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Abu Dhabi's Invest AD has launched an Iraq Investment Fund to channel investment into high-growth companies in a country where improving stability and increased oil production should fuel strong economic expansion in coming years.

Invest AD is seeding the fund and is marketing it alongside its other equities and private equity funds that invest in the Middle East and Africa.

"As Iraq stabilise, it should take its place as one of the major economies in this vibrant region," said Invest AD Chief Executive Officer Nazem Fawwaz Al Kudsi. "The country is overcoming difficult circumstances to make real progress towards an open economy, and we see tremendous opportunities in the long term. By entering the market early, we hope to capitalize fully."

The new fund, which is open to institutional and high-net-worth investors early in October, will make investments primarily in listed equities, but also in unlisted opportunities.

Iraq is widely considered one of the last frontiers in emerging markets, although the stock market is tipped to grow rapidly in coming years as the country recovers from conflict.

Invest AD, established by the Abu Dhabi government in 1977, is among a handful of companies to offer global investors access to Iraqi equities, and the only one based in the Middle East.

Mr Al Kudsi says that Invest AD is seeing growing regional and international investor interest in Iraq. "They see the growth potential, whether through fixed or portfolio investments. The Iraqi equity market is still quite small by regional standards, but from small beginnings come big opportunities. We expect our fund to grow in line with this."

Iraq's economy will grow by over 7 percent annually in the next couple of years, according to the International Monetary Fund (IMF), with the country's current account and fiscal deficits turning to surplus as oil production increases.

Iraq has the world's third-largest proven oil reserves and the country has signed 11 oilfield development deals with major oil firms including Royal Dutch Shell, Italy's Eni, Exxon Mobil, Occidental Petroleum Corp and South Korea's KOGAS. These deals are projected to lift the country's capacity within seven years to just under Saudi Arabian levels of 12 million barrels per day, from 2.5 million now.

ExxonMobil (XOM.N) and its partner Royal Dutch Shell (RDSa.L) plan to more than double the number of new wells in Iraq's West Qurna Phase One in order to reach its projected production target, an Exxon executive said on Monday.

According to Reuters, quoting ExxonMobil's Iraq Vice President, James Adams, Exxon aims to drill two to three times the current 370 wells in the field as part of its development plan for the field, to reach plateau output of 2.325 million barrels per day.

"In order to reach the output target, we need to drill two to three times the number of wells that are already there," Adams told reporters on the sidelines of an industry event.

Asked how many wells the firm will be able to drill this year, he said, "a handful", adding that at this stage the companies are still evaluating the field.

Current production is in the range 200,000 to 250,000 bpd, he said. In July, Adams told Reuters the consortium aimed to raise production by 10 percent by the end of the first quarter of 2011. IBN published the quarterly agreed targets for Iraq's Southern oilfields for coming year in this article.

The initial development plan agreed by Exxon and its partners for the West Qurna Phase One oilfield includes drilling eight new wells and overhauling up to 50 wells this year, an Iraqi oil official said in May.

Adams confirmed that Exxon was taking the lead among international oil companies in managing a multibillion-dollar water injection scheme, which could help raise extraction rates in Iraq's southern oilfields such as West Qurna, Majnoon, Zubair, Rumaila, Gharaf and Halfaya.

"The government made the decision to require that this [water injection project] be done on a communal basis. They invited us to take the lead," he said.

The Exxon-Shell contract to develop the 8.7-billion-barrel West Qurna Phase One project was one of a series that Iraq has signed with international oil companies to develop its vast reserves.

If the projects all turn out as planned, Iraq could quadruple its oil output capacity to Saudi levels of 12 million barrels per day, potentially giving it the billions of cash it needs to rebuild after decades of war, sanctions and neglect.

(Source: Reuters)

An Iraqi government spokesman said on Tuesday that the water injection project to help boost production from Iraq's southern oilfields is expected to exceed $10 billion.

Reuters reports that Iraq's cabinet approved a plan on Tuesday to repay the cost of the scheme to the international oil companies that would need to initially fund the project.

Quoting government spokesman Ali al-Dabbagh, the report says Iraq still needs to negotiate how to make the repayment, which will be taken from the country's future oil revenues.

"This we need to negotiate with them. It depends on how to make the repayment structure, because it is huge amount. It will affect the revenue of Iraq," said Dabbagh after the weekly cabinet meeting.

