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The head of the investment and strategy committee of Dhi Qar provincial council, Ahmad Taha, announced that a new round of investment licenses will be awarded soon to foreign and Arab firms.

The licensing round will include waste recycling, environment, electricity and gas stations projects.

Al SumariaTV also reported that "oil refineries will be established as well in the province".

(Source: Al SumariaTV)

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The Iraqi Industry Ministry has ordered its factories to work on generating electricity required for production, to minimize the load on the national electricity network. The ministry noted that power shortage is causing losses to its factories.

“The ministry has issued contracts to purchase large generators for this purpose,” the ministry said in a press release on Tuesday, as received by Aswat al-Iraq news agency.

Meanwhile, the Basra Provincial Council has approved an investment project with an international firm that will supply the al-Faw district with electricity. That project should be completed within 30 days.

In Kirkuk, Siemens is providing a 260MW generator to the electro-gas station in Taza area, according to AK News. The project is expected to take 18 months.

The Tuz Khurmatu electro-gas station in Kirkuk will also be upgraded by Siemens, with two new units producing 256MW and 65MW.

(Sources: Aswat al-Iraq, AK News)

AAIB View:

A spokesperson from A.A.I.B. Insurance Brokers commented: The fact that the Iraqi Industry Minister has needed to issue this sort of statement shows that industrial output is being impacted and further stresses the need to improve matters as the lack of sufficient output from the National Grid acts as a brake on industrial production.

Various estimates have appeared in the media as to how demand for electricity in Iraq may grow, ranging from five to fifteen percent per annum. As the economy recovers, industry expands and domestic consumption increases, more demands will be made on the electricity sector.

Work to reform, repair and improve the electricity sector has been underway for some years; however the Governments aggressive plan to invest heavily in new power generation and distribution capacity over the next five years is a clear sign of the importance placed on this subject, nationally and at a governorate level. We have seen a number of announcements from Government officials relating to contracts and projects for the construction of new power infrastructure, or to the refurbishment of existing power plants and bearing in mind the lead times for bringing extra capacity into production, many are hoping for early implementation of these projects.

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The government has given the green light to Iraqi provincial authorities to invest in power plants.

The move comes amid reports that the central government has almost given up hope of revamping the national grid on its own.

The move is also part of the government’s new policy to grant provincial authorities and private entrepreneurs a bigger say in the ailing power sector.

Previously, the provinces were only permitted to set up local power plants with a capacity not exceeding 30 megawatts. This condition has been removed, according to Faid al-Shamari, head of Najaf’s provincial council.

Shamari described the government’s decision as positive since it removes restrictions on investing in electricity by Iraqi provinces.

He said the Province of Najaf needed up to 600 megawatts while its share from the national grid is only 180 megawatts.

He said Najaf’s provincial council will make the best use of the new regulations and will give the building of new power plants in the province top priority.

Investments in electricity must come from provincial coffers, but Shamari said private investors, both Iraqi and foreign, were interested.

Granting private entrepreneurs a bigger say in the national grid follows bloody demonstrations protesting power shortages in several major cities in Iraq.

(Source: Azzaman)

(Image: Bayji Power Plant)

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Iraq's Prime Minister, Nouri al-Maliki, called for the development of economic and trade relations with South Korea, according to a statement of his office on Monday.

“On Monday (July 19) Al-Maliki held a meeting with a delegation of South Korean companies, Ambassador Su B. Park, and Head of the National Investment Commission Sami al-Aaraji,” said the statement received by Aswat al-Iraq news agency.

“The premier underlined the Iraqi government’s keenness to develop relations with South Korea, especially in economic and trade fields,” the statement added.

The South Korean ambassador expressed the wish that his country would play a bigger role in Iraq’s housing, oil, energy and electricity sectors.

(Source: Aswat al-Iraq)

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U.S. firms are welcome to invest in the oil-rich province of Kirkuk, an official statement said.

The statement, issued following a visit by some U.S. business representatives, said there were good investment opportunities in the province particularly in oil development, electricity and the refining of crude oil.

The province, of which the city of Kirkuk, one of Iraq’s largest oil centers is the capital, is still restive due to rivalries over its oil fields between various Iraqi ethnic groups.

Kurdish claims over the province are being disputed by Arabs and Turkmen, an Iraqi ethnic Turkish group which makes up a sizeable portion of Kirkuk’s population.

The statement said the U.S. representatives held meetings with provincial officials and visited several sites in the province.

The U.S. business leaders outlined the areas they are interested in, the statement said.

It said the provincial officials told U.S. investors  that some projects were urgent in order to upgrade public utilities, housing  and the service sector.

“We are planning to construct a large refinery and a large airport as well as power plants,” the statement said.

(Source: AK News)

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Scaffolding is creeping up the walls of bullet-scarred villas across rubble-strewn Baghdad, and gangs of labourers are piling up bricks as growing security allows a mini-construction boom to take hold in Iraq, according to a report from Reuters.

It may be the leading edge of a building surge as work now limited to a few hundred villas makes way for mega-projects when Iraq starts to restore its infrastructure and housing stock, left in tatters by decades of war, sanctions and neglect.

The Iraqi authorities want to build on a massive scale -- 1 million new housing units in three years. In a single project, plans call for 75,000 units in Baghdad's Sadr City slum. Gulf companies are bidding for many of the projects.

"The local production of construction materials will not be enough for such big projects," said Abdul Rahman al-Mashhadani, an economist at al-Mustansiriya University, who believes a government estimate that Iraq needs more than 3 million housing units is too low.

