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The increase in construction projects in Iraq is considered a positive indicator for Turkey's construction sector in the coming years, according to a report from World Bulletin.

A report by the Undersecretariat of Foreign Trade (Export Development Research Center) said the construction and contracting sectors have entered a rapid growth phase in Iraq.

The report said, "the main infrastructure investments carried out in Iraq focus on water supply projects, waste water treatment plants, electricity power plants, hospitals, school and housing construction, highways, airlines, bridges and port construction."

"Considering the rise in reconstruction, maintenance and construction projects, the amount of investment required is estimated to be around $US100 billion. The market for construction materials, mainly the cement, is envisaged to be dynamic in the coming years," the report said.

The report says that Turkish products are considered a symbol of quality in Iraq.

(Source: World Bulletin)

Within five years, Iraq will turn from an importer of petroleum products into the world’s largest exporter, according to the Oil Ministry’s new investment map, unveiled in Nassiriyah this week.

To achieve this, Iraq has opened the door wide for international companies to build four new refineries and refurbish existing ones in order to boost production of oil products up to 1.5 m barrels a day.

The plan aims not only at transforming Iraq into an exporter of petroleum products but also to build the country’s ability to attract skilled scientific professionals.

"Iraq suffers from the absence of specialised cadre in petrochemical manufacturing," claims Hussein Shahrastani, the Oil Minister. He urged the Iraqi youth to join universities and colleges specialising in subjects relating to the petrochemicals industry, because “the oil industry will secure them good jobs in the future.”

Shahristani says Iraq currently produces 550,000 barrels per day (bpd) of oil products, including 12 million litres of gasoline, 15 million litres of Kerosene Oil, and about 9 million litres of white oil.

The bulk of new projects and the largest of all will be in Nassiriyah province, according to Ahmad al-Shammaa, the Ministry of Oil Undersecretary for Oil Refineries and Industries.

The new refinery will carry the name of the province and its production capacity will reach 300,000bpd, generating 600MW of electricity and having access to ports. The refinery is expected to cost US$8 billion.

Karbala is another major target of the map. Though its refinery will be the smallest built under the new plan, it will be the most important. Its production capacity will be 140,000 bpd, producing 400MW of electricity. Its importance lies in its central location, the centre of consumption and the place where all production will be stored.

Two refineries in Missan and Kirkuk, at a cost of US$500,000 each will produce 500MW and 400MW of electricity and supply Iraq’s northern and southern areas respectively.

With Iraq needing to encourage investors to the country, the Ministry of Oil and the Council of Ministers have decided, according to Thamer al-Ghadban, the chairman of the advisors' commission, to provide international companies with incentives.

These include a 5 percent rebate on world crude oil prices. Elsewhere in The Gulf, the discount is only 1 percent.

Investment companies will be allowed to own projects on their own or partner with local firms and their leases on land are expected to be extended from 40 to 50 renewable years.

"Many Asian countries, especially Korea and China, expressed interest in Iraqi refineries, because they need energy, they import crude oil and they want to improve their refining capacities," said al-Ghadban. “There is a mutual benefit for Iraqis and investors.”

Investment incentives will come also from the National Investment Commission.

“According to the law, the commission will be responsible for issuing investment licenses to companies,” said Sami al-Aaraji, the Commission’s Chairman. "The size of investment in refineries will reach some US $25 billion."

The Commission, says al-Aaraji, will guarantee “freedom to move capital in and out of the country, in addition to tax exemptions,” and make registration easier. Existing, off-putting, procedures have been streamlined under the ‘Single Door’ system.

"This procedure has been adopted because of the many complaints received from investors regarding the complicated procedures," said al-Aaraji.

Shahrastani says the refineries are already at the design stage. Investment proposals are expected by the end of the year, when the design of the Karbala refinery will be complete.

"It is then that international companies will be able to see the quality of facilities we want built, the amount of oil products we want to produce, and the time needed for the completion of the work."

US companies will design the Nassiriyah, Missan and Kirkuk refineries, with an Italian company in charge of Karbala’s design.

For Iraqis, the refineries will bring jobs, lower petroleum prices and better quality products, as well as providing fuel for home generators and wattage to help solve Iraq’s chronic energy shortage.

"Iraq needs a budget capable of improving the very weak infrastructure in the country," said Qasem Jaber, an economist.

“Investment must be increased and that is the Oil Ministry’s responsibility, because it provides about 85-90 percent of Iraq’s GDP. Other sectors are still inactive and they all need oil to start functioning.

"The developments will not take place overnight. The implementation will take up to five years,” Jaber explained.

He urged the government to invest in the country’s existing refineries.

