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Long-term investors in many Iraq-focused oil companies have had their patience amply rewarded, as shares in companies such as Gulf Keystone Petroleum (GKP) and DNO have registered significant gains.

Tony Hayward, CEO of Genel Energy, puts this down in part to ExxonMobil's entry into Kurdistan, which has highlighted the opportunities in the region. So much so, in fact, that he now regards GKP and DNO as overpriced.

Outside fo the direct oil sector, Egypt's Orascom Construction has also hit new recent highs following its contract win in Baiji.

It's a different story for Iraq's indigenous quoted companies, however, which are down about 11% on average year-to-date, but as Mark deWeaver writes there are some technical factors that could cause that fall to correct itself rapidly.

Whether your business is domestic or foreign, Upper Quartile and AAIB are here to help you. For more information please contact Gavin Jones or Adrian Shaw.

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Iraq Business News is delighted to bring you the latest Iraq Market Tracker report from Dunia Frontier Consultants. The market tracker highlights the activities and market performance of a basket of publicly traded firms who derive a significant percentage of their revenues from operations in Iraq, but are traded on foreign exchanges: a proxy Iraq play as much as practicable. It also identifies and analyzes the primary political and security events that occur in country that have market-moving implications.

Click here to access the report.

Companies Mentioned:

DNO, Exxon Mobil, Genel Energy, Gulf Keystone

Action Calls:

• Iraqi Budget passed: Maliki gets most of what he wants, gives little that is not strictly symbolic.
• Genel starting to look elsewhere: Genel can't really stomach increasingly frothy valuations, but majors may.
• Basra SPM still not operational: We celebrated too soon, but bellwether works.

Headlines:

• Riyadh names ambassador to Iraq: Small step forward, confirming Iraq is not Iran's puppet. Hopefully more progress to come.
• AQI claims attacks: Worrisome, part of recent uptick in violence. Will indicate political progress, or not.

Calendar Events Discussed:

• Next week - Discussions on former Deputy PM Mutlaq's potential return
• April - National Reconciliation Conference

Click here to access the report, or to add your email address to Dunia's mailing list to receive the Iraq Market Tracker via email.

ExxonMobil has finally broken its silence regarding its plans to explore for oil in Iraqi Kurdistan.

In the company's 10k statement filed on Friday, it says:

"During 2011, production sharing contracts were negotiated with the regional government of Kurdistan ... Exploration and production activities in the Kurdistan region of Iraq are governed by production-sharing contracts negotiated with the regional government of Kurdistan in 2011. The exploration term is for five years with the possibility of two-year extensions. The production period is 20 years with the right to extend for five years."

Despite the anger of the central government in Baghdad, Exxon is reportedly pressing ahead with initial preparations in Erbil.

In the three months since its creation, the Anglo-Turkish independent, Genel Energy plc, has moved with "remarkable speed to build the foundations of what I believe will become a major regional oil and gas company," its chief executive Tony Hayward said on Thursday.

Previewing a presentation he will make to capital markets, Hayward said revenues from existing oil output were now sufficient to fund Genel's ongoing business in the Iraq Region of Kurdistan, including a significant expansion of production and an aggressive exploration drive aimed at adding up to 700 million barrels to the company's resource base.

"From our domestic sales alone we expect our Kurdistan operations to generate revenues of between $250 million and $300 million in the course of this year, with potential upside from exports," he said.

"Even with the threefold increase in investment we plan for 2012 which will take our capital spend to between $200 million and $250 million, current sales revenues are quite sufficient to fund our ongoing programmes, including exploration, appraisal and development. We therefore intend to manage the business on a cash-neutral basis and preserve our $1.9 billion cash reserves for other opportunities in the Middle East and Africa."

Hayward told analysts and fund managers that the company has made "rapid progress" since its formation in November from the merger of Vallares and Genel International. In its first 90 days it had:

Tony Hayward, CEO of Genel Energy, said today that the company will not buy Gulf Keystone Petroleum or DNO International because the entry of ExxonMobil into the region has forced up prices, reports Bloomberg.

“It’s too expensive for us ... What changed is Exxon coming in. We don’t need any more Kurdistan.”

"We are not intent on doing another big deal in Kurdistan. Anyone who thinks we're going to go and buy DNO is wrong, we're not."

When asked whether the company was going to buy Gulf Keystone, he replied: "Definitely not."

Genel had previously said it would be interested in acquiring Norway's DNO, while British firm Gulf Keystone is the subject of frequent takeover rumours.

"We are going to diversify now", Hayward said.

(Sources: Bloomberg, Reuters)

This article was written by Ali Sarhan, and was originally published by the Institute for War and Peace Reporting, iwpr.net. It is reproduced by Iraq Business News with permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

A plan to triple Iraq’s oil exporting capacity took off with the inauguration of the first floating terminal in the Gulf port of Basra this week.

The new Single Point Mooring, SPM, can process 850,000 barrels per day, and is the first of five similar terminals intended to increase Iraq’s export capacity from 2.1 million to over six million barrels per day. The other four should be in use by the end of 2013.

Iraq’s export expansion plans for the Gulf include two undersea and one onshore pipeline, as well as the five SPMs for loading tankers.

Oil ministry spokesman Asem Jihad welcomed the five-terminal project, located in Al-Faw, south of Basra.

“It’s one of the largest and most important projects in Iraq, and has no precedent,” he said. “The opening of this port is part of the ministry’s plans to raise export capacity over the next few years.”

