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Iraq’s oil minister, Hussain al-Shahristani, has addressed some of the complaints by oil majors about bureaucracy hampering their efforts to bring staff and equipment into the country, according to a report from Reuters.

Getting visas for oil industry professionals entering Iraq to work on oilfield development contracts ranks as a major hassle facing oil companies as they start work.

"This obstacle has been overcome with the cooperation of the Ministry of Interior, which thankfully has agreed to issue visas at the Iraqi airports to employees working on the contracts to develop the fields," Minister Hussain Shahristani said.

Shahristani said other problems, such as inadequate ports, decrepit roads and crumbling bridges, would not be overcome rapidly and oil majors would have to find a way to manage.

"It is expected there will be problems, especially as we know that Iraqi infrastructure like roads, bridges, ports, railways, airports and other things are not as they need to be at the current time," he said in a news conference in Baghdad.

Iraq awarded a series of massive oilfield development contracts last year to majors such as Shell and BP that could quadruple its output capacity to 12 million barrels per day within seven years.

Those output levels would rival top producer Saudi and give Iraq the billions it needs to rebuild after decades of war, sanctions and neglect.

Sabotage and a lack of investment since the 2003 US-led invasion has further degraded the infrastructure and hundreds of billions of dollars are needed for housing, the power grid, water and sewage plants and other sectors.

As the projects get off the ground, inadequate dock space at Umm Qasr, the country's main port, bureaucratic impediments to securing visas, customs clearance, and corruption have become tops complaints of oil executives.

Shahristani said the problem of the ports would be addressed by opening up new land border crossings.

"We have started discussing the opening of new border posts specifically for oil equipment in order not to affect the functioning of the Iraqi ports and not to delay our projects due to the capabilities of Iraqi ports," Shahristani said.

(Source: Reuters)

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• Investment in New Container Port at Umm Qasr
• Grand Faw Port Tenders Set for 2011

Saudi industrial and energy services company Taqa (TAQA.AD) is considering investing $1.6 billion in pipelines and $133 million in offshore platforms in Qatar and Iraq, an Arabic newspaper said on Friday.

Officials from Taqa told the Saudi-owned daily Asharq al-Awsat they were considering investing in the gas industry in Qatar and the oil industry in Iraq by building platforms and pipelines for companies already working in the two countries. Taqa, 40 percent owned by the Saudi government, said it has already invested 500 million riyals ($133.3 million) in offshore oil and gas platforms in Saudi Arabia.

Officials said interest has increased since one of the company's main partners, the Italian oilfields services company Saipem (SPMI.MI), won a $10 billion contract to develop fields in southern Iraq.

Taqa has recently been on the acquisition trail, buying a 40% stake in Oman's Sohar Aluminium for $400m, and some of Suncor Energy’s assets in Canada for C$285 million.

(Source: Reuters, BusinessWeek)

Iraq expects the CNPC-operated al-Ahdab oilfield to have an initial production rate of 60,000 barrels per day from July 2011, Deputy Oil Minister Abdul Kareem Luaibi said on Sunday.

Al-Ahdab was the first major oilfield development contract awarded by the Iraqi government after the 2003 US-led invasion when it agreed to revive a Saddam Hussein-era deal with the Chinese oil company.

In June 1997, Al-waha Petroleum Co., Ltd, a joint venture of CNPC and China North Industries Corporation, signed an agreement with Iraq's Saddam Hussein government to develop the al-Ahdab oil field, which was postponed by the UN sanctions on Iraq and the subsequent U.S.-led invasion to the oil-rich state.

In November 2008, CNPC signed a Development Service Contract of Al-Ahdab Oilfield with Iraq's Ministry of Oil.

Located 180 kilometers southeast to Iraq's capital city of Bagdad, Al-Ahdab Oilfield has a structural area of about 200 square kilometers.

It has since struck 11 other deals with global oil majors to help it quadruple its output capacity to Saudi levels of 12 million bpd within seven years.

(Sources: CNPC, Reuters)

Related articles:

• Oil Pipelines Extended to Nassiriya
• China Races to Secure Middle East Oil Deals
• CNOOC Seals Deal on Iraq Oil Field

By end of June 2010, 26 out of 55 operators licensed to offer WiMAX offered the service. WiMAX is commercially available in Algeria, Bahrain, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Saudi Arabia, Tunisia and the UAE. Moreover, Yemen and Oman are slated to WiMAX services in the second half of 2010.

