Thread: Archive News - Iraqi Dinar Think Tank - 06/10/2010 - 24/01/2011

Iraq Wants Hundreds of US Billions

…and it looks like it is going to get it.

Iraq has lofty investment targets for the next five years. Sami al-Araji, chairman of Iraq’s National Investment Commission, told Reuters:

“We’d like to go ahead and shoot for $600 billion. We hope of course we can realize it, but we will be very happy if we realize a good percentage of it. That’s if we pass the 50% in a solid way.”

This does not seem too far-fetched. New deals are reported in a steady stream by Iraq Business News, from budgets of $75m to complete hundreds of small deals to a $50bn deal to build one million housing units for millions of people.

It doesn’t stop there. ”If we go for the two million housing units, by itself, that will give us a good chunk of that mark,” Araji continued in his interview. “As of today, 132 companies have applied. We are concentrating on 35.”

Just this week, Baghdad Province completed deals with Russian and Ukrainian companies worth $20bn for projects in various sectors: bridges, education, energy, health, roads, sewers, tourism, water and youth.

A statement from the Office of the Mayor of Baghdad, Salah Abdul-Razzaq, said that the projects include “building nine hospitals accommodating 200 beds and 400 schools with laboratories, cafeterias and gymnasiums. There are other projects in the fields of housing and tourism through building a hotel at Baghdad International Airport and 50,000 housing units.”

“Other projects include transport field through building an expressway adjacent to Tigris river 250 km long…which contributes to transport 10,000 passengers an hour, in addition to building five bridges in different areas of the capital and other projects in the field of youth including building 14 swimming pools, 20 entertainment and sports clubs, 12 women’s clubs, football and basketball fields and 28 houses for culture and arts; and a power station with capacity of 1,300 mw will be built as well.”

http://www.iraq-businessnews.com/201...f-us-billions/

Iraqi oil exports hinge on pipelines

Increased oil exports through southern Iraq could be affected by what a U.S. study describes as excessive corrosion on oil pipelines.

Baghdad aims to increase oil production to more than 12 million barrels of oil per day within the next decade and most of that could be exported.

A study financed by the U.S. Army Corps of Engineers found that because Iraq hasn't injected chemical stabilizers into its crude, water collection at the bottom of export pipelines is corroding the inside walls, the Platts news service said.

Iraq exports much of its oil through pipelines in the south of the country where oil revenue accounts for a significant share of the country's income.

But because of the extent of the internal pipeline corrosion, Platts said, some exports would have to stop in order to carry out repairs.

http://www.upi.com/Science_News/Reso...8781287490158/

Iran’s Tactics Oil Play May Prove to Be Risky

Like a high-stakes game played with barrels of oil, Tehran told Baghdad last week: "I see your 143 billion and raise you 150 billion."

The Iranian minister of petroleum Masoud Mir Kazemi topped the Iraqi oil minister Hussein al Shahristani's earlier increase in proved reserves. But Iran is bluffing. Mr Mir Kazemi might hold good cards but he cannot play them.

Iraq's announcement, that its proved reserves had increased by a quarter, was an early move in a contest that will engage OPEC during the next few years.

Other OPEC members somehow have to find room to accommodate Iraq's ambitions which, taken literally, would make it a rival to Saudi Arabia. And Iraq is not the only challenger.

Other states, particularly Nigeria, are looking for the organisation's acquiescence in higher output.

Iran has historically been the second-largest player but it seems very unlikely that it will be able to retain that status, even though on Thursday Mr Mir Kazemi became the first Iranian for 36 years to hold the OPEC presidency.

To paraphrase the legendary Liverpool football manager Bill Shankly, the outcome of the quota game isn't a matter of life and death; it's more important than that.

For Iraq, the revenues from higher production are desperately needed to strengthen the fragile state, reward political constituencies and rebuild the country after three decades of near-continuous conflict.

With a few exceptions, such as Venezuela, other OPEC members are players with deep pockets. For them, given relatively healthy finances, the issue is important but manageable.

