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Crude oil prices are high enough to encourage investments in marginal fields, Iraqi Oil Minister Hussain al-Shahristani said.

Iraq, holder of the world’s third-largest oil reserves, is producing oil at “far below” its potential and plans to add four oil refineries with 750,000 barrels of capacity a day to tap rising demand from Asia, al-Shahristani said at the Asia Oil and Gas Conference in Kuala Lumpur today.

“It’s not expected that there will be much oil available from other parts of the world,” he said. “Any additional demand, particularly from Asia, will have to be met by Iraq.”

The Middle East nation is seeking foreign investors to boost output after six years of conflict and prior sanctions destroyed its infrastructure. The country completed two bidding rounds for oil development rights last year and has awarded a dozen contracts to international companies.

The country will receive $150 billion in investments from fields awarded last year, al-Shahristani said.

Nations counting on oil for revenue and investments have seen income fell as crude prices declined on concern slower growth will sap demand for energy. The price of crude oil in New York lost 14 percent in May, the biggest monthly drop in 18 months, partly on concern the euro region’s debt crisis will slow economic recovery. U.S. crude oil inventories have risen every week but two since the week ended Jan. 22, according to data from the U.S. Department of Energy.

Refinery Study

Foster Wheeler AG said last week that it won a contract for a feasibility study and the engineering and design of an oil refinery at Nassiriyah in Iraq, as the Middle Eastern country seeks to boost its capacity to meet domestic demand and allow for some exports.

Iraq plans to build a 300,000 barrel-a-day facility at the southern city of Nassiriyah, Foster Wheeler said in a Business Wire statement June 2. The company didn’t disclose the value of the contract.

“Within a couple of years Iraq should be an exporter of petroleum products rather than an importer,” al-Sharistani said.

Iraq consumed about 638,000 barrels a day of oil products in 2008, up from 596,000 barrels daily in 2007, according to a report from the U.S. Energy Department.

OPEC Meeting

The Organization of Petroleum Exporting Countries, which supplies 40 percent of the world’s oil, isn’t planning any emergency meeting before its next scheduled meeting, he said. The next scheduled gathering is on Oct. 14.

Oil prices are “reasonable” and there is no shortage of supply, Mohamed al-Hamli, the United Arab Emirates oil minister. said June 2.

OPEC is set to reduce shipments this month as demand from Europe and the U.S. remains weak, according to tanker-tracker Oil Movements.

OPEC will ship 23.47 million barrels a day in the four weeks to June 19, the consultant said in a report on June 3. That’s down from a revised figure of 23.6 million for the four weeks to June 12 and 23.7 million in the four weeks to June 5. The data exclude Ecuador and Angola.

OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from the quota system.

As markets continue to saturate in the region, Iraq emerges as a new destination for investors in the hospitality and aviation sectors, eagerly searching for new territories to conquer.

This weekend alone saw two major announcements with Abu Dhabi-based Rotana Hotels and Resorts poised to build a luxury property in Baghdad by 2012, while German carrier Lufthansa announced plans to jet into the Iraqi capital from September.

And even though the state-owned Iraqi Airways' bankruptcy declaration on Thursday could prove to be a setback for Iraq, the country's first private carrier, Alnaser Airlines, continues to forge ahead with its expansion plans after launching flights to Dubai earlier this month.

Earlier, Emirates Business had reported that Iraq's hospitality sector alone was expected to see an influx of $145 billion (Dh532.1bn) over the next fives years, with an estimated 22 per cent of that investment originating from the UAE.

Iraq's government-run National Investment Commission (NIC) revealed the figures, adding that an amendment in the law will now also allow foreign ownership of land to attract more international hospitality clientele.

"NIC plans to draw $500bn into Iraq over the next five years, with 29 per cent of that attributed to the hospitality industry alone," said NIC's Dr Ayser Fahd, Manager, Economic Department. "We expect foreign investment from the UAE to account for nearly 22 per cent in this sector."

Rotana, along with Marriott and Kempinski, are just some of the high-profile brands that have signed up or in the process of expanding their properties into Iraq.

While Rotana and Kempinski have already broken ground for four and five-star properties in Kurdistan - with the former hotel opening this summer - Marriott's entry is also on the cards, which Fahd confirmed, adding: "We have already processed the paperwork for Marriott International. I'm sure an announcement should follow soon."