Iraq's infrastructure needs are daunting, more than seven years after the U.S.-led invasion that toppled Saddam Hussein. Roads, railways, the electricity grid, ports, housing and factories must be rebuilt.

The National Investment Commission has put together a wish list of 750 projects that alone require $600 billion.

That could be good news for early foreign investors such as French cement maker Lafarge(LAFP.PA), which has braved continuing insurgent attacks and political uncertainty to invest in Iraq's construction materials sector.

But it could be bad news for inflation, and for Iraqi consumers, as prices of bricks, cement and plaster, which have tumbled, are pushed higher by soaring demand.

For now, dramatic gains in the last three years after the sectarian slaughter that followed the 2003 ouster of Saddam have allowed Iraqis to renovate decrepit villas or start new ones. Rising government wages have fuelled the boom.

"It feels like a baby or a tree growing before your eyes ..." said Kadhum Jawad, 37, an engineer, as he waited for a cement truck to arrive at a plot in Baghdad where he, his brother and his sister are building a new 150 square metre home.

PRICES, ONCE HIGH, HAVE TUMBLED

In the latter days of Saddam's 1979 to 2003 rule, as the economy tanked under the weight of sanctions and the cost of war, only wealthy families and high-paid officials could afford to build new houses or renovate a home.

The materials market was controlled by a state-run company, and while prices were subsidised, they remained beyond the reach of most homeowners. Ordinary government workers earned the equivalent of around $2.50 a month.

But the price of bricks has tumbled from two years ago, when the cost of waste oil used by brick factories was sky-high and fighting between majority Shi'ites and once dominant Sunnis meant many plants remained shuttered.

Prices of cement, sand, plaster and reinforcing steel used to strengthen walls are also down as old factories reopen, new ones are set up and more importers enter the market.

Materials now flow in from abroad. Importing cement from Pakistan, reinforcing steel from Ukraine and wooden doors from southeast Asia helps keep prices low.

As a result teachers, police officers and other wage earners are tackling home renovations.

"It was a dream for me to sell to a teacher or a government employee. They couldn't afford (these things). I used to sell them used bathroom sets and faucets," said Abu Karrar, a shop owner who sells mostly Turkish and Iranian products.

"Iraqis didn't know what a Jacuzzi or a shower cubicle was."

A tonne of reinforcing steel that sold for $1,270 in 2008 now costs $720, a three-tonne truckload of sand that went for $508 now costs $381 and a tonne of cement has fallen from $200 to $150, said one local trader.

France's Lafarge, the world's largest cement maker, is one company that will benefit from the coming boom.

It already has cement plants in northern Iraq's semi-autonomous and relatively stable Kurdish region and recently launched a $200-million renovation of an Iraqi cement plant near Kerbala in the south to boost production.

Imports will likely be needed nonetheless to meet demand.

"Our cement factories don't cover a quarter of the market's needs," said Abu Baqir, a Baghdad supplier whose plot of land is lined with piles of bags of imported and local cement, sand, stones, and brick.

Iraqis building a home have an increasingly impressive array of choices, not only of basic materials but also of luxuries like decorative tiles, Jacuzzis and shower enclosures.

"Iraqis are dazzled by the different types of ceramics and tiles they have seen since the fall of the regime," said Amer Ali, 47, a government worker building a home.

(Source: Reuters)

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A Dutch firm has proposed an electricity investment project to local authorities in Basra province, southern Iraq.

“The proposal includes the construction of a new power stations in Basra,” the province’s Governor, Shaltagh Aboud al-Mayiah, told Aswat al-Iraq news agency on Wednesday.

He noted that the local authorities in Basra allocate greater importance to electricity sector, because it contributes to all other activities in the province.

“We are looking for quality, speed, and ability to execute projects within conditions put by Electricity Ministry,” al-Mayiah added.

Meanwhile, Aswat al-Iraq also reports that an American company is keen to tackle the electricity crisis in Basra through an investment project to set up small- and medium-sized electricity generating plants within four months, according to a media source.

“A delegation from the company discussed the possibility of buikding electricity plants to deal with the crisis in the province with Basra's Governor,” the source told Aswat al-Iraq news agency.

“The company seeks to establish small and medium electricity generating plants with a capacity between 1-100 Megawatt within four months,” he added.

(Source: Aswat al-Iraq)

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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

The Iraqi Electricity Ministry is seeking to increase electricity production to 10,000 MW during the next 3 years," the Director of the Planning & Studies Department at the Electricity Ministry said on Monday.

"The Ministry has developed a plan parallel to the Investment Plan and presented it to investors in the electricity sector to implement projects that will increase the electricity production to 10 thousand MW during the next 3 years," Qusay Abdul-Sattar said.

"Iraq needs foreign expertise to implement its plans ... the country will have a stable electricity supply by 2013, when its production capacity will reach approximately 12,000 MW, and this what Iraq effectively needs," Abdul Sattar said.

(Source: AK News)

"The queues at gas stations in Baghdad were the result of the shortage of electricity and the high temperatures," the spokesman of the Iraqi Oil ministry said today.

"The high temperatures prompted citizens to store petrol for their home generators," Assim Jihad said.

"The Ministry is regularly providing the stations with fuel and gasoline," he added, noting that "the owners of the stations were told to increase their working hours at night."

"If the production of oil derivatives was compared to that of last year, we notice an increase of (20-40%) in the production, and the Ministry is now working on gasoline production which is between 15 to 18 million liters per day," he said.

The Iraqi Oil Ministry allowed foreign and Arab investors to develop the oil fields through the three licensing rounds in 2009 and 2010, in a move that aims to raise the country's exports of crude oil to seven million barrels per day during the next six years.

(Source: AK News)