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Iran has agreed to ship 1.5 million liters of fuel to breathe life into some Iraqi power plants made idle due to fuel shortages.

The agreement was struck during a visit by a high level Iraqi delegation to Tehran, a statement by the Ministry of Electricity said.

The agreement comes as power outages have worsened recently with major cities and provinces going without electricity for up to 20 hours a day.

All promises of regularizing power supply have come to nothing.

Billions of dollars have been poured into the sector, but supply has yet to reach what was available prior to the 2003-U.S. invasion.

How much the Iranians are going to reap from their fuel shipments to Iraq is not known but Tehran expects the value of its Iraq-bound exports to hit $8 billion this year.

The ministry blames fuel shortages, maintenance and lack of security for the outages.

The statement said power output could reach 8 500 megawatts. It is far beyond the pre-war level, but the ministry is known to have rarely met its own predictions.

( Azzaman )

Iraq is set to call for bids from energy firms to develop its gas fields, the oil ministry said on Wednesday, as the war-ravaged country seeks new revenue sources to rebuild its battered economy.

"The ministry will announce tomorrow (Thursday) the launch of a tender to develop gas fields and it will invite international companies to participate," ministry spokesman Assem Jihad said.

"The product of these fields will initially be used to supply electricity stations and for other domestic needs, with the rest to be exported. The ministry hopes that Iraq will reach the level of other gas producers in the region."

Iraq produces a negligible quantity of gas compared with the size of its reserves, and currently flares off most of what it produces.

A report last month in the Middle East Economic Survey (MEES), a regional oil and gas newsletter, said Iraq will offer three gas fields with more than 7.5 trillion cubic feet (tcf/210 billion cubic metres) of combined proven non-associated, or free gas reserves.

They are the 4.5 tcf (trillion cubic feet) Akkaz field in the western province of Anbar, the Mansuriya field in Diyala with three tcf and Sibba field in Basra with 60 billion cubic feet, MEES said, adding that 15 firms have been pre-qualified and invitations will be issued soon.

Akkaz and Mansuriya were offered in a round of bidding on oil fields last June but were not awarded.

French oil giant Total has already said it would "definitely" participate in the gas bid round.

Last year, Iraq awarded international oil majors contracts to develop 10 large oil fields in an attempt to ramp up its crude production capacity to 12 million barrels per day by 2017, from around 2.5 million bpd.

Iraq is highly dependent on crude exports for its government revenues, with 85 percent of its income coming from oil sales.

It has launched a major programme to build gas-fired power stations in an effort to triple electricity supply nationwide by 2014, according to the planning ministry.

As part of the expansion plan, the government has signed contracts worth more than five billion dollars with General Electric and Siemens.

( AFP )

A new electricity substation has been opened on Monday in northern Kirkuk city.

“The substation is French made, 33 x 11 KV, with a capacity of 31.5 Mwatt,” a provincial media source told Aswat al-Iraq news agency.

He noted that the total cost of the project was ID4.450 billion.

( Aswat Al Iraq )

Engineer Zeead Ali, electricity commission chairman in Basrah council, confirmed that the Provincial Council will not stand still regarding central intervention to assert national control  and the deprivation of citizens from a fair share of electrical power.

Zeead told Eye Media reporter "The council will take steps concerning workers of electricity departments who overburdened the Iraqi citizen."

He also pointed out that "The council is going to demand Basrah's full share of power, in addition to its stability."

( Eye media company )

A US construction team expected Iraq electricity production to increase to 22000 megawatt by 2014.

Iraq currently needs 9500 megawatt, the same source said adding that by 2016 Iraq would be able to export electricity.

( Al SumariaTV )

The Iraqi Council of Ministers agreed to pay the cost of purchasing 10 electricity transformers for Basra province.

“Each transformer is 400 KVA,” Dr. Ali al-Dabbagh said in a release on Sunday received by Aswat al-Iraq news agency.

He explained that Iraqi Prime Minister Nouri al-Maliki promised to pay for the transformers during his visit to Basra in 2008.

( Aswat Al Iraq )

Iraq has asked Iran to continue supplying it with electricity in the future, according to an official statement reported by Azzaman.

Electricity Minster Kareem Wahid held talks with the Iranian ambassador in Baghdad in the hope that Iran would agree to renew a contract regulating the purchase by Iraq of 350 megawatts from neighboring Iran, the statement added.

Iranian electricity is essential for Iraqi towns bordering Iran, particularly in the provinces of Diyala and Basra.