Saudi Arabia, the UAE and Kuwait, the most disciplined adherents to current quotas, could survive a period of lower production and prices with some trimming of budgets.

For the oil consumers, this debate raises some memories of the intra-OPEC dissension of the 1980s and 1990s. Then, unlike now, OPEC was pressured by strong competition from non-OPEC producers, notably those with North Sea oil.

But that factor could also return with the emergence of Brazil as a world-class oil province. And now, as then, there is a strong focus on reducing oil demand through new, more efficient technologies with the recent unveiling of a host of electric and hybrid car models.

Given these factors, it is surprising that oil prices, hovering above $80 a barrel, are so strong. OPEC's discipline is part of the explanation and the potential for that unity to crack is a reason oil producers and consumers alike should at least plan for the eventuality of falling prices.

For Iran, the quota stakes are highest precisely because it has no plan B for a period of lower oil prices. Inflation, officially 8.9 per cent, has been estimated at about 50 per cent by the Iranian Majlis's (parliament) research centre and many people go six months without being able to afford meat.

High inflation makes it difficult for the government to remove the burden of US$20 billion (Dh73.46bn) of subsidies from the budget. Unemployment, officially 15 per cent, may also be higher in reality and leads to a huge brain drain of educated young people. Corruption, capital outflow, financial aid to foreign allies and Soviet-style energy inefficiency are further problems.

Sanctions do not help, of course, but the real source of Iran's woes is mismanagement compounded by political deadlock and an unproductive, state-dominated economy.
When the oil price fell below $10 per barrel in 1998, the administration of Mohammed Khatami coped relatively successfully.

Under its current leadership, Iran would probably manage to create an economic crisis even at $200 a barrel.

This puts Iran in a weak position to play the quota game. Reserves are irrelevant: the contest is all about production. Boosted by a series of deals signed under Mr Khatami with Shell, Total, ENI and other major companies, the country's oil output climbed steadily since 2000 but recently began slowly to decline.

Oil exploration has been very successful but due to a lack of capital and new technology, developing the new fields has proved more problematic.

Symptomatic is the huge Azadegan field, found in 1999 and very similar to Iraq's super-giants such as Majnoon and West Qurna

But while the world's leading oil companies are hastening to Baghdad, they are leaving Tehran. On Thursday, Japan's INPEX announced it was pulling out of Azadegan. Yet Iran has tried to export its failed petroleum industry model to Iraq.

Production may dip as low as 3.3 million barrels per day by 2015, contrasting to today's capacity of almost 4 million. Combined with rapidly rising demand, fuelled by subsidies, Iran might cease to be an oil exporter as soon as 2025.

Whether Iran has the 150 billion barrels it has just announced, or the previous 138 billion, or even somewhat lower, does not matter. We know nature has dealt Mr Mir Kazemi the oil equivalent of the grand prize.

But there is no magic formula for basing OPEC quotas on reserves - the decision depends on bargaining, in which the best argument is the cold reality of production capacity.

Without systemic reform of its oil sector and probably of the whole economy, this game within OPEC is not one Iran can win. Otherwise, it can only hope that Iraq's projects falter of their own accord and that Baghdad retires first.

http://www.energytribune.com/article...ve-to-Be-Risky

Robin M Mills is an energy economist based in Dubai and the author of The Myth of the Oil Crisis

CNPC Finishes Drilling Its First Well of Rumaila Field

Daqing Drilling Engineering Company, a member of China National Petroleum Group (CNPC), finished drilling its first oil well of Rumaila oil field in Iraq on October 8, seven days earlier as planned, according to CNPC news releases on October 19.

Daqing Oil Field Co. Ltd. coming under CNPC this March won a contract to drill 21 oil wells in Iraq's largest oil field Rumaila. Weatherford International Ltd. will drill seven wells and Schlumberger Ltd. will drill 21 wells. The drilling contract for the remaining 21 wells of Rumaila oil field will be awarded to the most efficient one among the three companies, according to Iraqi Oil Ministry.

BP Plc and CNPC signed a 20-year technical service contract with Iraq in November 2009 to develop Rumaila and nearly triple the daily output of Rumaila to 2.85 million barrels in seven years.

