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Gazprom Starts Oil Deliveries from Badra


By John Lee.

Russia’s Gazprom Neft, the operator of the Badra oil field (pictured) in Iraq, has announced that first oil from the field is now being delivered to Iraq’s main pipeline system for transfer to the export terminal in Basra, on the Persian Gulf.

Current deliveries from Badra to the pipeline stand at over 15,000 barrels of oil per day and this level should be maintained until the end of 2014.

According to the service contract with the Government of Iraq, the consortium of investor companies will begin receiving a share of the oil produced at the field after a period of 90 days following launch of commercial supply.

All of the oil produced in southern Iraq, including at Badra, is Basrah Light oil. The Iraqi State Oil Marketing Organization (SOMO) is responsible for oil sales and each quarter will be delivering a share of oil to the investor companies to reimburse their initial project costs.

Once these project costs have been covered, the investor companies will receive remuneration in kind for ongoing development at the rate of $5.5 of oil per barrel produced. Each investor company will be selling their share of oil independently.

First oil from the Badra field was produced in December 2013. Final commissioning at the field and testing of production and transportation infrastructure began in May 2014. Two wells are currently in production at the field and a further three wells are being drilled under a contract with the Chinese company ZPEC. According to the service contract production at the field will achieve 170,000 barrels of oil per day.

Alexander Dyukov, Chairman of the Management Board of Gazprom Neft, said:

Over the period of just a few years, a consortium of companies led by Gazprom Neft has fully prepared Badra, one of the most complex geological field structures in Iraq, for full-scale commercial development.

“This is the first major international project in upstream the company has implemented from scratch. The unique experience gained during this project will contribute to our development of future projects both in Russia and internationally“.

The field is being developed by Gazprom as lead partner (30% stake), along with Korea’s KOGAS (22.5%), Malaysia’s Petronas (15%), Turkey’s TPAO (7.5%), and Iraq (25%).

(Sources: Gazprom Neft, KOGAS)

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KOGAS in $4.9 Billion Project


By Patrick Schmidt.

On Monday, Korea Gas Corporation (KOGAS) announced that it will invest $4.9 billion in the Zubair oil field project.

The investment will help establish the facilities needed to launch the project and help Zubair reach its potential of over 800,000 barrel per day production. KOGAS have a 23% stake in the Zubair field, while other stakeholders include Italy’s ENI and US firm Occidental Petroleum.

Zubair remains one of the key oil fields in the south of Iraq, located far from the violence in the centre and north of the country. A spokesman from KOGAS noted,

“The turmoil in Iraq is occurring in northwestern Iraq, which is located a considerable distance from the Zubair field, so it has not disrupted our output.’’

(Source: Reuters)

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Daewoo Wins $589m Gas Separation Contract


By John Lee.

Iraq’s cabinet has approved an $589 million oilfield service contract with South Korea’s Daewoo Engineering & Construction.

The contract, approved on Tuesday, is for the engineering, procurement and construction of a gas separation facility at the Zubair oilfield.

Production at the field is planned to increase from the current 320,000 barrels per day (bpd) to 850,000 bpd by 2017.

The development of the Zubair Field is led by Eni (32.8%) with Occidental Petroleum Corporation (23.4%), Korea Gas Corporation (KOGAS) (18.8%) and Iraq’s state-run Missan Oil Company (25%).

(Source: Reuters)

(Picture: Youngsik Park, CEO, Daewoo Engineering and Construction)

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Gazprom Raises Cost Estimate For Iraq Field


Russia’s Gazprom Neft has increased its estimated costs for the Badra oil field to about US $3 billion, reports Bloomberg, citing a bond prospectus recently issued by its parent company.

The company had previously forecast costs at about $2 billion.

The field is being developed by Gazprom as lead partner (30% stake), along with Korea’s KOGAS (22.5%), Malaysia’s Petronas (15%), Turkey’s TPAO (7.5%), and Iraq (25%).

The group is planning to produce 170,000 bpd from the field by 2017, earning a fee of $5.50 a barrel over the 20-year span of the contract.

(Source: Bloomberg)

(Picture: Drilling at Badra — Gazprom)

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Capital Gain Tax on IOCs in Iraq


By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Many countries impose capital gain tax on individuals, companies and corporations when a profit realized from the sale of assets. National and state legislation often has a large array of fiscal obligations and regulations regarding capital gains, however, these fiscal obligations may vary from jurisdiction to jurisdiction.

In other words capital gain tax is a normal component of taxation systems on both national and international levels, and thus has a significant contribution to the state revenues and fiscal policies. Iraq is no different and should consider doing the same.

