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30 May 2010 - CNBC

China's top power equipment maker Shanghai Electric is moving ahead with a $1 billion power-generating plant to boost Iraq's electricity capacity by 1,320 megawatts, officials said on Saturday. The planned steam power plant in the town of Zubaidiya near the city of Kut, 150 km (95 miles) southeast of Baghdad, is seen as one of the biggest power projects in the country, where intermittent electricity is one of the public's top complaints. Seven years after the U.S.-led invasion, Iraq's national grid still only supplies a few hours of power each day.

Iraq's dilapidated infrastructure has been hit hard by years of war, insurgency attacks and underinvestment. The project, which includes purchasing and installing four steam turbines, each with a capacity of 330 MW, will provide Iraq with a big power increase over the next four years, both Iraqi and Chinese officials said. Work to install those units started earlier this month and the first unit is expected to operate after three years. "It is a big project, it is considered one of the biggest power plants in Iraq," said Hameed al-Ibrahimi, an official in the Iraqi Ministry of Electricity, who is in charge of the project. "Iraq is in need of (any) 100 MW," he told Reuters at the project's site.

The Ministry of Electricity puts Iraq's available power capacity at 9,000 MW, and installed capacity at 11,000 to 12,000 MW. Demand is estimated to be at least 12,000 MW. The idea for the project is almost 10 years old. When Iraq's first talks with China's Shanghai started, it was to build a factory to manufacture power turbines. The plan was put on hold for years due to economic sanctions imposed on Iraq followed by years of bloodshed unleashed by the 2003 U.S.-led invasion. As security conditions slowly improve across the country, Iraq has revived and revamped the project. It signed the contract with Shanghai in 2007, but it was again delayed due to security concerns and unavailability of land for the plant.

Now work is ramping up with a handful of Chinese engineers and staff already on the ground as a camp is being built to accommodate the expected influx of workers over the next few months. The plan is to get at least 100 more Chinese workers in the coming two to three weeks as the pace of work increases, said Cao Linjun, the site manager from Shanghai Electric, dismissing security concerns as an obstacle. "If I feel afraid, I will not come here," he said during a visit to the plant, which was protected by three security units, an emergency police unit, an army unit along with other guards. Iraq is trying to shake off the legacy of years of violence and economic decline by luring foreign investment and expertise to help it rebuild. Violence has fallen sharply in the last two years, but daily bombs and killings are still common.

28 May 2010 - Azzaman

Two new power plants are to be built in the southern provinces of Babel and Karbala, the Electricity Ministry said in a statement.
 
The statement said Electricity Minister Kareem Wahid laid down the foundation stones for both plants, which will cost nearly $170 million.
 
It will take the gas-driven plants 18 months to be completed and will add 250 megawatts to the national grid, the statement said.
 
Meanwhile, the statement said about 1000 Chinese experts and technicians were to arrive in Iraq soon to begin on work on the Wasit Power Plant, one of the largest electricity projects in the country.
 
The plant, which is also being built in southern Iraq, will take three years to complete and will add 1,300 megawatts to the national grid, the statement said.

Gavin Jones, Partner with Upper Quartile,writing for The EIC

Iraq is fast becoming the engine for the oil and gas industry and is likely to hold this position for the next 10 years at least.    I hope that this article will address the scale and speed of development of this market for the engineering industry.

The scale of the opportunity is difficult to put accurate numbers to but is always in the hundreds of billions.   BP, Shell, Petronas, ENI, Lukoil, Statoil, Gazprom, China National Petroleum, Sonangol and Total are all rolling out development plans for fields with reserves quoted in the billions and production in the thousands of barrels.

International oil companies will manage many billions of contract value but make relatively little.    The 1^st licence round in June 2009 was heavily criticised – Iraq had not allowed production sharing agreements, they were unreasonable in what they were prepared to pay, they were expecting the oil industry to do too much rebuilding.   The Wall Street Journal announced that the licence round had flopped.   BP was the only company to accept what was on offer at half of what they bid then paid $500 million as a signature bonus.    The 2^nd licence in December 2009 round saw all available licences taken up and fees reduced to between $1.49 and $1.15 per barrel for the big fields: a remarkable change from the $40+ demanded initially.    The Iraqi Government has commitments to produce 12 million barrels of oil a day and $2 billion in cash commitments from the oil industry – guaranteeing commitments and in May agreed to set up a National Oil Company to manage these relationships.    Oh …. And then the Government launched a 3^rd round of bids for 3 gas fields on the 19^th May.