Talking about their expansion into Iraq, Rotana's President and CEO Selim El Zyr told the paper earlier: "The opportunity arose when we were approached to manage two new five-star projects, one in the city of Erbil, located in the Iraqi Kurdistan region and the other in Baghdad, located within the International Green Zone, which is the heavily guarded diplomatic/government area in central Baghdad.

"Based on our research and market study, we believed that these markets were emerging and saw them as an opportunity."

The group's 205-roomed Erbil Rotana, in partnership with Lebanon's Malia group, is set to open in the first quarter of 2010, said El Zyr.

The 250-room five-star Baghdad property is scheduled for an early 2012 opening, in partnership with Summit Hotel Limited.

Other hotel properties scheduled for Iraq include Abu Dhabi investment company, Noor Capital's, plans to build a $100 million five-star hotel apartment project in Karbala, with United Kingdom hospitality developer Range Hospitality.

The project, called The Range, is expected to be completed in 2013.

Turkey-based Divan Hotels, which also recently announced plans to open a $90m five-star hotel in Northern Iraq in the first half of 2011.

Chairman Sarp Turanlıgil said: "We believe that an international-standard chain hotel such as Divan Erbil will meet an unserved need in this market and for that reason we resolved to make this investment."

Flight connections

Deutsche Lufthansa, Europe's second-biggest carrier's announcement this weekend to restart regular services to Baghdad makes is the first for a western European and US carrier to resume flights to the capital.

Turkish Airlines became the first carrier in Europe to resume Baghdad flights in October 2008. The airline is offering one daily connection, according to its website. Bahrain-based Gulf Air began serving the Iraqi capital in September 2009, while Abu Dhabi's Etihad Airways followed last month.

Etihad also announced earlier it would launch services to Erbil from Tuesday, subject to government and regulatory approvals.

James Hogan, Etihad Airways Chief Executive, said: "We expect to see strong demand on these routes, particularly from government and business travellers, as well as people from Iraq visiting family and friends around the world.

"We launched a cargo operation to Baghdad in September 2009, and have recently commenced additional cargo flights to Erbil, which we expect will perform well for Etihad."

According to industry figures, Baghdad Airport currently manages around seven million passengers a year.

Meanwhile, Erbil could be served by nearly 30 international airlines by year's end according to media reports, with flydubai and Qatar Airways, each portraying interest in Iraq's Kurdistan region.

"Iraq is definitely on our radar. We've been there a few times," Fly Dubai's CEO told The Associated Press in an interview.

"It's currently underserved," said Ghaith Al Ghaith. Qatar Airways CEO Akbar Al Baker announced at the Arabian Travel Market earlier this month that his airline has permission to fly to Baghdad, Erbil, and Najaf.

Meanwhile, Alnaser Airlines, Iraq's first private airline established in 2009, started its daily flights from Dubai to Iraq earlier this month. The flights are running to their full capacity of 140 passengers.

The airline, owned by an Iraqi national, Shaikh Hussain Al Khawam, has started a joined venture with the US-owned FK Gryphon Airlines, which in 2008 started commercial operations in Iraq and Kuwait.

Ali al-Dabbagh, the official spokesperson of the Iraqi government has said that the transportation minister has been authorised by the cabinet to sign an aviation transportation agreement with Qatar, Aswat al-Iraq has reported.

The agreement aims to overcome difficulties and delays in aviation transportation between the two countries, he said.

( AME Info FZ LLC )

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

Iraq will supply crude to at least two Asian buyers at around 10 percent below contract volumes for June, possibly the first major cut in allocations by the OPEC producer this year, industry sources said on Wednesday.

The cut was on medium-heavy Basrah Light crude, they said.

It was not immediately known why Iraq cut the supply, but it might be related to production problems at its oilfield, the sources said.

Oil output and exports from Iraq fell last month due to repeated attacks against the Kirkuk-Ceyhan export oil pipeline and possible pumping problems in Basra fields.

A Reuters survey showed oil output in Iraq -- the only member of the 12-member OPEC producer group that does not have an agreed production limit -- fell to 2.28 million barrels per day (bpd) in April from 2.32 million bpd in March.

Iraq's oil exports fell slightly in April to 1.767 million bpd from 1.79 million bpd the month before, an Iraqi Oil Ministry official has said.

Iraq exported an average of 1.42 million bpd from the southern oil hub of Basra and 341,965 bpd from the northern oilfields around Kirkuk, including about 9,983 bpd by trucks to Jordan.

