Doubt Surrounds Satarem-Missan Refinery Deal

By Ahmed Mousa Jiyad.

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

Recent information on Satarem sheds serious doubt about its prospects and ability for executing the Missan Refinery project.

Iraq’s Ministry of Oil signed, in the presence of the Prime Minister Mr. Nuri Al-Maliki, a memorandum of understanding (MoU) with Swiss firm Satarem (represented by what was reported as Chief Executive Jerome Friler) on 10 October for the development of a 150 kbd refinery in Missan province at an estimated cost of $6 billion.

Almost a year ago I received communication from a consultant with a California based financial firm enquiring about Missan refinery and stating “For the last year or so, I have been working with an Iraqi group, developing the [Missan] refinery complex”. A few weeks later I received communication from an Iraqi law firm in Baghdad indicating they were “Advising on [Missan] refinery construction”. The two communications might be connected!

When reviewing information on the signed MoU, I assumed the above mentioned financial and legal firms were involved in the project. But soon afterwards the California based consultant informed me they were not, adding further, “We are of the opinion that the sovereign and financial payment extension risk in Iraq is too high to justify any investment from [….], at this time.”

Most of the comments reported within business, professional and media circles since the signing of the MoU are that Satarem is not known to be a refinery-specialized firm, or to have a track record in modern refinery construction. I did not find information on this company in the “Public Companies” or “Investment Fund Group” of the SEDAR company database.

2 Responses to Doubt Surrounds Satarem-Missan Refinery Deal

  1. Editor 20th December 2013 at 00:23 #

    Following publication of this article, Iraq's Ministry of Oil issued a statement on the matter which can be read here:

    - Editor

  2. Ahmed Mousa Jiyad 22nd December 2013 at 15:31 #

    Skepticism on Missan Refinery-Satarem MoU gaining momentum
    The recent announcement by the Ministry of Oil is very well appreciated and deserves highest admiration. However, the content does not provide new information that could help in answering the main questions raised on the MoU and Satarem’ technical, managerial and financial capacities to execute such a project.
    I take note of the Ministry’s assertion, “is adopting the concept of dealing only with the well-known companies to apply the strategic projects”; but it is hardly accurate or even proper to consider Satarem among “the well-known companies”!!!
    On the evening of Saturday 21 Dec 2013 three officials from the Ministry were hosted by the “After Nine” program on the State TV Aliraqiya discussing this MoU. The three officials are Laith Alshaher (DG of the Legal Department), Saadi Aldujaily (Assistant DG of the Economic Dept., and who signed the MoU) and Asim Jihad (the Ministry spokesman)
    The TV program was meant to provide clarifications and answers to many questions pertaining to the issue. But again they only repeated what was mentioned in the ministry’s announcement. What attracted my attention are the followings:
    1- The absence of any technical person though the ministry has a well experienced Deputy Minister for Refining might indicate serious technical reservation. It is worth recalling that the former Deputy Minister for Refining, Ahmed Alshamma, was always involved in refinery deals and discussion as I mentioned in my earlier posting on IBN on this issue; the TV program did not invite others from outside the ministry!
    2- There were some inconsistencies in what the three gentlemen have said: in one part they say there was no interests expressed by international companies; while in other part they say they have received an offer from Japanese company based on loans. But they reject it!!. The reason they gave is they do not want to execute the refinery through loan but it should be through foreign investment. The answer is not convincing in the absence of proper economic evaluation of different financing modalities; something we used to do for such project during the eighties!
    3- What surprised me also is what they say that Satarem offer includes “A company ranked fifth on global scale”, without giving the name of this fifth ranked company!! Moreover, how is it possible for them to accept that such a fifth ranking company would ever accept to be in a consortium led by a small company with no proven track record in petroleum and with capital of only 400 thousand Swiss-francs!!!
    4- The most astonishing of what they said is that “Satarem can take 70% or 200%” but they did not say of what?? Though they emphasized that Satarem is an “investor”, reading through Satarem’ “Vision & Mission” on its website, there was no mention of it as “investor”. Moreover, how is it possible for the three gentlemen could ever believe that a company with such insignificant recently increased capital could be considered as investor for such a project?!!!!
    5- My conclusion after seeing the debate is the program left me more worried and less convinced by what the three officials of the Ministry have said.
    On the other front the Parliamentarian Suzan Alsaad (member of the oil and energy committee-OEC of the Iraqi parliament) said on 21 December the parliament formed a truth investigating committee to address the issue and the OEC will hold a meeting with the Ministry of Oil on Sunday 22 December on the same subject. Moreover, the Missan Provincial Council expressed “shock” to hear about the deal and requested parliamentary investigation.
    Many through various media sources and direct communications attempt to exploit the issue for obvious political reasons.
    Finally, information indicates that a meeting between the Ministry of Oil and Satarem will take place on Monday 23 December to hear from the company what it has done so far. Both parties to the MoU are under immense pressure as many are waiting for clear, concrete and convincing outcome.
    Ahmed Mousa Jiyad,
    Iraq/ Development Consultancy and Research,
    [email protected]
    22 Dec 2013