The existing contract is due to expire soon. The statement by the Electricity Ministry did not say how much Iraq pays for the electricity it imports from Iran.

The statement said Wahid also discussed with the Iranian envoy progress regarding the implementation of other bilateral agreements.

These include new Iranian ventures manufacturing electrical appliances in Iraq, as well as the building of new power plants in the south of the country.

(Source: Azzaman )

The Wassit council has allocated 216 donums to set up a gas power station, chairman of the Wassit council said on Tuesday.

“The council decided during its session on Tuesday (April 20) to allocate 216 donums to implement a gas power station project as it represents one of the strategic projects, which is included within the electricity ministry’s plan of 2008,” Mahmoud Mulla Talal told Aswat al-Iraq news agency.

“The decision was approved unanimously in accordance with the Article 122 of the Iraqi constitution,” he added.

( Aswat Al Iraq )

20 April 2010 - Azzaman

The municipal council of the southern Iraqi province of Basra has approved 25 power projects worth $32 million.
 
“The projects will improve the supply of electricity in the province,” Ziyad Fadhil, head of the electricity committee in the council said.
 
He said the projects cover “the three sectors involved in the production, transfer and distribution of electricity.”
 
Part of the money will be used boost the generating capacity of al-Hartha Power Plant, he said.
 
The plant is about 20 km north of Basra city, the provincial capital. The 800-megawatt thermal plant was first commissioned in 1979.
 
With four generation units, the plant is one of the largest in Iraq.
 
It is not clear whether the plant, which was bombed during the 1980-1988 Iraq-Iran War, the first Gulf war and looted shortly after the 2003-U.S. invasion, is still running at full capacity.
 
Basra, like other major Iraqi towns, still goes without electricity for the largest part of the day.
 
The rest of the money will be spent on power lines, transformers and new stations, Fadhil said.

(Source:  Petroleumworld.com)

Iraq Prepares New Gas Field Licensing, Cuts Oilfield Signatory Bonuses Retroactively

Iraq's Oil Ministry has released plans to tender three gas fields—previously part of the first and second licensing rounds—to 15 invited companies and has named Shell, Total, and KOGAS as frontrunners, while also confirming that signatory bonuses for the renegotiated West Qurna-1 and Zubair oilfields have been slashed.

IHS Global Insight Perspective

Significance

Iraq will invite 15 oil companies to bid for the Akkas, Siba, and Mansuriya gas fields later this year, and has already named Shell, Total and KOGAS as preferred bidders at this stage, while the ExxonMobil/Shell West Qurna-1 oilfield project and the Eni-led Zubair development are seeing their signatory bonuses slashed significantly now that the election has passed.

Implications

Oil companies said that Iraq's financial terms were significantly improved as contracts from the first licensing round were renegotiated in late 2009 and the second (more successful) licensing round was drawing near, although full details of the improvements have remained elusive. Meanwhile, Iraq needs to get some core gas fields onstream, mainly to raise north and central gas feedstock availability for power generation—but pronouncing frontrunners before the tender might prove controversial.

Outlook

As IHS Global Insight has previously written, lower signatory bonuses—reducing upfront risk exposure—were understood to be under discussion early on in the contract renegotiations at West Qurna-1 and Zubair, although too politically risky to present in Iraq before the election as the government was loath to appear to be giving in to corporate interests.

Gas Trio Re-Offered

Fifteen oil companies—expected to be mainly among the companies that pre-qualified for Iraq's first and second licensing rounds—will be invited to bid for three strategic gas fields in Iraq. The Akkas and Mansuriya gas fields were initially offered as part of Iraq's first licensing round in mid-2009, but failed to be awarded, while the Siba field was initially to be offered as part of the late 2009 second licensing round, but was removed as that round's focus changed somewhat under political pressure to encompass more border-area fields in the north and east.

The Akkas field has been thought for a long time to be the closest to development, with large expectations in 2007 and 2008 that the field would be offered to bidders on a singular project basis, given its relatively fast development and export revenue-generating potential. The Akkas field is located in Western Iraq, on the border with Syria, and has always been seen primarily as an export field, given the proximity to Syrian gas pipelines on the other side of the border and the expense of reaching Iraq's domestic market through the construction of a pipeline traversing the Western Desert into central Iraq. In the 1990s and early 2000s Total and Shell expressed interest in the field, but a consortium of Italy's Edison, Malaysia's Petronas, China's CNPC, KOGAS, and Turkey's state-owned TPAO was the only bidder for the field in the first licensing round, which thus failed to meet the government's maximum remuneration level.