What about the service industry?    The working environment, the structure of the licences and the obligations mean that most of the work is going to be subcontracted in large chunks – at least in the early years.    Work has already begun, accommodation camps are being built, airlines have started commercial flights into Basra, Al Faw Port is being refitted at a cost of $4 billion, BP announced $600 million of drilling and down-hole service contracts and in addition Iraq will have to build floating oil terminals, clear land at Greenfield sites, repair pipelines, rebuild terminals, set up water-treatment plants for well injection, build oil-processing plants, lay pipelines, install gas-gathering equipment and power generators, haul in water and truck out fuel until pipelines are built. Water and power infrastructure remain major constraints, considerable spend on skills and CSR is also anticipated.  Schlumberger started recruiting 600 staff in May and Petronas is recruiting “hundreds” of staff.   Capital spending on oilfield services in 2011 alone is estimated to be five times that of Saudi Arabia, Bahrain, United Arab Emirates, Oman, Qatar and Kuwait combined.

What about the problems?     Well there are plenty and they keep coming.    Currently in the election aftermath there are calls to revisit licence awards.   This will cause some discomfort but I think the licences will stay – they are an excellent deal for Iraq with about 98% of the oil revenue remaining in the country and the required laws will be passed when the internal deals are done.    There will be ongoing discussions with OPEC – Iraq will challenge the pecking order in OPEC and weaken Saudi dominance as the world’s “swing producer” (the single mega-producer has been able to tweak the global price of oil by adjusting its own production).   Iraq is on course to pass Iran as the Gulf’s second-largest producer causing a significant realignment of power in the region.  Any decision on OPEC will be postponed until Iraq is in a much stronger negotiating position – my guess - at around 4½ mbbd and increasing.   Security issues remain but are changing in objective, increasing in magnitude but decreasing in number.    Iraq remains a dangerous place but security services are improving.   The biggest problem is getting all this easy-to-produce oil out of the country and into the international markets – deals are being done with Turkey and Ports are being rebuilt.   The oil is easy enough to produce but you still have to get the stuff to the big consumers like China.    This is the next big phase.

And the money?   If Iraq hits their 12 million barrel target this should tip $222 billion into the coffers annually but is going to take a few years.   Meantime the Government have negotiated a World Bank loan – on condition that they privatise the 240 State companies –and have been told that they can manage the $180 billion oil-for-food fund that the UN was holding over from the old days of sanctions and of the $120 billion in debts $55 billion - and 80% of whatever they owed China - have been written off.     The current state owned infrastructure and services are unable to respond to existing demand, the systematic dismantling of the private sector under the previous regime means there is no prospect of increasing capacity quickly.

My view is that the Iraqi Government has been a great deal more astute than many of the Governments advising them – they have sorted out the critical pieces of infrastructure (airports and ports); they have sorted out their income generation (oil) at a pace that would embarrass most developed Governments; they have put the gas gathering on the back burner (important but does not generate income) and are now starting to focus on the infrastructure to export oil; the next will be the schools, roads, hospitals and electricity to keep its citizens content.    20:20 hindsight is wonderful – but we have come a long way since the world announced last years licence round as a flop

Gavin Jones

www.upperquartile.co.uk

Electricity Minister Karim Wahied on Monday laid the cornerstone of a gas-fired power plant in Hilla at a cost of $84 million.

“The plant will work with a total capacity of 250 MW and the project was referred to a Canadian company, which signed the contract a few days ago,” Wahied said at a press conference, attended by Aswat al-Iraq news agency.

“The company will start the project next month,” he added, noting that the project will be accomplished within 18 months.

( Aswat Al Iraq )

The Chinese deputy Foreign Minister, Zhaijob, told an Arab foreign ministers meeting in China that his country is now the third economic power in the world but it needs time to face the big challenges of restoration despite the fact that his country could double its domestic product.

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Zhaijob said that China placed high hopes on the Chinese-Arab forum to face the challenges of the International financial and energy crisis and other problems. In reply to a question about the importance of the ministerial Chinese-Arab forum  Zhaijob said that this forum has special importance because it works on the formation of a strategic partnership and cooperation between China and the Arab world in order to start real joint development. He added that the fourth session of the forum which began in 2004 will boost Chinese-UAE relations and Chinese-Arab relations in the fields of energy and economy.

Shanghai Expo success

Zhaijob said China is the biggest developing country in the world with a population of 1,3 billion but it has special national conditions and some times it suffers from an imbalance of development. However the success of the Shangahi Expo in 2010 left a strong impression on the world that China has passed the global financial and economic crisis and is preparing to continue growth next year. He pointed out that this Expo represented a good opportunity for China to introduce itself to the Arab world and the rest of the world saying  ‘we are happy to share this big global event with UAE and the rest of the developing countries’.  His country put high hopes on the Chinese-Arab forum to face the challenges of global financial and energy crisis and the lack of food and climate change which both China and the Arab world endure.