U.S. oil major ExxonMobil had said it was taking the lead among oil companies that won development contracts for southern oilfields in two auctions last year, in coordinating initial studies for the project.

The cost of the project would be distributed among those majors, an Iraqi oil official said in April.

The water injection scheme could help raise extraction rates at Iraq's southern oilfields such as West Qurna, Majnoon, Zubair, and Rumaila. The fields are being developed by oil majors such as BP, Royal Dutch Shell , Lukoil , China's CNPC and Eni of Italy .

Water injection helps to increase the amount of crude that can be pumped from oilfields and will be a key to enabling the oil firms to reach ambitious production targets set in the oilfield development contracts.

The project aims to produce 10-15 million bpd of water and would use seawater, an Exxon executive told Reuters in July.

(Sources: Reuters, Platts)

Basrah is central to the biggest oil and gas projects that will be taking part in Iraq over years to come and in order for contracts to go ahead, approval and consent is needed from the local authorities for projects to commence. Iraq Mega Projects 2010 Conference & Exhibition, taking place in Istanbul, Turkey, on 26-28 October, is therefore pleased to welcome Eng Haider Ali Fadhel, Chairman of the Basrah Investment Commission, H.E. Taner Yildiz, Minister of Energy and Natural Resources -Turkey and Baroness Nicholson of Winterbourne, Executive Chairman, IBBC (Iraq Britain Business Council) to the programme.

Eng Haider’s insight on investment and projects required in the South of Iraq will be fundamental to those attending who wish to understand the requirements of the region. “It will be an honor for me to participate in this conference” says Haider.
CWC’s unrelenting efforts in the past to support and benefit Iraq by bringing the industry together have resulted in strong relationships with major stakeholders. It is with this in mind that Iraq Mega Projects is pleased to thank and announce the support and attendance of the following oil contract winners: Oxy, Total, Shell, Lukoil, TPAO, Exxonmobil, Statoil, Gazprom KOGAS, CNPC, ENI and Petronas.

The event will bring together the world’s leading contractors and field operators in the most important sectors to drive Iraq and its energy industry forward. Exhibitors such as Shell, Total, Lukoil, Caterpillar, SGS, Emerson Process Management, Halliburton and KBR will be part of the buyers and sellers forum, where oil and gas operators can meet service providers from across the entire supply chain.

The Conference & Exhibition will provide a number of networking functions including a Gala Dinner Cruise on the Bosphorus River, hosted by the event’s Platinum Sponsor Caterpillar, an Evening Cocktail Drinks Reception hosted by Beluga Shipping GmbH and a Corporate Lunch hosted by Oxy. The functions will provide an informal opportunity for exhibitors and delegates to meet face-to-face with senior level officials, to forge and strengthen relationships with new and existing clients, and most importantly do deals!

For further information contact:

Phillip Clarke
Business Development Manager
The CWC Group
+44 20 7978 0056
[email protected]

Business Monitor International (BMI) has published a new report on business in Iraq.

Summary:

The oil sector contracts signed between Iraq and international energy companies in 2009 reflect the first stirrings of what the oil and gas industry hopes will be the reestablishment of a strong working relationship. Following years of underinvestment as a result of the economic sanctions imposed on Iraq following the 1991 Gulf War, Iraq is hoping to tap the expertise and capital of international oil companies (IOCs), their state-run national oil company (NOC) competitors and service companies in order to boost the technical capabilities of its infrastructure as well as the production and export capacities of the country’s crude oil, natural gas and refined products.

Owing to the 1991 Gulf War and subsequent UN sanctions Iraqi production suffered during the 1990s. The country was granted an exemption from OPEC production quotas while it operated under the auspices of the UN Oil-for-Food program, which allowed Iraq to export limited amounts of crude oil in exchange for the purchase of food and essential medical supplies.

Although the Oil-for-Food program was disbanded after 2003, Iraq still benefits from the OPEC quota exemption. BMI forecasts Iraq’s 2010 production at 2.47mn b/d, of which 1.62mn b/d will be exported, and the government plans to boost production to 12mn b/d by 2020-a production increase of 485% over the 10-year period. BMI sees this target as ambitious, forecasting 2020 output of 4.5mn b/d, but our projections still see 82% growth over the period.

