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By Simon Watkins for the OilPrice.com. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Three New China-Russia-Iran and Iraq Agreements Confirm The New Oil Market Order

The last week or so has seen a flurry of major cooperation agreements - including in energy, security, and logistics - between various permutations of Iran, Iraq, Russia, and China.

The three most recent principal cooperation agreements will have immediate consequences for oil and gas flows around the world and their pricing.

Click here to read the full report.

By John Lee.

A delegation from the Iraqi Ministry of Transport has travelled to Russia for discussions on cooperation in the transport sector.

The Director of Iraq's General Company for Land Transport, Mortada Karim Al-Shahmani, discussed cooperation in land transportation of people and goods between Iraq and Russia. The meeting resulted in finalising a cooperation agreement between Iraq and Russia, which the Ministry said would contribute to the recovery of the Iraqi economy by facilitating the entry of goods and people and encouraging investment.

Meanwhile, the Director of the State Company for Maritime Transport, Ahmed Al-Asadi, discussed joint cooperation with the Russian maritime transport officials to enhance the role of the Iraqi national carrier. The cooperation agreement aims to provide new opportunities for the transport of goods and people, in line with Iraq's vision to open up to the countries of the world and develop the transport sector.

(Source: Ministry of Transport)

By John Lee.

(Source: Ministry of Industry)

By John Lee.

Iraqi Airways has started new flights between Baghdad, Moscow (Russia) and Medina (Saudi Arabia).

The Ministry of Transport announced the resumption of these routes this week, after a hiatus of more than three decades.

The Director General of Iraqi Airways, Eng. Karim Kazem Hussein, added that the fleet will continue to be upgraded with modern aircraft.

(Sources: Ministry of Transport, Iraqi Airways)

By John Lee.

The Iraqi and Russian governments have signed a draft agreement exempting diplomatic, service, and private passport holders from entry visas.

Dr. Abdul Rahman Al-Husseini, the Undersecretary for Administrative and Technical Affairs, signed on behalf of Iraq, and Russian Ambassador Elbrus Kutrashev on behalf of Russia.

According to a statement from Iraq's Ministry of Foreign Affairs, the agreement is aimed at enhancing the status of the Iraqi passport and facilitating seamless travel between the two nations.

(Source: Ministry of Foreign Affairs)

By John Lee.

The World Bank's latest Global Gas Flaring Tracker Report, a leading global and independent indicator of gas flaring, finds that global gas flaring decreased by three percent to 139 bcm in 2022 from 144 bcm in 2021

Consistent with previous years, flaring during 2022 was dominated by a relatively small number of countries, with the top nine flaring countries responsible for 74 percent of flare volumes and 45 percent of global oil production. These are, in order: Russia, Iraq, Iran, Algeria, Venezuela, the United States, Mexico, Libya, and Nigeria.

Click here to download the full report.

(Source: World Bank)

By Ahmed Mousa Jiyad.

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

The recent appointment of Ammar Al-Anbagi as the new, a twelfth in a row, director general of Iraq's State Oil Marketing Organization (SOMO), might be an opportunity to review the path of leadership of this very important entity in the petroleum sector and, indeed, for the entire economy of Iraq.

I have known most of SOMOs DGs since early seventies of the last century during either our postgraduate studies in the UK with scholarships from the Ministry of Oil financed by agreements with IOCs prior to mid-seventies oil nationalisation, or during my work with Ministry or INOC or the Council of Ministers before leaving the country in July 1988, or during the exile since then.

Ammar is the twelfth DG since my colleague Ramzi Salman assumed the directorship in 1972 and hold it for twenty years.

During these years the service duration of DGs varies between as short as four months and as long as twenty years. Prior to 2003 invasion, SOMOs leadership was characterised with relative stability, while the immediate aftermath of invasion witnessed frequent changes and instability, before returned to another phase of relative stability since mid-2006.

The following chart, compiled from and based on my database, exhibits SOMOs leadership by name and duration of their term, listed from recent appointment down to the first, during the last fifty years of ups and downs with most daring challenges that faced the country.

