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Iraq signed a $365 million agreement to install a pipeline network to import natural gas from Iran for power stations in the country, according to reports from Bloomberg and Iran Independent News Service.

The pipelines will eventually supply 25 million cubic meters of Iranian natural gas a day to the Sadr, al-Quds and South Baghdad power stations in the Iraqi capital, Mosaab Serri, a spokesman for the Iraqi Ministry of Electricity, told Bloomberg by telephone. The agreement with Iran, which holds the world’s second-largest gas reserves, requires the approval of the Iraqi Council of Ministers and Parliament.

The network of 48-inch pipelines will run for 130 km, and will pass the Mansouriya gas field, which is due to supply gas to the two power plants instead of Iran starting 2016, Serri said in a statement on May 22. Kuwait Energy Co., Turkiye Petrolleri AO (TPAO) and Korea Gas (Kogas) secured rights to develop Mansouriya.

Iraq and Iran have also reached an initial agreement to install another pipeline network from the Iranian region of Abadan to Basra in southern Iraq where it will feed a planned 1,250-megawatt power station, Serri said.

(Sources: Bloomberg, Iran Independent News Service)

Levels of violence are rising in Iraq. While some commentators in the press are referring to the increase as a spike, regular readers of Iraq Business News will understand that the rise has actually been very gradual - but consistent - with the number of attacks building up all the way from the beginning of the year. Last week AKE raised the risk rating for the country on Global Intake amid the slowly deteriorating situation and while it is our opinion that Iraq remains a major business opportunity, companies nonetheless need to emphasise the health, safety and security elements of their projects so as to minimise the risk of harm to their staff and assets.

Blame

Groups have not claimed responsibility for the latest string of violence but AKE believes that there is more than one organisation involved. Three of the attacks, including one in Basrah province, involved well planned and co-ordinated attacks using suicide bombers. This is a hallmark of radical Sunni groups such as the Islamic State of Iraq, while the targeting of the government and security forces is also typical of the group. Al-Qaeda affiliated organisations still have intentions of creating their own religious state in the country. While they have been critically weakened over the past four years they remain unwilling to compromise or negotiate with what they see as a corrupt, foreign-backed and apostate government. At the same time, recent attacks in the capital have taken place in areas normally associated with Shi'ah groups, while the prevalence of rocket and mortar attacks also suggests their involvement. Threat groups evidently abound on both sides of the sectarian divide.

Potential Targets

Some of the latest attacks have specifically targeted the places where individuals are supposed to be protected. Military bases, police stations and government compounds have all been targeted. Even normally well-guarded districts such as Jadriyah in Baghdad have been hit. While the Green Zone has not recently been attacked, it may be next on the target list if militant groups want to make an impact on the foreign presence in the country. While it remains well defended against infiltration it is nonetheless still vulnerable to rocket and mortar attacks.

Analysis

There are several possible reasons why conditions have worsened over recent weeks. As mentioned, conditions have been deteriorating gradually since the beginning of the year. Many are frustrated with the government's inability to provide electricity and jobs. Amid the 'Arab Spring' elsewhere in the region, Iraq too has suffered its own unrest, and some of the more radicalised elements of the frustrated population may be turning to militancy to express their dissatisfaction with the government.

The next weekly security update from AKE will show that conditions worsened once again in Iraq last week

The rise in attacks specifically against foreign interests is likely due to a different trend. The US is coming under increasing pressure to withdraw its military from the country by the end of the year. Amid speculation over the possibility of an extension of the Status Of Forces Agreement it could be that radical groups are attempting to send a strong signal to Washington that American forces are not welcome.

Advice

Foreign organisations looking to do business in the country should not be alarmed by what has been a very slow evolving trend in deteriorating security this year. However, safety needs to be treated as paramount when planning trips, meetings, accommodation and projects. Crisis management measures should also be taken into consideration. If you would like any assistance in planning an upcoming visit or you would like any advice in reviewing your current security measures please contact the AKE Iraq office at [email protected]

John Drake is a senior risk consultant with AKE, a British private security firm working in Iraq from before 2003. Further details on the company can be found here while AKE’s intelligence and political risk website Global IntAKE can be accessed here.

You can obtain a free trial of AKE’s intelligence reports here.
You can also follow John Drake on twitter here.

By Chris Bowers, British Consul General in Erbil. This article was originally published by Rudaw, and is re-published with permission by Iraq Business News.

Let me start by asking a question: why is gas less talked about than oil in Iraq? I am not sure why this is the case but it does seem to be true. In fact, the development of Kurdistan’s huge gas reserves is vital to energy security in Kurdistan, Iraq, the region and beyond. I am proud to say that UK energy companies are playing an important role in this.

Kurdistan is blessed twofold on gas: firstly on reserves, and secondly in its proximity to growing markets for that gas; markets that won’t wait. There is a growing and urgent demand for gas-powered electricity in Kurdistan’s neighbouring provinces. Iraqi gas should, of course, first be used to satisfy domestic demand and is great to see KRG reaching out to neighbouring provinces. This is an excellent example of Kurdish and Arab interests coinciding exactly and to the benefit of everyone.

Once domestic demand is sated, the second and growing market is Turkey. Turkey’s booming economy needs a significant amount of extra power every year. Naturally, much of that can be fuelled by Iraqi gas from Kurdistan.

Cementing the recent progress on Turkey-Kurdistan relations through deepened energy co-operation makes obvious strategic and more importantly economic and business sense. Turkey is a great market for Kurdistan and Europe as a whole has an interest in Turkey sustaining its strong economic growth.