While our outlook is sanguine, there are manifold risks to investment in the Iraqi oil and gas industry. In the long term, crude production growth will mean that Iraq will come under increasing pressure to rejoin the OPEC quota regime, presenting a potential cap on further output gains. In the short and medium term, Iraq’s large investment needs, political instability and security risks will all contribute negatively to the country’s energy sector aims. Furthermore, the role of ‘resource nationalism,’ particularly in a country with an insecure polity wary of foreign intervention, cannot be discounted in the upstream segment.

This can be discerned from the development contracts signed between Iraq and the various international companies jostling for position in the country’s energy investment plans. The final awardees originate from a broad spectrum of European and Asian countries, and only two US companies-ExxonMobil and Occidental Petroleum-were awarded contracts. Furthermore, the Iraqi government was keen to be seen as negotiating hard to obtain the best possible terms for the state, and the government has shown no hesitation in changing deal terms for its financial benefit. Earlier changes to contractual structures included a 5% decline rate provision for output above the applicable production targets, as well as changes in ownership structures to the benefit of the IOCs. Nonetheless, BMI believes that Iraq’s ambitious plans for its oil and gas sector present significant investment opportunities for foreign companies. Specifically, we have identified the country’s oil services sector, refining segment and natural gas industry as particularly attractive opportunities. We have highlighted below not only the nature of these opportunities, but the three most important risks that foreign investors will face in the Iraqi energy sector in the coming years.

The full report runs to 43pages, and is available at a price of £525 directly from Business Monitor International.

PetroChina , the world's second-most valuable oil and gas producer after Exxon Mobil Corp, said on Thursday that it wants to further strengthen relationships with Iraq as it looks for new sources of oil. It is also focusing on Venezuela and Kazakhstan.

The company was also in discussions for cooperation agreements with BP in the refining sector, executives told a media briefing after reporting quarterly results, according to a report from Reuters.

Earlier in the day, PetroChina posted a 4.2 percent rise in quarterly earnings, its best since the fourth quarter of 2008, as higher oil prices and stronger production offset weak refining margins.

(Source: Reuters)

KBR (NYSE: KBR) today announced that it has been awarded two contracts by the Republic of Iraq Ministry of Oil through the South Refineries Company. KBR will provide licensing and basic engineering services for the construction of Fluid Catalytic Cracking (FCC) and Solvent Deasphalting (SDA) units at the planned grassroots Maissan Refinery in Maissan [Maysan], Iraq. Work on the projects is expected to commence immediately.

KBR will license its FCC Technology for an anticipated 47,500 barrels per day (BPD) FCC unit and its Residuum Oil Supercritical Extraction (ROSE(R)) technology for a 45,000 BPD SDA unit. The FCC unit will be delivered under a joint marketing alliance between KBR and ExxonMobil Research and Engineering Company (EMRE).

"These awards mark the first wins for KBR's Technology Business in Iraq and provide KBR the opportunity to introduce two of its leading refining technologies into an important, emerging market," said Tim Challand, President, KBR Technology. "We look forward to forging a solid and sustainable relationship with the Ministry and South Refineries Company."

KBR is a global engineering, construction and services company supporting the energy, hydrocarbon, government services, minerals, civil infrastructure, power and industrial markets.

By Ali Al-Mawlawi, Iraqi Institute for Economic Reform

The Iraqi Ministry of Oil hosted a symposium on Sunday as part of efforts to include Iraqi civil society organizations in the Extractive Industries Transparency Initiative (EITI). The event was organized by the head of the Iraqi EITI, Alaa Mohie El-Deen, and brought together NGO’s nationwide, including representatives from the Kurdistan region and southern provinces.

The EITI is a global standard for transparency in the oil, gas and mining industries that seeks to reconcile payments made by resource companies to governments. An independent validation process is overseen by a multi-stakeholder group comprising government, private sector and civil society representatives. Iraq’s 16-member committee includes senior officials from the oil, finance and industry ministries, the Integrity Commission, the Supreme Board of Audit and a member of the Iraqi parliament. Shell, Exxon Mobil and CNPC were also chosen to represent the international oil companies following a workshop held in Dubai last June and Iraq’s unions and professional guilds are represented by the journalists, accountants and lawyers unions.

Sunday’s event sought to introduce civil society activists to the EITI process and to establish a mechanism for selecting Iraqi NGO’s to join the multi-stakeholder committee. Mr Mohie El-Deen explained that Iraq’s implementation of the EITI was only the first step towards creating an open and transparent oil industry. Further efforts are required to enhance public accountability, including full disclosure of federal budget allocations and revenue sharing legislation.