The fall in exports was due to bad weather in Basra and a brief halt of exports via the Kirkuk-Ceyhan pipeline after a bomb attack last month.

Term buyers of Iraqi crude have not been eager to take Basrah Light in the first quarter of this year due to increased supplies of other medium-heavy grades, such as from Saudi Arabia, Qatari al Shaheen crude and the new Russian ESPO Blend, traders have said.

Reflecting the weak demend, Iraq's State Oil Marketing Organisation (SOMO) made a rare offer of 3 million barrels of Basrah Light on the spot market for loading in March.

Demand for Basrah Light improved slightly last month, with some cargoes heard to have traded at premiums to the official selling price (OSP), trader said.

Iraq raised the OSP of its Basrah Light crude loading in June to customers in Asia by 10 cents to a discount of $1.05 to the average of Oman/Dubai quotes.

Top oil exporter Saudi Arabia earlier this week said it would supply full volumes to at least seven Asian clients in June, steady from May, as oil held within the kingdom's preferred range and Asia was expected to lead demand growth. (Additional reporting by Florence Tan, James Topham in TOKYO, Ahmed Rasheed in BAGHDAD and Alex Lawler in LONDON; Editing by Ramthan Hussain)

Doha, 10 May 2010 - Reuters

Iraq plans to boost power capacity to 27,000 megawatts in four years after opening its gas sector to foreign investment and sealing a gas capture deal with Royal Dutch Shell, a minister said on Sunday.

The OPEC member would need to invest at least $3 billion to $4 billion per year to reach that target, Iraq’s Electricity Minister Karim Waheed told Reuters on Sunday.

He did not say how Iraq plans to raise such funds. It has struggled to finance its previous power generation plans.

Reaching the ambitious power capacity target would depend mainly on finalising a venture with Shell to capture and use gas now being burned in the southern oilfields around Basra, and on output from three gas fields, which Iraq is auctioning off in September, Waheed said.

‘This depends on both the gas fields — the announcement for the third round — and on capturing the burned gas deal with Shell,’ he said in an interview on the sidelines of an energy conference in Qatar.

Waheed said if Iraq does not come to an agreement with Shell, the ministry will have to rethink its power plans.

Iraq is close to signing a final deal between its South Gas Company, Shell and Japan’s Mitsubishi, after it sent the final draft of the agreement to the cabinet for approval, Iraqi Oil Minister Hussain Al Shahristani said on Thursday.

Shahristani also said that Iraq will invite 45 international companies, which were prequalified for two oil auctions last year, to bid to develop Akkas gas field in Iraq’s western desert, Mansuriyah gas field in eastern Iraq and Siba in the southern oil hub of Basra.

Waheed said he expects the gas fields now being tendered to start producing in two to three years.

TENDERS

Iraq plans to issue new tenders next week for installing turbines as part of the ministry’s plans to boost electricity capacity, Waheed said.

In 2008, it said it had agreed a 1.5 billion euro ($2.03 billion) deal with Siemens for 16 gas turbines and a deal with General Electric worth $3 billion for 56 turbines. The turbines are expected to add nearly 9,000 megawatts of capacity over the next few years.

Iraq scrambled for ways to finance the purchase after a plunge in oil prices in 2008 deprived it of revenues and forced it to slash its 2009 budget three times. It had offered investors stakes in the electricity turbines it has ordered, and said it would repay investors from future electricity sales.

In March, the finance minister said Iraq raised $2.1 billion from local banks via a one-year treasury bond issue to fund electricity projects.

‘Next week, we will tender for bids for installing turbines at two more sites, at Baiji for six turbines of 160 MW and Kirkuk for one turbine of 260 MW,’ Waheed said.

‘Some 38 companies will participate and compete for the deals. Just to install the turbines, we’ve already bought the turbines.’

Waheed put 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.

Frequent fuel shortages and constant maintenance are a main reason behind the shortfall in available power capacity in Iraq, where dilapidated infrastructure has been hit hard by years of war, insurgency attacks and underinvestment.

Seven years after the U.S.-led invasion, Iraq’s national grid still only supplies a few hours of power each day. Intermittent electricity is one of the public’s top complaints.

Baghdad, the capital, is expected to enjoy about eight hours of electricity a day when temperatures hit 50 degrees Celsius in the summer, Waheed said.