A few quick remarks are worthy of making at this occasion.

• All DGs, except Falah Al-Amiry, have had many years of experience within the Iraqi petroleum sector before assuming their leadership of SOMO.
• Prior to 2003 invasion, SOMO was the most secretive entity within the petroleum sector and was directly connected to highest political and authority structures through, first Follow-up and Agreement Execution Committee / Revolution Command Council, then through the Republic Presidency Office, though it was within MoO structure.
• Prior to 2003 invasion, there were only five DGs with Ramzi Salman serving terms from 1972 to March 1991 as the longest DG, who had consolidated SOMO's structure and status. The terms of other four DGs ranging from only 4 months (Ali Rajab) to six years and a half (Sadam Zuban).
• SOMO' leadership witnessed frequent changes immediately after 2003 invasion with four DGs within less than three years in total, reflecting the chaos that dominates due to invasion and causing organisation instability.
• In March 2006, Dr. Falah Al-Ameri was appointed and his term, the second longest ever, ended in September 2017. During his term, the petroleum sector and, consequently, Iraq, witnessed many serious challenges and crucial developments: two oil price collapses, in 2008 and 2014; Daesh and its devastating consequences from mid-June 2014 onwards; the unwise decision to nominate SOMO as the "State Partner" in Al-Ahdab and Rumaila oilfields upstream service contracts; the commencement of limited spot offering through Dubai Auction in April 2017; OPEC+ implication for Iraq; unrealistic proposal for transforming SOMO from oil "marketing" to oil "trading" company; opportune expanding towards East Asian markets; forming temporary, but problematic, partnerships with a Russian company, " Litaso" and a Chines company, "ZhenHua", and immaturely considering oil price hedging, among others.
• Alaa Al-Yassiri term lasted six years and a half, characterised with, mostly, business as usual, except ignoring the idea of converting SOMO from "marketing" to "trading" company and oil price hedging.
• Now, SOMO provides more data than before, particularly in contrast to the firm secrecy of pre-2003, but still more transparency and openness are needed on time and regularly. These includes monthly oil lifting, in volume and price, by IOBs, monthly market destinations, monthly or quarterly oil lifting pursuant to upstream development service contracts, and ministerial meetings regarding export oil prices, among others. Also, SOMO needs to be proactive and should state its position on various projects that have direct implications for the country' oil export outlets, such as pipelines, since it is the only entity that have direct and first-hand knowledge and professional expertise with regards to comparative transport cost to various market destination, price differentials and competitive market shares; all such matters impact the economic feasibility of any project to expand oil exports.
• Due to domestic politics, personal vendetta or legal integrity premises, many accusations of corruption and financial irregularity were raised regarding SOMO, as entity, and some directed against both Al-Ameri and Al-Yassiri, with some even requested their removal from SOMO.

A few cases are referred to here: SOMO itself confirmed, in February 2013, that one of its senior staff was leaking, for a long period, information on prices to foreign companies, and request the Ministry to take, a rather mild action, against him! A more serious case worth mentioning related to legal action taken by the Parliamentarian Uday Awad, resulted in Basra Appeal Court issuing an arrest order against Al-Yassiri, in October 2019, but, apparently, the arrest was not made.

• Ironically, the former Minister of Oil Jabbar Luaiabi considered in an official meeting of the Ministry Advisory Commission- Hayaat Al-Ray, in 12 June 2017, SOMO among seven state-owned companies associated with the ministry as "loss making companies", and gave them six month to improve their fiscal balances; by September that year Al-Ameri was removed. A company that generates almost all of Iraq's foreign exchange was accused of making losses; is there any other manifestation of ignorance and absurdity better than this??!!!
• On the legal and ministry structure levels, SOMO is the only legal sovereign entity in charge of oil exports in the country; this monopoly goes back to MoO Law 101 of 1976 and Decision 272 of 1987. SOMO was, and still is, an issue of whether to include or exclude it from INOC Law, as the said law has been in limbo since the Federal High Court revoked many of its main articles since January 2019.