A supporting committee will now be formed consisting of Iraqi NGO’s that are engaged in transparency and anti-corruption work. Three organizations will then be selected to work on the multi-stakeholder group, which will be tasked with monitoring and evaluating the EITI process.

Iraq was officially accepted by the EITI as a candidate country in February this year after Prime Minister Nouri Al-Maliki expressed the Iraqi government’s interest in joining the process. With Yemen being the only other country in the Middle East to gain candidacy in the initiative, Iraq is set to become the largest oil producing country to implement the EITI. It now has less than two years to fulfil the validation criteria, which include ensuring that payments made by international companies to the government are independently audited according to international standards.

Currently, only Azerbaijan and Liberia are EITI-complaint, with Peru expected to become the third shortly. If Iraq is successful in implementing the EITI, it could create pressure on other oil-rich countries in the Middle East to open up their industries to public scrutiny.

Ali Al-Mawlawi, [email protected]
Related articles:

• Iraq’s media regulator calls for greater press freedoms
• Iraq to Join EITI
• Iraq on Road to Stamping out Oil Graft

Markets hate uncertainty, but history has shown us that times of uncertainty create the greatest opportunities.

Warren Buffett's famous saying, “be fearful when others are greedy, and be greedy when others are fearful”, is true whether referring to the stock market or to risk-taking in general.

And Iraq is giving us plenty of risk and uncertainty at the moment:

• Security: What will happen when US combat forces are withdrawn?
• Government: Who will eventually win this titanic battle? Did Tuesday's meeting in Damascus between the secular Ayad Allawi and anti-U.S. Shia'ite Muslim cleric Moqtada al-Sadr bring us any closer to a resolution?
• Hydrocarbon law: As we've reported, both al-Maliki and Allawi are committed to honouring the existing contracts, but will the Supreme Court uphold them as valid? We'll update you on this as soon as the Court makes a ruling.

But the fact that these issues are coming to a head now means that they will be resolved sooner rather than later. Companies like ExxonMobil and BP are not letting these factors delay their plans, while others are seeing this as exactly the right time to get into Iraq.

Instead of waiting for everything to be resolved, the French government, for example, is building a heavily fortified business centre and boutique hotel where businessmen can sleep, eat and work in safety. They're not ignoring the risks, but they're seizing the opportunities while they are still available.

If you're considering taking that step into the Iraqi market, AAIB and Upper Quartile are the perfect team to help you manage the risks and grasp the opportunities. For more information please contact Gavin Jones or Adrian Shaw.

ExxonMobil (XOM.N) and its partner Royal Dutch Shell (RDSa.L) have not been affected by a delay in the formation of Iraq's new government, and work on their West Qurna Phase One project is moving ahead, an Exxon executive said on Monday.

Exxon expects to tender later this year to drill new wells in the supergiant field and will award contracts for well services within four weeks, which could include some work-over, said ExxonMobil Iraq Vice President James Adams, according to a report from Reuters.

"Right now things seem to be going ahead fairly well," Adams told Reuters on the sidelines a conference in Baghdad between oil company executives and the Iraqi Oil Ministry.

Iraq held a general election in March that produced no outright winner and as yet no new government.

"No, it's not affecting us," Adams said.

The Exxon-Shell contract to develop the 8.7-billion-barrel West Qurna Phase One project was one of series Iraq has signed with international oil companies (IOCs) to develop its reserves.

Adams said Exxon was taking the lead among the international oil companies in coordinating initial studies into a water injection scheme that could help raise extraction rates at West Qurna Phase One, Majnoon, Zubair, Rumaila, Gharaf, and Halfaya oilfields.

"We are taking the lead in terms of coordinating and undertaking the initial studies, because you don't want each field or each IOC to be doing their own design," he said.

He said the aim would be to produce 10-15 million bpd of water and while the project was in the very early stages of concept evaluation, it would definitely use seawater.

He said it would cost billions of dollars and that such projects typically took at least three years to complete.

"The timeline right now is undetermined but the timeline will be very fast," he said.

(Source: Reuters)

Related articles:

• International Oil Symposium in Baghdad
• West Qurna 1 to See 8 New Wells
• ExxonMobil to use water injection to enhance southern Iraqi oil ouput