Iraq currently produces 2.9 million barrels a day, but – under deals reached in 2008 when the government awarded 15 oil and gas deals to international firms such as Shell, Exxon Mobil, BP and Total – the plan is to increase daily output to rise to 12 million barrels by 2017.

Iraq has the world's third-largest oil reserves, and 95 per cent of its revenue comes from oil exports, so increased production has to be linked with improved capacity to export.

Advertising Feature

Iraq Business News is delighted to bring you the latest Iraq Market Tracker report from Dunia Frontier Consultants. The market tracker highlights the activities and market performance of a basket of publicly traded firms who derive a significant percentage of their revenues from operations in Iraq, but are traded on foreign exchanges: a proxy Iraq play as much as practicable. It also identifies and analyzes the primary political and security events that occur in country that have market-moving implications.

Click here to access the report.

Companies Mentioned:

DNO, Exxon Mobil, Genel Energy, Gulf Keystone, Total

Action Calls:

• Fourth bidding round terms sweetened: Exxon, Total, and general IOC discontent starting to take effect.
• DNO returns to profit, expects oil output to rise: Few major catalysts in near term, though momentum could continue.
• Iraq opens SPM, boosting capacity: Iraq hits milestone, refocusing attention on next obstacles.

Headlines:

• White Iraqiya declares support at Interior: Signal we looked for. If confirmed, will show Maliki's consolidating power.
• Arrest warrant for Salahaddin Council President: Reminder that arrest warrants for political opponents are acceptable tactics for Maliki.

Calendar Events Discussed:

• April - National Reconciliation Conference
• This month (?) - First vote on budget

Click here to access the report, or to add your email address to Dunia's mailing list to receive the Iraq Market Tracker via email.

Statement by the office of the Deputy Prime Minister of Iraq, Dr Rowsch Shaways:

In the last few days, some media outlets have reported statements by federal Iraqi government officials related to the oil contract with Exxon Mobil and a potential contract with Total. These statements have drawn the attention of many local and foreign media, which have contacted us for an explanation.

In light of this, we would like to clarify the following points:

According to the Iraqi constitution, the oil and all the natural resources that exist in Iraq are national wealth that belongs to all Iraqi people, living in all of the regions and provinces of Iraq. This wealth should be used to increase the well-being and prosperity of all the people of Iraq. Therefore, such agreements should be a joint effort between everyone in Iraq and no individual group should single-handedly decide on how these resources are used.

In our view, these statements, especially those that threaten renowned international investment companies working in the Kurdistan Region, could lead to companies being reluctant to work in all of Iraq, and they will portray a negative image to investors across all sectors. This contradicts the general policies of economic openness, the promotion of trade and attracting foreign direct investment in order to provide better services to the people of Iraq, who have suffered for decades from closed centralized economic policies that have led to widespread poverty, destitution and deprivation.

Kurdistan, along with East Africa and the North Sea, has been identified by an analyst at brokerage Seymour Pierce as a key oil and gas region that is likely to see significant positive momentum this year.

Dr Doug Youngson initiated coverage on eleven stocks and picked the three places as his ‘Top Regions’. In Kurdistan, he picks out Gulf Keystone Petroleum and Heritage Oil & Gas.

He highlights an estimate by the US geological survey that Kurdistan hosts 40 billion barrel of oil and 60 trillion cubic feet of gas with low geological exploration risk

He says the semi-autonomous region of northern Iraq is more stable than the rest of the country and this has been one of the drivers of new investment in the area.

“Activity in Kurdistan has been steadily increasing in recent years with the entrance of several small and medium independent E&Ps,” the analyst said.

“However, the region finally got the “seal of approval” following the announcement that ExxonMobil was to acquire significant acreage in six exploration blocks in late 2011. More recently, speculation has mounted that Total were planning a similar move, although this has yet to be formally announced.

“We believe that the increasing influx of foreign oil companies into Kurdistan and the increasing capital expenditure they bring is the most likely driver for resolution of the oil law.

“Increases in production outside Kurdistan have been disappointing so far and if Iraq is to see any tangible increase in production in the short to medium term we believe that this will come from Kurdistan.”

The analyst says that Gulf Keystone Petroleum has been a long term player in Kurdistan and it has seen considerable exploration success so far, with it finding around 15 billion barrels of oil in place.

“This year will see [Gulf Keystone Petroleum] move into export production for the first time, resulting in the first significant cash inflows,” he said.

“The entrance of ExxonMobil and Total into the region has enhanced its credibility as a potential major future oil producing province. We feel that the persistent takeover rumours are premature, but likely to be accurate in the longer term.”

In the year ahead he expects share price drivers to come from further resource upgrades and increases in production at the Shaikan field.

Meanwhile, Youngson is also watching Heritage Oil which, he says, has struggled to recover since its Miran West field was confirmed to be gas bearing and not oil bearing. He says Heritage is looking at ways to export the gas and it is still exploring Miran.

The analyst reckons positive results could boost the share price in 2012.

(Source: Proactive Investors)

The Iraqi Deputy Prime Minister for Economic Affairs, Rosh Shaways [Rowsch Shaways], has asked government officials to stop threatening oil companies that are operating in Iraqi Kurdistan, according to Bloomberg.

“These statements will give a negative picture to investors and violate the state’s public policy of opening the economy and promoting investments in all fields,” Shaways said.

A spokesman for Iraq’s Deputy Prime Minster for Energy, Hussein al-Shahristani, said on Monday that Exxon won’t be allowed to participate in the next oil and gas bidding round because of its deals in the northern region.

(Source: Bloomberg)