WiMAX stands for World Interoperability for Microwave Access. WiMAX/IEEE 802.16 is a global standard-based technology for Broadband Wireless Access. WiMAX is a broadband wireless technology that is largely supported by the computer and the telecom industry. Its guarantee is that it is engineered to deliver ever-present fixed and mobile services such as VoIP, Information Technology and Video at relatively low cost. Furthermore, WiMAX vendors state that WiMAX systems are able to cover a large geographical area (up to 50 km) and to deliver significant bandwidth to end-users at up to 40 Mbps. WiMAX technology can be deployed as a Point Multi-Point in last mile connection and as part of the backhaul to the PSTN and Internet access points.

The first commercial deployment of WiMAX in the Arab World was in Algeria in 2007. Moreover, by end of June 2010, a total of 26 service providers in 11 countries (including Algeria) in the MENA region offered WiMAX. The Arab Advisors Group expects an increase of 3 operators, at least, by end of 2010. A new report, “WiMAX in the Arab World 2010” was released to the Arab Advisors Group’s Telecoms Strategic Research Service subscribers on June 19^th, 2010. This report can be purchased from the Arab Advisors Group for only US$ 950. The 37-page report, which has 51 detailed exhibits, investigates the availability of WiMAX regulations in 18 Arab countries, the frequencies used, entities that have tested WiMAX or pre-WiMAX services, and vendors for equipment. The report covers the following Arab countries: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Syria, Tunisia, UAE, and Yemen. Any investment in this report will count towards an annual Strategic Research Service subscription should the service be acquired within three months from purchasing the report.  Please contact the Arab Advisors Group to get a copy of the report’s Table of Contents. “There are still no detailed regulations specific to WiMAX in some Arab countries. Still, a few have specified the type of license that needs to be obtained to provide WiMAX service. For example, in Algeria, the company should have a VoIP authorization and the regulator’s specified band for WiMAX. In Jordan, the company should have an individual license needed to use the frequency (a scarce resource) as well as win the spectrum auction for WiMAX.” Alaa Numair, Research Analyst at Arab Advisors Group noted in the report.

The top three frequencies allocated to operators in the Arab world are 3.5 GHz, 3.6 GHz and 2.6 MHz. The 3.5 GHz band, allocated to 19 out of 55 licensed operators to provide WiMAX, is the most common allocated frequency in the Arab countries. 3.6 MHz and 2.6 MHz followed with 8 and 7 licensed operators, respectively. Tareq Masarweh, Research Analyst at Arab Advisors Group added. The Arab Advisors Group’s team of analysts in the region has already produced over close to 1,920 reports on the Arab World’s communications and media markets. The reports can be purchased individually or received through an annual subscription to Arab Advisors Group’s (www.arabadvisors.com) Strategic Research Services (Media and Telecom).  To date, Arab Advisors Group has served over 600 global and regional companies by providing reliable research analysis and forecasts of Arab communications markets to these clients.

By Tariq Abdell, Founder & Chairman, Mesopotamia Insight.

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

Iraq's Lebanized democracy coupled with its lingering and convoluted political impasse are perfect recipes for a week and sectarian-based government, that is shackled by the region's geopolitics (e.g., Iran's nuclear and regional ambitions, Saudi Arabia, Syria, Turkey, etc...) consequently turning Iraq into proxy wars battleground for years to come and long after the U.S. forces are gone.