With the new power plans, Baghdad, with current 3,000 MW of power available, could finally have 24 hours a day of electricity in two years.

10 May 2010 - AME

Qatar Airways CEO Akbar al-Baker has said the airline has received approval to fly to Baghdad, Erbil, and Najaf in Iraq, The Kurdish Globe has reported.

"We are waiting for the arrival of more planes to our fleet before starting service to Iraq aggressively," he said.

FlyDubai’s chief executive CEO, Ghaith Al Ghaith, has said the airline is considering starting up services to Iraq."Iraq is definitely on our radar" and that the country is "currently underserved" he said.

The chief executive of Qatar Airways has also said it was looking at expanding to multiple cities in the war-scarred country.

If the airlines go ahead with the idea, they will be joining a growing number of carriers - including Germany's Lufthansa and Abu Dhabi's Etihad Airways - entering the Iraqi market as security improves and business picks up.

( Gulf News )

Qatar Telecommunications Co QTEL.QA (Qtel) announced on Wednesday that it more than doubled its first-quarter net profit, beating analysts' expectations.

They posted a first quarter net profit of 1.2 billion riyals ($329.8 million), compared with 593.7 million riyals a year-ago.

Analysts polled by Reuters expected a first quarter net profit of 644.7 million riyals.[nLDE63A03Y]

Expected competitive pressure in Qatar was offset by growth in other markets, particularly Tunisia, Iraq, Algeria and Oman, a Qtel spokesman said in an interview with Reuters.

"The growth that we saw came from markets outside Qatar. That is consistent with our strategy, as we've been prepared for competition (at home) for some time now," he said.

The company, which operates in 17 countries, has expanded rapidly to mitigate the loss of its monopoly after Britain's Vodafone (VOD.L) VFQS.QA entered the Qatari market.

Its focus has been on acquisitions in the Middle East and North African region, the Indian subcontinent as well as south east Asia.

"Qtel will be looking for acquisitions and organically growing their core operations this year," said NematAllah Choucri, analyst at HC Brokerage in Cairo.

"We expect healthy growth in the top line in 2010, but lower margins because of increased competition in three markets: Qatar, Tunisia and Kuwait," she said.

Vodafone Qatar VFQS.QA, the Qatari unit of British mobile operator Vodafone (VOD.L), broke Qtel's monopoly with its bid for Qatar's second mobile telephone license for $2.12 billion in 2007. In March, Vodafone was awarded the country's second fixed-line phone licence.

( Reuters )

Recovery in the world's biggest economies could be jeopardized if crude oil prices stay over $80 per barrel, the International Energy Agency said Tuesday.

The IEA also reported that OPEC posted the first "significant decline" in output in March in more than a year -- falling 190,000 barrels per day to 29 million barrels a day -- largely due to a near 10-percent drop in Iraqi output.

The agency, the energy arm of the Organization for Economic Cooperation and Development, a grouping of the world's richest nations, said concerns remain that global oil markets are "overheated," with crude around $85 per barrel.

"Ultimately, things might turn messy for producers if $80-100 (per barrel) is merely seen as the new $60-80 (per barrel), stunting economic recovery while prompting resurgent non-oil and non-OPEC supply investment" the Paris-based IEA said in its monthly oil market report.

Price subsidies that benefit consumers in non-OECD countries like China and India, and tighter credit than two years ago "could stall OECD economic recovery or render it more oil-less than we currently envisage," it said.

The IEA said that operational problems and weather-related export disruptions at its southern terminals drove down Iraqi output by 220,000 barrels per day last month. But the agency noted that Iraq's exports hit a two-decade high of 2.07 million barrels a day in February, and total exports in March were tallied at 1.79 million.

The IEA estimated global demand in 2010 would rise by 30,000 barrels a day in 2010 to 86.6 million barrels a day compared to last month's report. Demand for 2009 was revised down by 70,000 barrels to 84.9 million.

The agency said OPEC kept its output targets unchanged last month largely on expectations that global oil demand will pick up later this year to absorb above-target production.

Oil prices have been hovering around 18-month highs of $80-85 per barrel. The international oil cartel is not expected to meet again until Oct. 14 in Vienna.

Qatar's oil minister said last week that crude's recent rally is driven mainly by speculation, not a shortage of supply, and dismissed the likelihood that OPEC would hold a special meeting to re-evaluate current production.

( Associated Press )