Capacity at Al-Ahdab oilfield reached 120,000 bpd on Friday, three years ahead of schedule, according to Reuters.

The one-billion barrel field in Wassit Province, central Iraq, is being developed by Chinese firm CNPC. The firm started production at 60,000 bpd in summer, six months ahead of schedule and it has doubled it far faster than expected.

CNPC is the first foreign oil company to sign an oil service contract in the post-Saddam era. It renegotiated an old development deal for Al-Ahdab back in March 2009. It collected its first payment this week for work on the field: 650,000 barrels of crude oil.

Output for the field is intended mostly for export, but it will also fuel local power stations to ease fuel shortages.

(Sources: Reuters; AFP)

A deal for US fighter jets and tanks will not be stopped by political instability, reports Al Jazeera.

The deal is reportedly for USD11bn-worth of weaponry. Since the US pulled out its remaining troops two weeks ago, violence has increased, arrest warrants have been issued against senior politicians opposing prime minister Nouri al-Maliki, and opposing factions have made demands for decentralising power to such an extent and in such a way that it would probably require amending the constitution.

Alexandre Vautravers, editor of Swiss Military Review, told Al Jazeera: “If the US did not sell weapons to Iraq, the weapons would still materialise, perhaps from Russia or China, or perhaps from Iran.”

Although the weaponry is advanced, it is not cutting edge. ”The types of weapons which have been sold, F-16s, M1 Abrams tanks, these vehicles, these aircrafts, have been designed 20 or 30 years ago.”

According to Vautravers, the US accounts for nearly 60% of arms sales to the Middle East.

(Sources: Al Jazeera)

150,000 refugee Iraqi’s have returned to Iraq from seemingly more unstable countries, according to AKNews.

Iraqi immigration minister Dindar Dosk said that these Iraqis, who escaped from Iraq after the Iraq War began, have now returned since the outbreak of protests in the Arab world over the past year, in particular from Yemen, Libya, Egypt and Syria.

“We have registered 150,000 Iraqi families who have returned to Iraq and still there are others who want to come back,” said  Doski.

Millions of Iraqis fled to Syria and Jordan during and after the Iraq War with smaller numbers getting further, even to Europe and the USA.

(Sources: AKNews)

Halfaya is not currently the most exciting oil field, but it is growing fast. In less than two years, the large consortium of Chinese, Malaysian and French companies developing it has increased production from 3,000 barrels per day to around 15,000 bpd, with 2,000 bpd of those having just been added with a new well, according to Missan Oil Company, which is overseeing the project.

CNPC, Total and Petronas are drilling 300 wells over five years to free up more than 500,000 bpd in an oilfield with as much as 15 billion barrels of reserves. The oilfield in the south-east of Iraq was initially believed to hold recoverable reserves closer to four billion.

Back in summer, state-run Missan Oil Co. had expected Halfaya to be producing 90,000 bpd by the first quarter of 2012. Now it expects a more modest 70,000 bpd by the end of 2012. Still, it is a good growth rate from modest beginnings.

(Sources: Bloomberg)

Iraq’s stock exchange closed 34% up for the whole of 2011 due to the earliest foreign investors buying into Iraq’s growth story.

Undeterred by increasing security and political issues, and housing and power shortages, intrepid foreign buyers bought a net USD110m in shares this year in a market currently valued at $4bn. Next year will bring more of the same.

Sherif Salem, a portfolio manager with Invest AD, an Abu Dhabi investment company, told Reuters: ”We are still committed to the Iraqi market.” Invest AD has invested around $18m in Iraqi companies in just over a year.

Bartle Bull of Northern Gulf Partners said: “Iraq will be the fastest-growing important economy in the world by far for the next decade, and we expect to see this reflected in the country’s public companies.”

Banking dominates the exchange of less than 100 companies, but it also features insurance, industry, tourism, agriculture and even a carpet business.

The Iraqi State Oil Marketing Organization has launched a tender to buy 3,400 tons of gasoil per day for 12 months to power electricity generators.

In July 2011, Iraq signed a one-year deal with Iran to receive approximately 1,300 tons per day of gasoil to help power the growing needs of a country already short on fuel.