Thus, investors contemplating on doing business in Iraq, given the country's untapped natural resources (billions of oil and gas reserves), are most likely to encounter a series of costly and challenging constraints common to post-conflict environments both internal and regional. These constraints are most likely to derail investors’ market entrée strategies, left unchecked, and damaged their long-term business interests in Iraq:

Internal constraints:

• According to transparency international 2009 corruption index, Iraq is the fourth most corrupt country along with Sudan.
• Well-entrenched tribal laws and archaic costumes undermine central government and foreign investors' interests alike (tribal discontent of the oil companies, for instance).
• 20 to 25 percent of Iraqis still live below the country's poverty line (Ministry of Planning), a potential source of societal and political upheavals.
• Higher illiteracy levels make it difficult for domestic and foreign investors to find a skilled and professionally literate workforce.
• Higher unemployment rates, notably among military-age male population, are direct causes of the sudden surge of organized crime and militia's activities.
• Lack of basic services, e.g., drinking water, electricity, and running sewer nurtures resentment vis-a-vis public officials and foreign investors alike as recently demonstrated by electricity protests across Iraq.
• Deep-seeded distrust and apprehension of oil companies are crippling residues of decades of planned economy, e.g., oil union fervent opposition to the oil law and contracts.

Regional constraints:

• Iran, third's largest oil producer (3.2 million bpd), is a major player in Iraq's politics through its infamous Islamic Revolutionary Guard Corps' elite Qods Force and its proxies. As top U.S. commander in the country Gen. Ray Odierno said "There is a very consistent threat from Iranian surrogates operating in Iraq," (Washington Post July 13th).
• The fallouts of Iran nuclear standoff with the West, United States recent approved new unilateral sanctions against Tehran, could easily spillover to Iraq's internal politics and further undermine its stability. In fact, early signs of undercutting U.S. sanctions already been detected in the northern region where millions of dollars of oil and goods are smuggled to Iran (New York times report July 8).
• The proximity of Iraq's major oil fields to Iraq-Iran porous borders makes international oil companies’ workforce and equipments a vulnerable target for kidnapping and sabotage -Granting Iran invaluable leverage against the west.
• Saudi Arabia, world's largest oil producer (8.2 million bpd), could be a potential destabilizing force if the Shiite establishment continues to marginalize and ignore Sunnis' demands.
• Turkey's recurrent incursion into Northern Iraq in the pursuit of the Kurdish workers party (PKK) elements and PKK assiduous attacks on the northern oil pipelines are a major threat to the country's sovereignty and unity. According to Gen. IIker Basbug, head of the Turkish army, "The presence of PKK bases in northern Iraq will certainly affect Turkey and Iraq's relationship, and will negatively influence relations between the U.S. and Turkey" (VOA News).
• Kirkuk's unsettled dispute (Northern oil hub) is a timed bomb that could expeditiously ignite a second civil war given Kirkuk's ethnic diversity, e.g., Arabs, Kurds, Turkmens, etc...
• U.S. planned hastily withdrawal in the absence of a legitimate and strong government it's a strategic misjudgment with a dangerous and costly repercussions - Foreign investors may need to beef up their security personnel to countervail U.S. troops withdrawal.

Hence, foreign investors' only cogent avenue, to overcome the aforementioned challenges, is to foster a sustainable political capital via a genuine and acculturated corporate social responsibility, and as Abraham Lincoln once said "Public sentiment is everything. With public sentiment, nothing can fail. Without it, nothing can succeed"

Case in point:

According to the terms of certain service contracts, in the absence of the hydrocarbon law, the international oil companies (IOCs) will receive $1.90 for each additional barrel produced, which is then charged with 35 percent tax and 25 percent cut for the state oil partner. Moreover, IOCs must factor in the financial impacts of the oil sector current constraints, for instance:

• Major Oil fields require billions of dollars for rehabilitation and development as result of years of sanctions and wars.
• Current oil workforce is in desperate need of training and know-how.
• The Iraqi federation of Oil Union could be extremely problematic if both the IOCs and the government continue to ignore the Union's demands.
• Oil facilities protection services (FPS) lacks adequate training, equipments, and, most importantly, loyalty.
• Contractually, ministry of oil can ask IOCs to reduce production to either meet Global markets demands (OPEC quotas, for instance) or to avoid systematic bottleneck as result of inadequate infrastructure.

Consequently, in order for IOCs to minimize their capital exposure while safeguarding their bottom line, IOCs should ask the following before committing billions of dollars for years to come:

a) Does the IOC's leadership embody Transcultural competence and strategic insight?

b) What's the IOC’s risk tolerance and price tag it's willing to pay to mitigate the impact of unforeseen externalities associated with the post-conflict environment.