BP holds a 38% stake in the deal, while CNPC has 37% stake and Iraq's South Oil Co. owns the remaining 25%.

http://www.tradingmarkets.com/news/s...d-1239085.html

Maliki confirms that the new Iraqi government will see the light soon

Iraqi Prime Minister outgoing Nuri al-Maliki that the new Iraqi government will see the light soon.

Maliki said after talks Wednesday 20.10.2010 in Cairo with Egyptian President Hosni Mubarak said the aim is to form a government representing all Iraqi sects bear all the responsibility and therefore the ongoing dialogues and we are now at the end of their path and you will see this government soon.

Al-Maliki praised in a press conference following the meeting, Egypt's stance which is not biased to the Iraqi faction at the expense of others, explaining that he had discussed with President Mubarak also reconstruction, construction and installation of security and documentation of Iraq's relations with neighboring countries.

Maliki has called for foreign companies to invest in his country, saying that the security situation improved markedly after the years of conflict.

He acknowledged that the kidnapping and sporadic violence still a problem in Iraq, but emphasized that the work environment safe for investment.

He said in a press conference that Iraq has investments of Turkish companies and Syrian, Iranian, Korean, Japanese and added it may be magnified as being useful that there are violations of security and it does not deny it, saying that it however does not mean a collapse of security as it was before.

http://www.wasatonline.com/index.php...d=40&Itemid=99

Basra Governorate Council will meet a delegation from the newspaper "The Wall Street Jorenz" (Journal)

Received the Chairman of the Commission on oil and gas in the Basra Governorate Council Engineer Farid Ayoubi, a delegation from the newspaper "The Wall Street Jorenz" During the meeting, raised several issues regarding the licensing round for international companies currently operating in Basra, The Ayyubid to the unstable security situation has contributed significantly in attracting international companies specialized investment in the oil sector, which achieves an increase in oil imports would support the process of reconstruction and development of infrastructure and provide more services to citizens.

Asked by the newspaper about the extent of cooperation and coordination among companies operating in the province and the local government said Ayoubi The local government strives to provide all conditions for the work of these investment companies, said there is cooperation and constant coordination between the government and local companies (LOCK OIL) specialized in the development of oil fields in wishing to maintain than other companies to follow the example of the company.

With regard to compensate owners of agricultural land used for the exploration and drilling projects Ayoubi noted that some land owners were compensated by the Southern Oil Company in the absence of compensation they can resort to the courts for the purpose of compensation.

Ayoubi said to the drilling and exploration of oil fields in constant evolution, pointing to the possibility of the arrival of some international companies specialized in this area in the next few years.

This meeting was attended by Ms. Bliss emotions member provincial council in Basra.

http://www.basrahcouncil.org/News/20...10-10-21-5.htm

Will Anbar Prevent Akkas Gas Deal?

As Iraq reports the results of its recent gas auctions, the western province of Anbar is demanding more control over its potentially huge energy reserves, including the vast desert province’s Akkas reservoir.

According to Reuters, Anbar’s government last week rejected Baghdad’s plan for the auction due to the possibility that surplus gas will be exported.

Anbar’s opposition reflects deep discontent in Iraq’s Sunni heartland about the Shiite-led central government.

“We are against the approach of the central government and we will be against any contract between the central government and any company in the world,” Anbar Governor Qasim Abid said.

“We have our own vision of how to develop this [field].”

Mainly Sunni Anbar Province, controlled by Al-Qaeda in the years following the US-led ouster of Saddam Hussein, has been relatively quiet since tribal sheikhs joined forces with US troops to drive out Sunni Islamist militants in 2006 and 2007.

“We demand the Oil Ministry start exploration in Anbar because it’s unfair to develop and start production from oilfields in some provinces and ignore the billions of barrels of crude we have,” Anbar provincial council leader Jassim Mohammad said.