"There is a gap between the production capacity of existing refineries, which is about 800,000 bpd and their actual production of 500,000  bpd.”

The Ministry of Electricity needs approximately 9 million litres of kerosene a day to run its plants. However, the Oil Ministry is only able to supply 4 million litres. The difference is being covered by imports from Kuwait and Iran.

“Any real improvements will only come if that gap is bridged. There is a chance now that the Oil Ministry has taken over energy production since the sacking of Iraq’s Electricity Minister, Kareem Wahid."

Hamza al-Jawahiri, an oil expert, described a change among oil-producing countries from exporting cheaper crude oil to exporting the pricier products of refining, bringing greater benefits to their economies, pointing to the example of Algeria.

"Now, the country is getting so close to exporting oil products instead of exporting crude oil," he said.

Not only does this mean more money coming in for refined petroleum products but it also means more jobs in refineries and service facilities for local workers.

However, al-Jawahiri warned that all the government’s ambitious plans for improving the oil sector must meet international environmental and safety standards.

“Failure to apply international standards in environmental protection and industrial safety are the most alarming risks. The Iraqi government must set strict public safety standards and rules and remain aware of all possible risks.”

(Source:  Niqash)

An advisor to the governor of Diyala revealed on Thursday that the sum of $300 million was “squandered” in payments to Iran for the supply of electricity.

“Iran’s Karmanshah line that supplies Diyala with electric power since 2004 caused the waste of $300 million paid to the Iranians, despite beign a mediocre service that provides the province with 200 megawatts of power while the province’s actual need is up to 500 megawatts,” Rassem Ismail, an advisor on reconstruction and investment affairs, told Aswat al-Iraq news agency.

“The sums paid for the Iranian side ever since the project commenced were enough to build 10 power stations at a total capacity of 2250 megawatts,” he added.

(Source: Aswat al-Iraq)

Iraq's cabinet has approved a multi-billion dollar deal with Royal Dutch Shell and Japan's Mitsubishi Corp. The deal, signed on Tuesday, will provide much needed electricity from natural gas that is currently being burned off.

The State-owned South Gas and Basra Gas companies in southern Iraq will take a 51 percent stake in the contract, with Shell taking 44 percent, and Mitsubishi taking a 5 percent share.

Lacking the technology needed to capture the gas for power generation, Iraq produces a negligible quantity of gas compared with the size of its reserves, and currently flares off most of what is produced as a by-product of its crude oil production.

The joint deal with Shell and Mitsubishi will exploit gas in the Rumaila, Zubair, West Qurna and Majnoon fields near Basra.

At the time said the deal was first proposed in 2008, the government expected it to be worth around $4bn, but no specific financial figures were given on Tuesday.

As we reported recently, Iraq has invited international energy firms to submit bids in an auction for three gas fields, in a third major tender aimed at developing the war-torn state's oil and gas sectors.

Existing power plants in Iraq have proved incapable of generating sufficient electricity to meet peak summer demand, forcing draconian rationing that sees consumers receive supply for one hour in five, or less.

Iraq's LNG reserves are estimated at 110 trillion cubic feet.

(Sources: AFP, WSJ)

The managing director of the Telecommunication Company of Iran in Kurdestan province, Mohammad Saeed Ahmadi, told Fars News Agency that his company was ready to help upgrade the telecommunication infrastructure and fiber-optic systems in Iraq's northern regions.

"In addition to fiber-optic projects, we have the ability to undertake all kinds of telecom activities in the region," he said.

He was speaking on the sidelines of an exhibition of Iranian companies' capabilities in the northern Iraqi city of Sulamaniya.

Ahmadi said Iranian companies have the technical know-how to carry out complex telecom projects overseas. "We will start our work whenever authorities of Iraq's northern region voice their readiness."

Referring to TCI successes inside the country in recent years, he said "We have announced our ability and willingness" to help share the experience with the Iraqis and rebuild their telecom infrastructure.

More than 185 companies from 21 Iranian provinces participated in the exhibition displaying Iran's capabilities in the Iraqi Kurdish city.

As we reported last week, Iran said it is ready to export electricity to Iraq.

"We have the possibility of supplying 500 to 1,000 megawatt of electricity to the Bashmakh market in Iraq," head of the Power Distribution Company of Iran's Kurdestan province Mohammad Mostafa Najafian said.

(Source: Iran Daily)

National Overview

There were 105 incidents reported nationally between 20 – 26 June showing a small decrease in the level of incidents from the previous week when 123 were officially reported. The number of Explosively Formed Projectiles used in that period dropped from eight to two, both of which occurred in Basra, targeting a Private Security Company and a United States Forces – Iraq patrol. In the review period, the north central region saw the most reported incidents, increasing slightly from 37 to 40.