In sum, given international investors and oil companies experiences in high-risk environments, understanding and anticipating policy risks in a politically volatile environment such as Iraq could be a valuable source of a competitive advantage. furthermore, IOCs and investors who adopt business model which entails balanced operational efficiency with sustainable political capital (efficient leverage of trusted relationships) are most likely to survive Iraq's political quagmire for years to come. Conversely, operating impetuously with no apparent understanding of the country's political landmines and nuances could be a costly and dangerous venture with detrimental effects on both humans and capital, and as the renowned American businessman Malcolm Forbes once said "The best vision is insight".

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

Tariq Abdell, founder & chairman, Mesopotamia Insight and Iraq analyst

Can be contacted at: [email protected]

or

Follow him on twitter: www.twitter.com/atariqx

Iraqi oil producer DNO International ASA (DNO.OL) leapt to a 14-month high on Wednesday, following reports that Emirates-based RAK Petroleum may bid for the 70 percent in the Norwegian company it does not already own.

DNO was the first Western company to drill for oil in Iraq following the U.S.-led invasion and although it cannot export due to Iraqi disagreements over how to divide up revenues, it has repeatedly been the subject of takeover talk.

Britain's Daily Telegraph newspaper reported that RAK Petroleum had made an offer to buy DNO shares at 11 crowns per share, citing what it called 'well-placed market sources'.

Trade in DNO shares was suspended after they jumped 7.3 percent to 8.945 crowns. After the resumption, they touched 9.39 crowns -- up 12.7 percent on the day and the highest level since May 2009 -- before dipping to 8.8 crowns by 1500 GMT.

"I will not comment on rumours and speculation," DNO Chief Executive Helge Eide told Reuters in a brief telephone interview.

RAK Petroleum was not available for comment.

The Daily Telegraph said there could be a counter-offer from other companies. DNO's main asset is the Tawke oilfield in Kurdish northern Iraq, a reservoir estimated to hold 220 million barrels of oil.

CHATTER OR INTEREST?

"The chatter doing the rounds is that there is a potential counter bidder from the U.S.," said the UK paper. "Goldman Sachs is said to be advising the mystery suitor, while Enskilda bank is working for DNO International."

Goldman Sachs and SEB Enskilda representatives declined to comment, according to Reuters.

Some analysts questioned the reported bid price at 11 crowns per share, a valuation which priced in more cash flow from Iraqi activities than other foreign oil firms were due to receive.

A takeover attempt by RAK would not be a surprise, however, given increasing interest by the Ras Al Khaimah-registered company in running Oslo-based DNO.

In June, RAK -- the biggest single shareholder in DNO with a 30 percent stake -- gained two seats on DNO's five-strong board, including one for former U.S. ambassador to Iraq and Afghanistan, Zalmay Khalilizad.

Shares in RAK Petroleum are "closely held by public entities and individuals in the United Arab Emirates and Saudi Arabia," the company said on its website. Its business is to "to build an upstream business focused geographically in the Middle East and North Africa through both drilling and strategic acquisitions."

Data from Reuters Trader showed JP Morgan as the buyer of nearly 43 percent of the volume of DNO shares traded on Tuesday.

Nornet, a Nordic online trader for retail investors, was second with over 14 percent of the volume. The biggest sellers were Nomura with 35 percent and UBS at 23 percent.

(Sources: Daily Telegraph, Reuters)

Revenues from oil sales account for 95 percent of Iraq's income, Oil Minister Hussein al-Shahristani said on Tuesday, underlining the war-battered nation's reliance on crude to rebuild its economy.

Shahristani said Iraq raised 171 billion dollars from sales between 2006-2009, which accounted for all but five percent of the government's income during those years.

Shahristani said the following amounts were raised from oil:

• $30bn in 2006;
• $40bn in 2007;
• $60bn in 2008; and,
• $41bn in 2009.

The decline in revenues in 2009 was likely attributed to a fall in global crude prices in the second half of the year.

Iraq produces about 2.5 million barrels per day (bpd) of crude, of which it exports 1.85 million, according to Shahristani.

Last year, Iraq held two auctions of its oil fields for development, the first time foreign energy firms have had the opportunity to plant a foot firmly in the country since its energy sector was nationalised in 1972.