In Iraq the signed service contracts provide the IOCs with a possibility to assign (sell) wholly or partly their participating interests as specified by a common clause in the signed contract, “any Company shall have the right to assign any of its Participating Interest, shares, rights, privileges, duties or obligations under this Contract to an Affiliate.” Such right for assignment is subject to and governed by a set of provisions outlined in the signed contract.

Due to the long duration of the contracts (the Term) that extend beyond 20 years, and due to the usual practice of Merger and Acquisition (M&A) in the international petroleum business it is highly probable that IOCs might “farm in” and “farm out” by acquiring, selling or exchange participation interests in the related petroleum field.

The transfer of participation interests between IOCs involves financial transactions or transfer of “asset” ownership between the concerned parties: the buyer and the seller.  This assignment deal may (though highly likely) results in significant realized gain (profit) for the selling party compared to the actual cost (investment) it made as a consequence to its participation in the related upstream petroleum development project.

 This realized gain is known to be “capital gain” and in most countries it is taxable. The “Capital Gain Tax” is imposed on individuals, companies and corporations and in many countries it is imposed in addition to other direct taxes such as “Property/Wealth Tax” and “Income Tax” among others. The percentage of Capital Gain Tax differs according to the taxation systems and fiscal policies across the world. 

Posted in Ahmed Mousa JiyadComments (3)

Private Security Companies in Iraq


By Robert Tollast.

Robert Tollast is a consultant at Noorbridge, a Helsinki based consultancy with staff in London and Nasiriyah, Iraq. He has written extensively on security, politics and economic issues in Iraq for various publications, and is currently researching a modern history of Iraq with support from The Middle East Forum. email: [email protected] twitter: @roberttollast

Private Security Companies in Iraq: Think Again. An interview with Haider Abadi of the Al Sajer Security Company.

What comes to mind when you imagine private security firms in Iraq? At worst you might recall the leaked footage (from 2005) of Blackwater personnel firing wildly at civilian cars during the coalition occupation. We then heard of 2007’s infamous Nisoor square massacre, and Blackwater’s reputation hit rock bottom.

Sensationalist books such as License to Kill: Hired Guns in the War on Terror or Hollywood portrayals from The Green Zone and The Hurt Locker have not helped an industry widely perceived as mercenary. Perhaps you are a soldier reading this who served in Iraq and remember nothing but swagger, expensive sunglasses, caps and chinos and the knowledge that these men were making far more money than you.

These days the industry in Iraq is highly regulated, and after coming under significant pressure from the Iraqi government in 2012 it has reformed considerably. 2008 saw the advent of the Montreux document, an international agreement that now has 49 participating states, initiated by groups such as the Red Cross and the Geneva Centre for the Democratic Control of Armed Forces.

It would be hard to argue that from a tactical, strategic, ethical, reputational or business perspective, these regulations do not make sense. A community that is alienated by bad behaviour is more likely to be hostile, and incidents are often broadcast on the global stage in minutes thanks to the proliferation of smart phones.

Some private security companies have adapted to the extent that they are considerably reliant on local staff (not just Iraqi nationals, as specified by Iraqi law.) This bond with the community is often vital and is now happening in Al-Qaim: the town where the Abu Mahal tribe started the first uprising against al-Qaeda in 2005 that shattered the organization (before it was allowed to revitalize) lies close to the Akkas gas field in Anbar, currently being worked on by the Korean company KOGAS.

Haider Abadi, projects manager at Al Sajer Security explains that this could be one of the most dangerous private security jobs in the world. But with the Anbar council supporting the project and local tribal involvement, it is currently manageable. Haider Abadi’s work shows us that PSCs are not only securing their clients, but also Iraq’s economic future.

Posted in Oil & Gas, Robert Tollast, SecurityComments Off

KOGAS may Sell Stake in Akkas


By John Lee.

The Korea Gas Corporation (KOGAS) is among the state-owned Korean energy firm that have come under heavy pressure from the country’s new government to shed assets and pay off debt by 2017, reports Reuters.

Korea’s Yonhap news agency says that the company is considering selling a 49 percent stake in its fully-owned Akkas gas field, in Anbar province, for $287 million.

Under the proposals, KOGAS would retain operating control of the project.

(Source: Reuters)

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STX Wins $449m Pipeline Order


By John Lee.

Korea’s STX Heavy Industries has won a $449 million order to build a 550-kilometer gas pipeline in northwestern Iraq.

The pipeline, scheduled for completion in June 2017, will take gas from the Akkas gas field in Anbar, which is operated by Korea’s KOGAS.

(Source: STX)

Posted in Construction & Engineering, Oil & GasComments (2)

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