine and recommend to the Higher Petroleum Council of Ministers, after consultation with the think-tank, partial or total privatization (with safeguards to the employees) of some of the downstream and non-pivotal upstream companies, which may include the maintenance and/or services but not the main operating oil companies or strategic functions such as the pipeline transportation

08 November 2006 (Azzaman)

Fuel is in such a short supply in northern Iraq that families are scrambling for branches of trees, bushes and dung to use for both cooking and heating.
“The (fuel) crisis has aggravated recently,” declared Mohammed Zibari, head of Fuel Distribution Commission in northern Iraq, which includes six provinces Mosul and Kirkuk as well as the three Kurdish provinces of Arbil Sulaimaniya and Dahouk.
Zibari blamed the crisis on interruption of imports, particularly from Syria and Turkey.
He did not say why the countries had stopped supplying northern Iraq with fuel. Last year Turkey suspended fuel exports as the Ministry of Oil stopped paying Turkish traders.
The commission, in preparation for the cold winder months, had signed deals with both countries for the import of liquefied gas, kerosene and gasoline in quantities which Zeibari said would have met local consumption in the six provinces.
“The neighboring countries have halted supplies despite the contracts,” Zeibari said.
Iraq’s fuel import bill is estimated at more than half a billion dollars a month and still the country faces a chronic shortage.
Analysts say the Oil Ministry, which also handles fuel imports and distribution, is mired in corruption and there are reports of faked contracts and forged fuel distribution deals with local contractors.
“Imports from Turkey have been off for nearly two months and we have not received a single drop of the quantities specified in the contracts,” Zibari said.
Zibari decline questions on whether the allocations made for the contracts were still in government coffers or have already vanished.
Iraq holds massive oil reserves and its refining capacity under former leader Saddam Hussein was estimated at nearly 750,000 barrels a day.
Fuel shortages were non-existent before the 2003 U.S. invasion.

Fuel shortages worsen in north | Iraq Updates

Unbelievable how their own people have to suffer while they can do something about it.

CCGideon: So sorry for the loss of your husband's daughter. May God bless you and your family and give you strength and peace.