Ten Mechanisms

They had  agreed to put ten mechanisms to work for cooperation between the two sides in the fields of media and culture, economic and political. He he pointed out that his country has diplomatic ties with all Arab countries and these ties are based on the historical relations which began hundreds of years ago in the era of the Silk Route .

In reply to question about the reasons for high growth in China, Zhaijob said that his country is a developing country and not in a perfect situation and that is why there are many fields that need reform and improvement. He emphasized the necessity for Chinese-Arab communication and said each side should get acquainted on each other’s affairs through our own media and not through western media which dominates all of us.

Economic co-operation

Regarding economic cooperation between the two sides Zhaijob said that the volume of commercial exchange between China and Arab countries reached 100 billion US dollars last year while China imported 90 million tons of oil from Arab states in the year of 2009 and he said that Arab countries are strong political and economic partners especially in the energy field and he refuted the presence of any political obstacles to stop the development of the ties between the two sides. He said that ‘there could be some difficulties but within our quest to boost cooperation we will overcome these difficulties’.

Much to do on human rights

Concerning human rights in China Zhaijob said ‘we give this matter big importance and as the biggest developing country China is interested in providing food and dignity for all Chinese peoples’. Zhaijob added that China is not paradise and also that America is not paradise because paradise is in heaven not here on earth. ‘We admit that there are tens of millions of Chinese people in the  middle and west of China without electricity and we admit that we have big development problems but we are working on improving the lives of our people. China is now the third economic power in the world but if we distribute our national income to 1,3 billion people then we would still be behind other advanced states’.

UN security council

In reply to a question about Chinese efforts to amend the international system Zhaijob said that the global financial crisis revealed the necessity to amend the international system and he emphasized his country’s quest to amend the (UN) security council because of the lack of representation of developing countries. The amending process will not take longer than one hour if the intentions were honest. And he said that the international system failed to manage the financial crisis because it is not a fair system.  He emphasised that there will be no financial or political reform without the participation of developing countries.

( Iraq Directory )

The Diala public Company for electrical industries provided a number of ministries and government departments with 310 electrical transformers last April, the Industry Ministry said on Thursday.

“The electricity departments in al-Sadr, al-Karkh, al-Shamal, al-Rusafa and Diala have been provided with transformers from the Industry Ministry at a cost of 2.183 billion dinars,” the general director of the company, Abdulwadoud Abdulsattar said in a statement received by Aswat al-Iraq news agency.

( Aswat Al Iraq )

Iraq and Iran signed on Tuesday an agreement through which Iran will build housing compounds in Baghdad and number of Iraqi provinces.

“The agreement was signed by the undersecretary of IraqiElectricity Ministry and Iranian embassy in Iraq,” said a release issued on Tuesday by the Iraqi Trade Ministry and received by Aswat al-Iraq news agency.

It noted that the two sides have a number of other agreements that are still within the preliminary stage.

( Aswat Al Iraq )

Iraq Minister of Electricity Karim Wahid said that the Ministry bids to open the door of investment in order to implement vital projects in electric power development field.

Wahid told Alsumaria that he expects electric power supply to make an important progress during this summer.

( Al SumariaTV )

Iraqi Council of Ministers authorized the Electricity Ministry to sign a contract with the Japanese based firm, Hitachi, to supply spare parts for the Taji Power Station.

“The decision reflects the cabinet’s interest in providing electricity to people,” Dr. Ali al-Dabbagh, the official spokesperson of the Iraqi government, said in a release on Sunday received by Aswat al-Iraq news agency.

He explained that there is a strongly increasing demand for electricity in the summer season, and the Taji Power Station needs quick rehabilitation to put it back into service.

( Aswat Al Iraq )

The Iraqi government is determined to boost power output to 27,000 megawatts in four years, said Electricity Minister Kareem Waheed, and it should invest $3-4 billion annually to meet that target.

Waheed said the target to produce the massive amount of electricity that will meet Iraq’s domestic needs is attainable.

The ministry is known to have missed almost all its previous targets despite billions of dollars of investments.

However, Waheed said the pledge this time was possible to honor because “of the agreement the government has with the Royal Dutch Shell for the storage of liquefied and natural gas in the country.”

The government has signed a contract with the international oil major for the installation of modern facilities in the southern city of Basra to treat and store liquefied gas.

Most of the new power stations Iraq is constructing and wants to build are gas-driven.

Fuel shortages are reported to be one of the major causes of power outages which may last up to 20 hours a day in major cities.

To reach the new power output target, Waheed said, the government should invest $3-4 billion every year.

( Azzaman )