Over the past eight years, the finance ministry has tried to alleviate the problem with $27bn of disbursements. Power supply has roughly doubled since 2006 from 4,000 MW to between 7,000 MW and 8,000 MW, but demand has also grown due to Iraq’s strengthening prospects, from around 8,000 MW to 14,000 MW.

When there are no power failures, Iraqis gets electricity for roughly two-thirds of the day, on average. Mortality in Iraq is still high during the hot summers due to power shortages and failures.

(Sources: Reuters; AKNews)

Summary
Levels of violence rose in Iraq over the past week, with dozens of people killed and injured in a series of attacks in Baghdad on 22 December. Meanwhile, the political crisis between senior politicians also endures, posing a significant risk to overall national stability and raising the possibility of major internal strife over the course of the coming year.

Statistics
In total, at least 105 people were killed and 253 injured in nationwide violence last week, which was concentrated in the capital, as well as the northern cities of Kirkuk and Mosul. At least 48 separate bomb attacks left 82 people dead and 228 injured. Small arms fire attacks left 14 people dead and 13 injured.

Weekly Attacks in Iraq - the last 6 months. Note the notable rise in the number of incidents reported last week.

Kidnap Risk
Last week the US authorities issued a statement warning of the imminent risk of kidnap posed to American nationals. Evidently kidnap remains a major risk in the country and foreign personnel are advised not to become complacent. Iraqis continue to be abducted on a regular basis. The Iraqi authorities managed to free two kidnap victims in separate incidents in the north and centre of the country last week and dozens more are likely to be taken over the coming months. If you would like to receive AKE’s quarterly kidnap brief please complete your details here.

Baghdad Violence
There were several attacks over the course of 22 December in Baghdad, which left up to 70 people dead and almost 200 injured. The bombings, which were later claimed by al-Qaeda in Iraq took place in the districts of Abu Dshir, Adhimiyah, Allawi, Amil, Bayaa, Dourah, Ghazaliyah, Harthiyah, Jihad, Karradah, Mansour, New Baghdad, Qaddisiyah, Qahirah, Sha’ab, Shu’lah, Shurtah and Yarmouk as well as along Abu Nawas street, Maghrib street and Mohammed al-Qassim highway. Targets included a garage, school, hospital and the integrity commission office in Karradah, as well as gatherings of civilians, targeted on an indiscriminate basis.

Warning Signs
Previous AKE reports indicated that the authorities were expecting another mass-casualty terrorist attack and the country was indeed statistically overdue. What needs to be determined now is whether or not this latest spate of attacks, following the US military departure, signals a change in the tempo of violence. Organisations should review their security measures in light of the potential for a deterioration in conditions and be prepared for the frequency of attacks to increase from now on. Even organisations working in normally well patrolled districts such as Karradah, Jadriyah and even the International/Green Zone are reminded that they are not immune from risk. Indeed, it is precisely these districts which should be regarded as possible targets, not least because of their high profile and political weight.

John Drake is a senior risk consultant with AKE, a British private security firm working in Iraq since 2003. You can access AKE’s intelligence website Global Intake here, and you can obtain a free trial of AKE’s Iraq intelligence reports here.

The high price of oil could prove the latest projection of a USD14.5bn budget deficit in 2012 as being too pessimistic.

The Cabinet approved a $100bn budget for 2012 in the first week of December, although it is still waiting for Parliament to give its approval. The budget is based on oil at an average $85 dollars per barrel. With around 95% of Iraqi government revenue coming from oil, the price of a barrel is the most important factor to forecast.

At the end of 2010 the government had forecast a budget surplus for 2012, but in its latest budget it has instead committed to greater expenditure to speed up infrastructure investment and growth. Iraq’s budget has risen by around $30bn since 2010, leading to a forecast of a $14.5bn deficit in 2012.

With oil now at $100/barrel or more, it is possible that the government will cut into this deficit in 2012 if prices remain higher for most of the coming year. In the past two years, Cabinet and Parliament have based their budgets on conservative oil price estimates. If these latest projections also turn out to be conservative enough, the projected deficit could come down significantly.

The second tricky number to project is the number of barrels of oil the country will produce. The final numbers are not in, but it looks like the government was pretty close to its target of 2.2m/bpd target in 2011.  The 2012 budget is projecting an average 2.65m barrels per day.