Anbar authorities warned they would refuse to provide security to foreign firms working in Akkas and would use all means, including “civil revolt,” if Baghdad ignores their demands.

http://www.iraq-businessnews.com/201...kkas-gas-deal/

Iraq May Get $4.2 Trillion in Income from Oilfield Developments

(Bloomberg) -- Iraq may earn $4.2 trillion in revenue from oil fields being developed by international companies after rights for production from the deposits were auctioned last year, Oil Minister Hussain al-Shahristani said.

The fields, whose development rights were assigned after two bid rounds held last year, will produce 60 billion barrels of oil, he said. The Iraqi government will get 99 percent of the revenue from those deposits, al-Shahristani said today opening the country’s third hydrocarbon bid round in Baghdad.

http://www.businessweek.com/news/201...elopments.html

Sunni Arabs in Iraq demanding all profits from gas field

Demonstrators in a largely Sunni Arab province of Iraq demanded the future profits from a natural gas field awarded on Wednesday to a foreign consortium.

The sentiments reflect the intersection of ethnic power and energy in Iraq, where the Kurdish and Shiite regions -- but not the Sunni Arab region -- benefit financially from the oil industry.

Iraq awarded three gas fields in an auction on Wednesday, including one to a South Korean-led consortium for Akkas field, located in the desert of Anbar province near the Syrian border.

Sunni Arab demonstrators in the Anbar cities of Falluja and Ramadi filed into the streets to support an Anbar Provincial Council decision that the revenues should go only to Anbar province and its people.

Since the overthrow of Iraqi leader Saddam Hussein in 2003, the fortunes of Shiites and Kurds have risen and Sunni Arabs largely have felt disaffected, with many supporting insurgents. But the presence of energy resources in places like Anbar could bolster their livelihoods.

Citing agreements signed between oil companies and the government of the three-province Kurdish region, the demonstrators chanted "we support our council " and carried banners with the same message.

Led by South Korea's Korea Gas Corp., or Kogas, and Kazakhstan's KazMunaiGaz, the consortium won the 5.6 trillion cubic foot Akkas field, the largest of the three fields offered during the licensing round at the Oil Ministry.

The winning bid was $5.50 per barrel, and the targeted plateau production is 400 million cubic feet per day.

Turkey's TPAO, Kuwait Energy and Kogas was awarded the Mansouriya field in Diyala province, north and east of Baghdad. It won the 4.5 trillion cubic foot field with an offer of $7 per barrel. The targeted plateau production is 320 million cubic feet per day.

The 1.1 trillion cubic foot Siba field, in Basra province near Kuwait, was won by Kuwait Energy and TPAO. It is Kuwait's first entry into Iraq's energy sector since Iraq's 1990 invasion of Kuwait. The offer was $7.50 per barrel and a targeted plateau production of 100 million cubic feet per day.

http://www.cnn.com/2010/WORLD/meast/....gas.protests/

Iraq gas auction draws muted interest

Iraq's latest bid to revive its battered energy sector and rebuild after years of war drew little interest, with a gas field auction Wednesday attracting mainly smaller oil firms. It proved again that when it comes to balancing the country's security risk with reward, only oil can lure the Western oil giants.

Heading into the country's third energy auction since Saddam Hussein's 2003 ouster, Oil Minister Hussain al-Shahristani appeared focused more on persuading those present to participate than taking on the role of a man confident he had what others wanted.

Al-Shahristani, who had beamed about the expected boom in oil production after two markedly more successful oil licensing rounds last year, told the companies that the current auction was "very important" for Iraq. He promised they had the full support of the government in developing the fields.

Few appeared reassured, with only five of the 13 companies that paid the participation fee actually submitting bids. In all, 45 companies had been pre-qualified.

"From an Iraqi point of view, it's a disappointment," said Samuel Ciszuk, Mideast energy analyst with IHS Global Insight in London. "They had been hoping for much more experienced companies - both internationally experienced and technically experienced - to take on those fields."

The only major Western company to make an offer, France's Total SA, submitted a failed bid asking for compensation more than three times higher than that sought by the field's eventual winner.

In the end, South Korea's Korea Gas Corp., Kuwait Energy, the Turkish Petroleum International Co. and Kazakhstan's KazMunaiGas EP JSC emerged the overall winners, securing access to what amounts to 10 percent of Iraq's 112 trillion cubic feet in proven gas reserves.