Some 10 deals were agreed at the auctions, and one more signed since will, if fully realised, ramp up Iraq's oil output five-fold to 12 million bpd, putting it on a par with the world's top producer Saudi Arabia.

At 115 billion barrels, Iraq has the world's third-largest proven oil reserves, behind only Saudi Arabia and Iran.

However, there has been little exploration or development of fields in the past three decades because of wars and a UN embargo imposed on Iraq in 1990 following now executed dictator Saddam Hussein's invasion of Kuwait.

(Source: AFP)

After more than 20 years, Saudi Arabia will restore aviation links with Iraq - the first flight from Jeddah to Baghdad will be by the Kingdom's privately owned Alwafeer Air on Thursday.

Alwafeer Air will initially operate a weekly flight from Jeddah to Baghdad and two flights a week from Jeddah to Basra, said Saleh A. Bogary, the airline's marketing director.

Bogary said Alwafeer had been contracted by Saudi Arabian Airlines to operate flights to Iraq following an agreement endorsed by Saudi and Iraqi aviation authorities. "The first flight carrying some 450 passengers will leave King Abdulaziz International Airport (KAIA) on July 15," he said.

"In fact, a test flight landed at Baghdad airport on Sunday ahead of the resumption of full-fledged commercial operations," said Bogary.

Flights between the two countries stopped after Saddam Hussein's invasion of Kuwait in 1990, which sparked the first Gulf War. The attack soured relations and led to the indefinite suspension of air links. Even after Saddam's ouster in 2004, relations remained frosty. The only flights that come to the Kingdom from Iraq at present carry pilgrims for the annual Haj.

Bogary said Alwafeer would have enough passenger load as it would fly Iraqi pilgrims as well as regular passengers.

The first flight to Basra would leave Jeddah on July 25. The airline will operate a Boeing 747, which can carry up to 450 passengers.

"Plans are also afoot to operate a flight to Sulaymaniyah, a governorate of Iraq, in the Kurdistan region," said Bogary.

(Source: Arab News)

Iraq's northern Kurdish region is cracking down on fuel oil smuggling through the area and across Iraq's borders, the government of the semi-autonomous region said on Sunday.

The Kurdish Regional Government (KRG) issued a statement in response to a New York Times story on Friday that said hundreds of millions of dollars worth of crude and refined products were smuggled through the mountains of Iraqi Kurdistan every year.

The sales were blunting the impact of U.S. sanctions on fuel sales passed into law earlier this month that aim to curb supplies to the Islamic Republic, the NYT reported.

The KRG said that the only crude exported from the Kurdish region flowed through the official route, Iraq's northern pipeline to the Turkish Mediterranean terminal of Ceyhan.

Still, smugglers had shipped fuel oil refined outside the Kurdish region over the Kurdish region's borders, according to the statement. Subsidised fuel oil sales elsewhere in Iraq, while designed to support the economy, had created an opportunity for profiteering, the KRG said.

"The KRG is committed to working with the Federal Government to eliminate permanently all such profiteering in fuel oil, not only in the KRG but also along the entirety of Iraq's international borders," the statement said.

Among the measures would be mandatory licensing of all fuel oil tankers entering the Kurdish region, the statement said.

Iraqi Oil Minister Hussain al-Shahristani said only the central government, through the State Oil Marketing Organisation (SOMO), had the right to export Iraqi crude.

"Any other arrangements to export oil to any country is smuggling," Shahristani told reporters at an investment conference in Baghdad. "It's forbidden by Iraqi laws and we will be taking action if we are made aware of it."

Subsidies throughout the region have created opportunities for smuggling, and sources in top oil exporter Saudi Arabia said on Sunday that it was investigating the export of products intended for domestic use.

The Second Fair for Municipalities, Constructions, and Ceramics was opened on Monday, 12th July, in Erbil city.

“The fair will last for one week,” a source from the fair told Aswat al-Iraq news agency on Sunday.

He noted that 259 foreign firms from 10 countries are participating in the fair.

AK News reports that Iran, Turkey, Syria, UAE, Saudi Arabia, France, Jordon, Germany, Bulgaria, Romania and Iraq will all be represented.

The event was organised by Pyramids Company in partnership with the Kurdistan Regional Government (KRG).

(Sources: Aswat al-Iraq, AK News)