Iraqi Security Forces continue to develop despite the partial funding freeze imposed on security spending by the Ministry of Finance. Key challenges include the constrained Iraqi government budget; poor planning and procurement capacity and limited ministerial transparency and capability. Iraqi Security Forces do not show any signs of fracturing along ethnic or sectarian lines and continue to make progress in diversifying the composition of units.

An ongoing concern is the attempted disarmament of the Sons of Iraq militias (the Concerned Local Citizens). This issue is thought to be a serious risk to local security conditions in some parts of Baghdad, eastern Anbar, Babil, plus the provinces immediately north of Baghdad (Diyala and Salah al-Din). Though not a widespread phenomenon yet, there is potential for anti-government resistance to disarmament and a resultant shift of sympathies by Sunni militiamen back to anti-government forces.

Elections Overview

When the new Iraqi parliament convened for the first time on 14 June, the session was left open in an attempt to procedurally stall the process of government formation. The move was choreographed by the core of the emergent “unity government” – Prime Minister Maliki’s bloc, the pan-Shiite Iraqi National Alliance and the Kurds.

The delay will provide these factions with more time to complete their negotiations regarding the prime ministerial position and the dispensation of ministerial portfolios. This gambit worked in 2006, when the opening session of parliament lasted for 60 days. When the session finally closed in May 2006, most of the issues had been agreed and the other milestones on the government formation track were met in quick succession. This is probably how the process will unfold this year as well. It may be difficult to complete all negotiations before the start of Ramadan around 11 August, making it possible that there will be no government before the time Ramadan ends in mid-September.

Prime Minister Maliki continues to seek re-nomination for the premiership through his Shia allies and the Kurds. His ostensible allies, the Iraqi National Alliance, continue to seek to unseat him and replace him with Iraqi National Alliance politician Adel Abd’al-Mahdi. Maliki’s strategy is to point to his cohesive bloc of 89 State of Law list members and his very high personal voting tally to highlight his credentials, whilst using his remaining time in government to offer inducements to potential allies and to string out the government formation process to outlast his adversaries.

Iyad Allawi’s Iraqiyya movement appears to be fragmenting and weakening, with elements entering into dialogue with Maliki and the Iraqi National Alliance over ministerial positions. Iraqiyya negotiators have agreed to participate in a “national partnership government.” Allawi’s group are unlikely to be an “insider” partner in the government, and will instead be splintered, with some elements falling outside the government and others given ministerial positions to buy them off.

On 29 June, Prime Minister Maliki and former Prime Minister Allawi met for a second time, though no further information was forthcoming as to the progress on the formation of the next government. It is in both parties interest to seek cooperation; for Maliki it could win back the confidence of the Sunni electorate thus giving his unity government more credence and for Allawi it could offer him proper inclusion in the government through the designation of key roles for him and other key Iraqiya members. However, the testing relationship between the two leaders could jeopardise any future deals.

Baghdad

The Islamic State of Iraq, an Iraqi offshoot of Al Qaeda, has claimed responsibility for the simultaneous double Vehicle Borne Improvised Explosive Device outside the Trade Bank of Iraq in the Mansur district. Open sources quoted a spokesman for the group mocking the weak security surrounding the area, suggesting that the bank was targeted in order to de-legitimise the government by demonstrating its inability to protect or maintain core services. A similar motive can be observed in recent attacks on electricity infrastructure across Iraq. The bank’s association with efforts to attract foreign investment are also thought made it an appealing target for insurgents who are vehemently opposed to such endeavours.

At Camp Taji the threat levels for kidnapping and Indirect Fire remained high in accordance with reports of insurgent movements near Taji. On 26 June an Indirect Fire Attack using 107mm rockets impacted four times on the base though no casualties were reported. The Iraqi Army Quick Response Force recovered four 107mm rockets and nine Improvised Rocket Launchers at the launching site south east from Taji.

No attacks were reported against Private Security Details and Route Irish and the International Zone and Baghdad airport did not witness any incidents. There were no officially recorded EFP attacks in the capital (although there was an ineffective Explosively Formed Projectile attack against USFI in the Abu Ghraib area).

Basra Province

There were two attacks against United States Forces Iraq patrols, the first took place on 24 June on Route Topeka, the second on 25 June when an Explosively Formed Projectile was used in the north of the city; this is only the second Explosively Formed Projectile attack in the city this year.

Local nationals continued to demonstrate against the government following on from last week’s protest about the dire lack of electricity. Security operations in the City were stepped up and the demonstrations passed without incident. These rallies could continue into next week, though they are likely to die down now that the resignation of the Electricity Minister, Karim Wahid, has been accepted.