The Siba field has previously been eyed by Kuwait as a source of imports, but after having initially sounded optimistic about a bilateral deal in the post-2003 war environment, the Iraqi government earmarked the field for domestic supplies. Mansuriya in the north could, in theory, be interesting for potential future gas exports across Turkey on to Europe—currently being prepared from some gas fields in Iraqi Kurdistan under the leadership of Dana Gas, OMV and MOL—but domestic demands for gas feedstock for Iraq's power generation, as the rebuilding of the electricity sector gathers pace, are likely to make exports from Mansuriya a relatively distant prospect for now.

Jumping the Gun

In a staggering pre-judgement of any competitive bidding, Sabah Abdul Kadhim, legal and commercial chief of the Oil Ministry's Petroleum Contracts and Licensing Directorate (PCLD) told Reuters that "we are keen to select international companies with experience with gas and which have gas projects across the world", adding however that "Shell, Total and KOGAS will be at the top of the list because they have good experience in the gas industry and gas operations worldwide". Thus jumping the gun, Kadhim might find himself the centre of criticism, as any suggestions that Iraqi contracts have not been completely competitively awarded (for example, at Shell's South Gas Project) have drawn significant—and often damaging—disapproval. Currently the attempts and negotiations to form a new Iraqi government in the aftermath of the March elections mean that the focus is elsewhere, but the politicisation of the oil industry is likely to return as a new government settles in—and with it attempts by parliamentarians to gain influence over oil policies and supervise the privatisation process. Being mentioned as a frontrunner by one of the licensing round's organisers before it has even started is thus probably not a blessing at all for the companies and could well backfire if they do indeed secure any contracts.

Cutting Bonuses

Meanwhile, Reuters is reporting that Iraq's Oil Ministry has also agreed to slash signatory soft-loan bonuses on two of the flagship projects significantly, albeit turning the remaining sums into unrecoverable payments. The long-term soft loan initially required will be cut from US$400 million at ExxonMobil's and Shell's West Qurna-1 project, to US$100 million, while the US$300-million soft-loan signatory bonus to be paid by the Eni-led consortium developing Zubair also will be cut to US$100 million—in both cases being changed into a straight non-refundable signatory bonus, according to Kadhim.

The contracts for the deals in question were signed in January and renegotiated (both mega-fields were initially unsuccessfully offered in the first licensing round) during the latter part of 2009, indicating that there has been an understanding regarding this term improvement since before the definitive signing. As oil companies came back to the Oil Ministry and renegotiated some of their failed first-round bids just ahead of the second licensing round, oil executives indicated that Iraq had relented on its excessively tight terms and helped forge compromises that made the contracts more attractive. Iraqi Oil Ministry personnel and Oil Minister Hussein al-Shahristani, however, maintained that Iraq had not eased terms in any material way, fearing a domestic political backlash ahead of the March elections if the Iraqi government was to be seen as going to oil companies cap in hand and caving in to their economic demands. While little since then has emerged on exactly what had made the contracts significantly more attractive—apart from certain changes to how taxes were applied—rumours of the signatory bonuses being cut prevailed.

Outlook and Implications

The signatory bonuses were always relatively unpopular, demanding that the companies pay large sums upfront at a time when political risk and legal uncertainty ahead of the 2010 elections still loomed large and the fear of political parties winning and later changing or scrapping the contracts as completely illegal could not be ruled out. Hence scrapping them, or lowering them significantly, was always going to have a huge impact on the companies' risk exposure as they approached the planning and waiting time between the early 2010 signings of their contracts and the deadline for full deployment, some time after the likely installation of a new government. For the Iraqi government and Oil Ministry political considerations were always at the heart of their financial negotiations, and the need for secrecy surrounding the concessions that would make deals possible were always clear—and impressed upon their counterparties.

Iraq's gas plans show that the Oil Ministry now is moving forwards with its attempts to tie up some of the remaining loose ends from its first and second licensing rounds. Iraq will need to raise its gas production fast in order to meet domestic demand from its electricity sector as it is rebuilt, and although a lot more associated gas is likely to be produced as the oil mega-projects begin, both Siba and Mansuriya have the geographical capacity to act as early stable producers—and later as buffers—while oil companies decide on how much associated gas they need for reinjection and how much they can spare. In the case of Akkas, however, exports remain the most cost-efficient option, given that the field is much closer to Syrian pipelines then to Iraqi demand and domestic markets. Appearing to jump the gun and declare three companies as frontrunners for the late 2010 auction—even if misinterpreted—might cause both the Oil Ministry and the named companies some level of later aggravation.