I had previously addressed SOMO' issues in a few articles written in Arabic, English and were circulated widely and accessible, as listed below. Also, I keep watching its affairs closely and have direct line of communication with SOMO and am very keen to maintain and enhance the contact.

Norway

12 March 2023

SOMO Reveals More Important Data on its Marketing Activities, posted on IBN, 22 July 2019

https://www.iraq-businessnews.com/2019/07/22/somo-reveals-more-important-data/

https://www.akhbaar.org/home/2019/7/260413.html  posted on 23 July 2019

SOMO Discloses Data on its Spot Sales, posted on IBN10 July 2019

https://www.iraq-businessnews.com/2019/07/10/somo-discloses-data-on-its-spot-sales/

https://www.akhbaar.org/home/2019/7/259802.html  posted on 6 July 2019

SOMO Does Not Work This Way. Posted on 16 August 2018  https://www.iraq-businessnews.com/2018/08/13/somo-does-not-work-this-way/

http://www.akhbaar.org/home/2018/11/251035.html posted on 11 Nov 2018

Reforming and Transforming SOMO- A Follow Up,  posted on IBN on 13 Dec 2017 https://www.iraq-businessnews.com/2017/12/13/reforming-and-transforming-somo/ and on Al-Akhbaar 13 Dec 2017 http://www.akhbaar.org/home/2017/12/238018.html

Debating SOMO' Transformation.  The English text posted on IBN and AlKhbaar on 5 Sept 2017 https://www.iraq-businessnews.com/2017/09/05/expert-blog-debating-somo-transformation/  ; http://www.akhbaar.org/home/2017/9/233074.html and the Arabic text on http://www.akhbaar.org/home/2017/9/233297.html  

Click here to download the full analysis in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former 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: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

By John Lee.

Russia's LUKoil and Japan's INPEX South Iraq Ltd have received approval from Iraqi state-owned Thi-Qar Oil Company (TOC) for "Declaration of Commerciality of Reserves and Outline Development Proposal" for the Eridu [Arido] oilfield located within Block 10 in Iraq.

Following approval by TOC (also known as Dhi Qar Oil Company, DQOC), LUKoil and Inpex are planning to proceed with the implementation of the Eridu oilfield development plan targeting 250,000 barrels per day production.

Geological exploration at Block 10 started in 2012, 2D and 3D seismic surveys have been carried out, three exploration and six appraisal wells have been drilled.

These activities resulted in discovery of the Eridu oilfield with estimated reserves of 12.9 billion barrels. The field is one of the largest petroleum discoveries in Iraq over the last 20 years.

(Source: Lukoil)

By John Lee.

KRG President Nechirvan Barzani met with the Russian Ambassador to Iraq, Mr. Elbrus Kutrashev and his accompanying delegation in Erbil this week.

The meeting discussed the political and economic developments in Iraq, Erbil-Baghdad relations and the ongoing negotiations to resolve their differences.

The two sides also exchanged views on Russia's bilateral relations with Iraq and the Kurdistan Region and the latest visit of the Russian Minister of Foreign Affairs to Baghdad.

Discussions also highlighted the developments in the war in Ukraine and its ramifications, and the situation in the wider region.

(Source: KRG)

Remarks for the Ambassador's Keynote Speech at the Iraq Oil and Gas Show
Saturday, February 18, 10:45 a.m. (Babylon Rotana Hotel)

I have recently returned from Washington, D.C. where we had the privilege of hosting Foreign Minister Fuad Hussein and his 15-member delegation.  This visit was historic.  It was the first Higher Coordinating Committee that was focused on economic cooperation, energy sector development, and climate change.

In Washington, the Foreign Minister and Prime Minister Sudani's advisors laid out a plan to diversify Iraq's economy from being more than just an oil exporting country to a country with vibrant private industries, where the private sector is the main engine of economic growth.

In addition to the meetings with Secretary of State Blinken and other senior government officials, the Foreign Minister's delegation met with the U.S. Chamber of Commerce and about 40 U.S. companies inviting them to play a role in Iraq's economic development, including in growing Iraq's nascent private sector.  I came away from this trip confident in the strong and expanding relationship between Iraq and the United States, and excited for the opportunities to foster real growth in Iraq's economic future.

