Dunia Frontier Consultants have issued a new report entitled Foreign Commercial Activity in Iraq – 2010 Year in Review.

According to their research, the total number of reported investments, service contracts, and other commercial activities by foreign firms more than doubled in 2010.

The report includes a listing of the 30 biggest foreign investment deals in the country over the past year, analysis by region and sector, and details of the main investor countries.

Please click here  to download a copy.

Infrastructure continues to be the key focus of reconstruction efforts in Iraq, as the country grapples with electricity shortages, a scarcity of housing and insufficient transport links. In BMI’s view, improving core economic social infrastructure provision should help place the country on the path to economic normalcy.

The key areas of focus continue to be:

Electricity: Iraq’s power sector has opened up to allow a number of companies to enter the market and reap the potential rewards on offer. Back in May 2010, the government announced a new target for the electricity sector, to generate 27,000 megawatts (MW) of electricity by 2013. With current nameplate capacity standing at around 15,000MW, this includes almost doubling capacity in three years. This target is ambitious to say the least. Tenders have been released to install 28 of the 72 gas turbines ordered in 2009, which is a good start in a sustainable solution. This quarter saw new contracts awarded for the installation of 20 gas turbines, which were purchased from General Electric (GE) in 2008. The contracts, which are worth a combined US$900mn, were awarded to three Turkish companies: Calik Enerjim, Enka Insaat and Eastern Lights.

Transport: In light of growing demand, there are a number of projects under way or in the pipeline to improve transport infrastructure. The rail and port networks appear to be the main areas of interest at present; however, both the airports and the roads are also in great need of investment. In the last quarter, seven government funded road projects were finalised in Missan province, Iraq. Four roads have been newly paved, with three highways also finalised. The roads range from 4km to 27km in length and all lie within the province to the south of Baghdad.

BMI’s Q1 2011 update on Iraq’s telecommunications market provides comprehensive coverage of recent developments in the country’s mobile, fixed-line telephony and internet sectors. This quarter sees our five-year growth forecasts for the country’s telecoms service sectors extended through to the end of 2015. Our new mobile subscriber forecast for Iraq incorporates the latest subscriber data, published by the country’s two largest operators, Zain Iraq and Asiacell, for the third quarter of 2010. Data on these two operators is published by Kuwait’s Zain Group and by Qatar Telecom (for Asiacell). We continue to estimate the number of subscribers served by Iraq’s smaller mobile operators; among them is the Kurdistan-based cellco Korek Telecom. In late November 2010, it was reported that France Telecom had entered into talks to buy a minority stake in Korek Telecom, as part of a strategy to expand its presence in the Middle East. According to the Financial Times, the French telco is interested in eventually securing a controlling stake in Korek.

As of September 2010, we estimate there were 21.344mn subscribers in the Iraqi mobile market. Although this reflected y-o-y growth of 11.6%, it represented an increase of just 0.5% in relation to the previous quarter. Q310 was one of the lowest growth quarters experienced by the Iraqi mobile market to date. Furthermore, it stood in stark contrast to the 1.3mn net customer additions in Q210. It appears that both Zain and Asiacell experienced relatively weak customer growth in Q310 compared with the previous quarter. This contributed to the poor performance in the market overall. Despite the relatively poor performance in Q310, we estimate that, for 2010 as a whole, Iraq’s mobile market grew by 14.4%. By the end of the year, we believe there were some 23.57mn mobile customers, equivalent to a penetration rate of almost 75%.

Business Monitor International (BMI) has published a new report on the oil industry in Iraq.

Summary:

BMI forecasts that Iraq will account for 10.27% of Middle East (ME) regional oil demand by 2015, while providing 11.56% of supply. Middle East regional oil use of 4.98mn b/d in 2001 will rise to an estimated7.40mn barrels per day (b/d) in 2010. It should average 7.70mn b/d in 2011 and then rise to around8.70mn b/d by 2015. Regional oil production was 22.83mn b/d in 2001 and will average an estimated24.96mn b/d in 2010. After an estimated 25.22mn b/d in 2011, it is set to rise to 27.24mn b/d by 2015. Oilexports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001,the region was exporting an average of 17.85mn b/d. This total will ease to an estimated 17.55mn b/d in2010 and is forecast to reach 18.54mn b/d by 2015. Iraq has the greatest export growth potential, followedby Qatar.

In terms of natural gas, the region will consume an estimated 391bn cubic metres (bcm) in 2010, with demand of 483bcm targeted for 2015, representing 23.7% growth. Production of an estimated 467bcm in2010 should reach 614bcm in 2015 (+31.4%), which implies net exports rising to 130bcm by the end ofthe period. In 2010, Iraq will consume an estimated 1.28% of the region’s gas, with its market shareforecast at 2.38% by 2015. It will contribute 1.07% to estimated 2010 regional gas production and by2015 could account for 2.93% of supply.

Business Monitor International (BMI) has published a new report on business in Iraq.

Summary:

The oil sector contracts signed between Iraq and international energy companies in 2009 reflect the first stirrings of what the oil and gas industry hopes will be the reestablishment of a strong working relationship. Following years of underinvestment as a result of the economic sanctions imposed on Iraq following the 1991 Gulf War, Iraq is hoping to tap the expertise and capital of international oil companies (IOCs), their state-run national oil company (NOC) competitors and service companies in order to boost the technical capabilities of its infrastructure as well as the production and export capacities of the country’s crude oil, natural gas and refined products.

Owing to the 1991 Gulf War and subsequent UN sanctions Iraqi production suffered during the 1990s. The country was granted an exemption from OPEC production quotas while it operated under the auspices of the UN Oil-for-Food program, which allowed Iraq to export limited amounts of crude oil in exchange for the purchase of food and essential medical supplies.

Although the Oil-for-Food program was disbanded after 2003, Iraq still benefits from the OPEC quota exemption. BMI forecasts Iraq’s 2010 production at 2.47mn b/d, of which 1.62mn b/d will be exported, and the government plans to boost production to 12mn b/d by 2020-a production increase of 485% over the 10-year period. BMI sees this target as ambitious, forecasting 2020 output of 4.5mn b/d, but our projections still see 82% growth over the period.

While our outlook is sanguine, there are manifold risks to investment in the Iraqi oil and gas industry. In the long term, crude production growth will mean that Iraq will come under increasing pressure to rejoin the OPEC quota regime, presenting a potential cap on further output gains. In the short and medium term, Iraq’s large investment needs, political instability and security risks will all contribute negatively to the country’s energy sector aims. Furthermore, the role of ‘resource nationalism,’ particularly in a country with an insecure polity wary of foreign intervention, cannot be discounted in the upstream segment.

This can be discerned from the development contracts signed between Iraq and the various international companies jostling for position in the country’s energy investment plans. The final awardees originate from a broad spectrum of European and Asian countries, and only two US companies-ExxonMobil and Occidental Petroleum-were awarded contracts. Furthermore, the Iraqi government was keen to be seen as negotiating hard to obtain the best possible terms for the state, and the government has shown no hesitation in changing deal terms for its financial benefit. Earlier changes to contractual structures included a 5% decline rate provision for output above the applicable production targets, as well as changes in ownership structures to the benefit of the IOCs. Nonetheless, BMI believes that Iraq’s ambitious plans for its oil and gas sector present significant investment opportunities for foreign companies. Specifically, we have identified the country’s oil services sector, refining segment and natural gas industry as particularly attractive opportunities. We have highlighted below not only the nature of these opportunities, but the three most important risks that foreign investors will face in the Iraqi energy sector in the coming years.

The full report runs to 43pages, and is available at a price of £525 directly from Business Monitor International.