Doubt Surrounds Satarem-Missan Refinery Deal

This foggy image of Satarem is a reminder that brought back the bad experience of similar cases. An announcement was made during the “Symposium for Reviewing Iraq Oil Policy”, held in Baghdad February 27-March 1, 2009, that the Ministry of Oil through Iraq Drilling Co (IDC) had concluded an important agreement with a UK based drilling company. After hearing that announcement I asked some of my colleagues if they knew the profile of that company but I left Baghdad with no answer. A few weeks later the Ministry of Oil and IDC abandoned the deal with that UK-based company.  A colleague and close friend paid a visit to the location of that company and found no trace of a credible drilling company at the provided address in London!

Karbala refinery is another example. Eric Watkins wrote (1 August 2011) in the famous Oil and Gas Journal (OGJ) that Iraq’s ministry of oil has signed an agreement with Karbala Refinery Corp. Ltd (KRC) for the construction of a 200 kbd refinery at an estimated cost of $6.5 billion, citing KRC Chief Executive Officer Dean Michael. Moreover, analyst Catherine Hunter of IHS Global Insight said the project will be aimed at meeting Iraq’s domestic demand for gasoline and diesel.

Two weeks later the oil ministry said what was signed was “an initial form of a document with the Italian investment group to build the refinery of Karbala. And Mr Ahmed Al-Shamaa the then deputy minister for refining affairs said that the ministry signed this agreement to enable these Italian companies to finish the procedures of applying the project. And he denied the signing of the contract as the mass media reported.

The third example is the famous two contracts by the Ministry of Electricity comprising a $1.2 billion contract with the Vancouver-based Canadian Alliance for Power Generation Equipment (CAPGENT) and a $500 million deal with Germany's Maschinenbau Habentstads Mbh. The two contracts were revoked when the two companies were proven to be unqualified for such contracts.

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,
    22 Dec 2013