"If one looks at the gas reserves in the U.S., plus the developments in the other countries in the region, the attractiveness for Iraq is really crude oil, not natural gas," said Olivier Jakob, managing director of the Switzerland-based consultancy Petromatrix.

"I think you can see that through the interest that developed in the crude oil fields compared to the gas fields."

"Those are not the top tier oil and gas companies," Jakob said, referring to the winners.
Iraq certainly needed more.

Despite sitting atop the world's third largest reserves of conventional crude, Iraq suffers from a nagging shortage in electricity generation. Boosting gas production is seen as key to addressing that shortfall, kick-starting its crippled industrial sector and rebuilding.

The companies appeared unwilling to take the risk of pumping in millions of dollars into the three gas fields with little in the way of tangible assurances that Iraq would be able to step up the necessary infrastructure, or that they would find willing export partners in a world awash in natural gas.

Iraq's security woes factored into the equation.

The two biggest gas fields offered, the 5.6 trillion cubic foot Akkas in western Iraq, near the Syrian border, and the 4.5 trillion cubic foot Mansouria field in Diyala province in the east, sit in some of the most volatile regions of the country. Both fields had been offered in earlier oil auctions, but were not awarded.

A consortium led by KOGAS and with KazMunaiGas won Akkas, offering $5.50 per barrel of oil equivalent and peak production of 400 million cubic feet per day.

Their only rival was a Total-led consortium with Turkey's TPAO that wanted $19 per barrel of oil equivalent produced. The rate reflected concerns about operating in Anbar province, once the epicenter of the Sunni Muslim insurgency in Iraq and a region largely missing the oil wealth found in the country's north and south.

TPAO also teamed with Kuwait Energy and Korea Gas Corp. as sole bidders for Mansouria. They eventually accepted Iraq's counteroffer of $7 per barrel of oil equivalent produced after their bid of $10 per barrel was rejected.

The third field on offer, the 1.1 trillion cubic foot Siba field, was snatched by Kuwait Energy and TPAO, offering Kuwait it's first foothold in Iraq since Saddam invaded the emirate in 1990, sparking the first Gulf War.

KOGAS' executive vice president, Young-Sung Park, said the company had some concerns about security, but noted that given the overall security situation in Iraq, Akkas "is more secure compared with other gas fields."

But in a reflection of the challenges the company faces, hundreds demonstrated in Anbar's capital, Ramadi, complaining that the central government had failed to consult with the province's leader. They also demanded that local labor be used in the project.

"We, as the provincial council of Anbar, will not cooperate with oil ministry and not deal with them concerning this subject," Shaalan Obaid, the deputy president of the Anbar Provincial Council, told The Associated Press.

The dispute was troubling for KOGAS.

"I didn't expect that," Park, the KOGAS executive, said, referring to the protest. "Anyhow, we have to work together with the central government and provincial government to solve or prevent such kinds of incidents."

Al-Shahristani was less diplomatic, telling reporters that "we expect the provinces where these fields are located to thank the (oil) ministry for creating job opportunities and bringing in extra revenues."

"We will not allow to anyone to delay the implementation of these contracts in any way, and we will deal with them according to the damage they inflict on the Iraqi economy," he said, adding that the initial signing will be "in the coming few days." He did not say when the deals would get final approval.

Thamir al-Ghadhban, the prime minister's chief adviser on energy, said he expects all three fields, which have yet to be developed, to come online within three years.

Other challenges also kept the major companies on the sidelines, not the least of which was a lack of adequate gas transmission infrastructure and relatively little accurate sense of when one will be up and running.

"It's a question of stability. Gas deals require long term planning, ... and Iraq doesn't have a long term framework," said Ciszuk, noting that companies were also worried about the actual projected demand situation in Iraq.

"No one knows what demand would probably be if Iraq was reconstructed because it was never reconstructed properly since the Kuwait war," he said.

http://www.thestate.com/2010/10/20/1...amid-weak.html