Doubt Surrounds Satarem-Missan Refinery Deal

Dr. Kubba’ letter to the Prime Minister was circulated among Iraqi oil professionals but so far no formal response has come from Baghdad. Surprisingly, someone phoned Dr. Kubba (Saturday 14 December) informing him that he could offer the Missan Refinery to his company! (Dr. Kubba mentions in his letter that he owns a small company “TRASCO” with a capital of 500,000 Swiss francs).  The caller name could be false but his mobile number is recorded!

The qualification requirements to execute a modern refinery project with such a capacity should be similar to those adopted by the ministry for other refineries. For the Nassiriya Integrated Project (NIP), as a relevant example, the ministry uses legal, technical, financial and HSE criteria (for both parts: the field development and the refinery). Interested companies had to submit comprehensive data and tables covering the years 2009, 2010 and 2011 in order to assess their technical capacity for either part of the NIP.

For Satarem I doubt very much that a proper qualification was ever made.  Moreover, credible information indicates that the MoU was not signed by a high ranking officer within the Ministry (assistant DG) and many technical people inside the ministry know now that Satarem is incapable of executing this project. They are only waiting the expiry of the four-month period of the MoU to put an end to it, since they do not expect this company to come up with the expected comprehensive plan that includes among other things the financing, constructing the refinery and marketing its products.

Undoubtedly, with so many reservations the Satarem deal is facing uphill bleak prospects and could be destined to collapse. Such bad deals are very damaging to the Ministry’s image and reputation, wasting a good deal of time and effort, and backfiring politically.

Finally, the Ministry of Oil has to come out with formal statement on this matter and a decision on the fate of the signed MoU needs to be made sooner rather than later. Needless to say offering a modern refinery at such cost should be thought through seriously, carefully and with credible comprehensive due diligence! Quick deal-fixes and photo opportunities do not build modern refinery, if any things else!

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

Mr Jiyad is an independent development consultant, scholar and Associate with Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: [email protected], Skype ID: Ahmed Mousa Jiyad).

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