But, Europe also has a broad interest in Iraqi gas from Kurdistan. There is a gas shortage in Europe and the gap between supply and demand is likely to increase in the long run. Gas is better for the climate than coal, is less costly initially than most forms of renewable energy and less controversial than nuclear.

Bloomberg reports that Iran has agreed to supply 1.5 million liters a day (9,400 barrels), of gasoil to Iraq over the next 12 months for power generation.

Masaab Serri, spokesman for the Iraqi Electricity Ministry, said in an interview that the fuel will enable power plants to generate 250 megawatts, according to the agreement signed by officials from the neighboring countries in Baghdad. The gasoil will be transported by truck and sold at international prices, he said.

Iraq, holder of the world’s fifth-largest crude reserves, is seeking fuel to meet domestic demand. The nation’s refineries at Doura [Dora, Daura] in Baghdad, in the northern city of Baiji [Bayji], and in the southern region of Basra, have a combined capacity of about 700,000 barrels a day.

In practice, they process less crude than that because of wartime damage and are unable to meet the domestic demand of about 600,000 barrels a day, according to a U.S. Energy Department report.

(Source: Bloomberg)

Lanco Infratech Ltd. (LANCI) of India signed an $81.3 million contract to build a gas-fired, 250-MW power station in western Iraq.

Masaab Serri, an Electricity Ministry spokesman, told Bloomberg that the company is scheduled to build the plant within 16 months in Al-Qaim, in Anbar province in western Iraq, using natural gas from the nearby Akkas field, which the Iraqi government has recently awarded to Korea Gas Corp (KOGAS).

The country sought bids this year to build more than 60 generation plants to add more than 14,000 megawatts to the national grid. Iraq currently produces 7,000 megawatts and imports 1,000 megawatts while domestic demand totals about 14,000 megawatts, Iraqi Electricity Minister Raad Shallal said in April.

(Sources: Dow Jones, Bloomberg)

Iraq’s Prime Minister, Nouri al-Maliki, has said on Sunday that his government can’t solve the country’s electricity supply problems without the help of private investment companies, reports Aswat al-Iraq.

“The government is unable to increase the electric power alone, without the help of investing companies, and we have information that several businessmen wish to invest in the electricity sector,” Maliki told a meeting of the leaders of the Independent Commissions.

He said that “investors have demanded protection by the security forces ... adding that they demanded their supply with power and we gave such promise, demanded fuel and the Oil Ministry’s Undersecretary had given such commitment; but the problem, facing the sector are high prices ... if we allocate all the State budget, it won’t cover the wages of the investing companies.”

Maliki said that over the past 7 years Iraq had paid $10.5 billion [13 trillion Iraqi dinars] to companies investing in electric power sector, to secure an output of 2,500 Megawatts.

(Source: Aswat al-Iraq)

Iraq's core annual inflation rose to 6.3 percent in May from 6.1 percent in April, a senior official at the Central Bank of Iraq told Reuters on Sunday.

The agency reports that the figure is driven by the cost of imported goods and services, especially healthcare.

Inflation had previously risen from 5.5% in February to 5.7% in March due rising electricity prices.

(Sources: Reuters, AKnews)

The exiled former head of the Trade Bank of Iraq (TBI), Hussein Al-Uzri [Hussein al-Azri], has denied allegations of corruption and mis-management in a telephone interview with Reuters.

"It's about control of this bank," the U.S.-educated banker, aged 48, told the news agency in his first media interview since fleeing Iraq. "Having control of the bank gives them control of substantial assets and they can basically utilize it."

For his own security, he did not want to say from which country he was speaking.

A top Maliki aide, cabinet general secretary Ali al-Alaq, has said authorities moved against the bank because its leadership was suspected of violating banking regulations and issuing improperly secured loans. Alaq said the irregular practices had cost the country "millions of dollars."

But Sir Claude Hankes, a British adviser to TBI’s board, has written an open letter to Iraqi President Jalal Talabani saying that the charges are simply a political ploy to give Prime Minister Nouri Al-Malik control of the bank.

The full text of Sir Claude's letter follows:

According to a report from Bloomberg, the $130 million [150 billion Iraqi dinar] contract to build a 500-megawatt power station in central Iraq has been won by the Baghdad Company for Gas Turbines Ltd.

The privately owned company was founded in 1993, and re-registered in 2003.

The company is scheduled to build the natural-gas fired power plant within 18 months in Haidariya in the Najaf region, Electricity Ministry spokesman Masaab Serri told the news agency.

The other five bidders for the project were South Korea's Hyundai Engineering & Construction Co., Metka SA (METTK) of Greece, Turkey's Enka Insaat & Sanayi AS, Lanco Infratech Ltd. (LANCI) of India and one unidentified Jordanian company.

AKnews reports that the plant will consist of four 125 MW turbines.

(Sources: Bloomberg, AKnews, Baghdad Company for Gas Turbines Ltd)

The Iraqi government energy committee decided to cancel plans for the construction of four power plants to boost power-generation capacity by 2,750 megawatts, according to Bloomberg.

The bids were for a 1,250-megawatt plant near Basra, and three 500-megawatt plants in the cities of Samawa, Diwaniya and Amara.

“These proved to be non-profitable for the Electricity Ministry, as the tenders were for building and operating the stations,” Electricity Ministry spokesman Masaab Serri said.

“We are studying the possibility of issuing new tenders just for their construction.”

(Sources: Bloomberg)