For Iraq to realize this bright future, Iraq must do at least three things:  invest in critical infrastructure, combat corruption, and create a business environment that is favorable to foreign direct investment.  By that I mean encouraging foreign companies to bring both their capital and their expertise to Iraq and where these investments generate jobs and companies train Iraqis to run their own businesses.

There is no place better to focus these opportunities than the energy sector, specifically the country's electricity grid and oil and gas field development, including gas capture.  These areas capture both Iraq's greatest source of revenue and its greatest constraint on economic growth.  We all know electricity demand will only grow and there is promising potential for investment and improvement.

I have spoken with the Minister of Oil, the Minister of Electricity, and the prime minister's new adviser on energy, all of whom have laid out a vision for modernizing the energy industry, and not just in the oil sector, but by capturing and using the vast amounts of gas in Iraq to help develop the electricity sector to meet the power demands of a growing economy.

The Biden Administration is encouraging U.S. energy companies-those already in Iraq and new ones, to explore opportunities in Iraq and where they could bring their world-class expertise and help generate jobs for Iraqis.  On Thursday, General Electric and the Ministry of Electricity signed an MOU to develop the energy sector in production, transmission, maintenance, staff training, and reducing carbon emissions.  And there is certainly more room for other companies.

Strengthening Iraq's energy sector will require significant investment.  Gas capture plants will have to be built along with new power plants to use the additional gas.  The electricity grid will have to be upgraded and modernized to make sure that the 50 percent of power that is currently lost in transportation due to theft and poor equipment can instead be harnessed to power Iraqi homes and businesses.

That is why energy infrastructure is an obvious place to start with investment.  Iraq has a valuable pre-existing resource that has the potential to advantage not just Iraqi citizens, but the economy - especially since the lack of electricity is one of the largest constraints facing manufacturing and industry today.

In the gas field, Iraq has both a challenge and an opportunity.  After Russia, Iraq is the highest emitter of flared gas in the world.  This causes severe environmental problems.  Capturing the gas that is currently flared would dramatically improve Iraq's climate, allowing Iraqis to breathe cleaner air, drink cleaner water, and suffer less from debilitating diseases such as cancer.

But capturing gas is also an economic opportunity.  Most assessments conclude that if the amount of gas flared in Iraq today was processed in new electricity generating power plants, Iraq could double the total amount of its electricity production and meet the current shortages.   By using captured gas to power electric generators, Iraq could dramatically increase the amount of electricity available to its people - as much as 3,500 MW of additional electricity, or an increase of 25 percent to the entire country's electrical grid.

To fully take advantage of developing the energy sector, we must also address the important challenge of corruption.  The business environment must convince foreign companies that their investments are protected, and the regulatory climate is predictable, transparent, and honest.  Also companies, especially those that are going to do business with the government, must know they will get paid on time.  Unfortunately, this has been an issue in the past.

Finally, the bureaucracy itself must modernize, efficiently process contracts and projects, and streamline the process for companies, both foreign and domestic, to do business here.  When companies compare opportunities to do business, they will almost invariably choose those with less risk and greater ease of doing business.  In today's fast moving global economy, time matters to international investors.

So let me conclude by saying that modernizing Iraq's energy sector is key to Iraq's ability to become a secure, stable, sovereign country that can provide for its own people using its own vast natural resources.

In Washington last, the Biden Administration launched a new and expanded vision for Iraq focused on economic development.  We are committed to working with the Sudani government to create new opportunities that strengthen the economic interests of both our countries and the region.  American companies are ready to invest and participate in modernizing Iraq's energy sector to the benefit of Iraq's sovereignty and its environment and help build a more secure future for the Iraqi people.

We are continuing this conversation with Prime Minister Sudani and his team at the Munich Security Conference.  We look forward to working with the Government of Iraq, the private sector (including other western companies), and directly with the Iraqi people to make this happen.   Thank you.

(Source: US Embassy)