Local reporting has stated that the Sadrist militia, the Mahdi Army, have been attempting to bring people onto the streets in protest against the government, although their efforts are proving unsuccessful at present. This move by the Sadrist militia is likely to be part of the wider political strategy to undermine Prime Minister Maliki and force him to stand aside.

US Forces and Iraq Security Forces and their associates will continue to be targeted by insurgent elements with Improvised Explosive Devices and Explosively Formed Projectile attacks on Main Supply Routes and Indirect Fire attacks against the Basra Contingency Operating Base.

Basra's governor has announced projects totalling more than 50 billion Iraqi dinars ($42m), according to a report from AK News.

"Many projects will be implemented and financed from Basra's budget at a cost of more than 50 billion Iraqi dinars. The first project is to establish an industrial city for 40 billion dinars that includes industrial parks of various sizes," Shiltagh Abboud said.

"The other main project is an irrigation project that starts from Kuteiban river at the Iranian border and then to the Faw; the value of this project is more than ten billion Iraqi dinars. There is another project that is importing 200 electricity generators from an Iraqi company in Diyala province."

About his recent visit to Amman and London, Shiltagh Abboud said that he "arranged with the mayor of London for a British and Jordanian delegation to visit Basra in late June to discuss investment opportunities.

AAIB View

William Wakeham, Managing Director of A.A.I.B. Insurance Brokers, a specialist company focusing on Iraq, comments: The building of an industrial city for 40 billion dinars illustrates the progressive vision of the local politicians in furthering support for the business sector and raising growth and development activity.

The role of industrial cities (and special economic zones) in assisting economic development is a widespread practice in the Middle East and elsewhere. The aspirations helping to drive the creation of industrial cities, besides the net financial results, include economic regeneration, better social cohesion, an enlarged, skilled labour force and greater political engagement.

It will be interesting to see further details of the Basra project in terms of the size and zoning of the city, what basic infrastructure will be put in place, the sorts of services, products and businesses that the city will seek to attract, and what sorts of financial and non financial incentives may be offered to companies setting up there.

These may include specialist business advice, streamlined licensing and permit procedures, tax incentives and free use of property for certain periods. Preferential treatment for private investors can be an important factor in the level of success achieved. Also, we also need to be mindful of how overall economic development policies and procedures, stemming from the central government in Baghdad may help to shape the industrial city.

A major campaign kicked off in Basra on Sunday to clamp down on the theft of electricity from the grid.

Basra police chief Maj. Gen. Adel Dahham, speaking in a statement to "Eye Media" on the role of security services, said "military and police forces worked with the electricity departments in a campaign to stop abuse of the power network. Illegal wires tapping into the national system were removed in the areas of Ma'qal and the outskirts of Jiblah. The campaign is continuing in the area of Jumhoriya."

(Source: Eye media company)

The Basra Provincial Council has allocated an additional ID300 billion [$250m] to rehabilitate the power network in Basra. “This is a temporary and quick solution for the power problem in Basra,” the council’s head told Aswat al-Iraq news agency on Wednesday. He noted that agreements have been obtained to construct four new gas-driven power stations in Basra, each with a capacity of 500 MW. “Basra needs 1,200 MW,” the source stressed. He pointed out that all the four new power stations will be devoted to Basra exclusively

A spokesperson from AAIB Insurance Brokers, a company specialising in Iraq commented, “this move shows that the authorities are fully aware of the dangers stemming from insufficient supplies of electricity and that they are taking actions to address the root issues. Within Iraq we can expect to see this spend to be followed by more, larger budget allocations targeted at the power sector as part of a strategic response to the current challenges faced.

The issues of power shortages have been well documented. We know that insufficient power supplies can help foster civil unrest, hamper economic activity and necessitate costing imports to help meet the demand.

The insurance market is able to support construction and engineering projects of this type, but the number of companies willing to do this is limited. We have found that providing the right risk level of detail when approaching insurers, such as project specification and cost, project schedule, contract wordings etc helps us to obtain the types of insurance needed and enable coverage of Contract Works, Machinery, Plant etc plus cover for various liability exposures.

(Source: IRNA)

IRNA, the Iranian news agency, reports that the Islamic Republic of Iran is willing to supply electricity to northern Iraq.

The managing director of Kurdistan's electricity department said the Iranian electricity distribution company will supply electricity to the Iraqi national grid at the border town of Bashmag, in northern Iraq.

"According to an agreement inked between the two sides, the Iranian company will supply 500 to 1,000 kw of electricity to the Iraqi national grid at Bashmaq," Mohammad Mostafa Najafian said.

Bashmaq is a border point between Iran's Kurdestan province and Iraqi Sulaimaniyah.