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By John Lee.

Iraq's Minister of Foreign Affairs, Hoshyar Zebari, and his Russian counterpart, Sergei Lavrov, signed a memorandum of understanding on Tuesday for political and diplomatic cooperation.

Following the signing ceremony, political and technical talks between the two sides took place on ways to develop relations between Iraq and Russia as well as exchanging views on the latest regional, international, and the Syrian crisis developments.

The two sides stressed the need to stop violence and bloodshed and to find a political solution to the deepening Syrian crisis.

The Iraqi side requested Russia's help to liberate Iraq from the remaining provisions of Chapter VII.

They also discussed mechanisms to end the mandate of the Special International Coordinator in charge of the Kuwaiti missing people and properties under Chapter VII. Both sides agreed to work together with the rest UNSC permanent members to issue a new resolution that ends the mandate before the end of this year.

The Iraqi delegation included of the Minister of Foreign Affairs, Chairman of the Advisers Council at the Cabinet Dr. Thamer Al Ghadban, Legal Advisor to the Prime Minister Dr. Fadil Mohammed Jawad, Chairman of the National Investment Commission Dr. Sami Al Araji, and Iraq's Ambassador to Russia Fayek Neroy.

The Russian side comprised Undersecretary of the Ministry of Foreign Affairs, Chairman of the Middle East Department, Senior Advisers at the Ministry for Arab and Iraqi affairs, and the Russian Ambassador in Baghdad.

Lavrov held dinner invitation in honor of Minister Zebari and his accompanying delegation.

(Source: Iraqi Foreign Ministry)

By John Lee.

Both Russia's Gazprom Neft and the Kurdistan Regional Government have denied that the company has frozen projects in Iraqi Kurdistan.

"Gazprom Neft is still working on these projects. The company keeps its interest in Kurdistan," a Gazprom Neft source told Reuters.

A spokesman for the KRG said Gazprom had informed the KRG on Wednesday that it remains committed to its contract in the Kurdistan region.

This follows a report from International Oil Daily, citing Iraqi Oil Minister Abdul-Kareem Luaibi  [Elaibi] as saying Baghdad had received a letter from Gazprom, in which the company said it had frozen its contract with Kurdistan.

Gazprom management will travel to Kurdistan before the end of the year to discuss oil development in the province.

(Sources: Reuters, Bloomberg)

Iraq’s energy sector holds the key to the country’s future prosperity and can make a major contribution to the stability and security of global energy markets, the International Energy Agency (IEA) says in a special report of the World Energy Outlook released today – the first time that the IEA has conducted a comprehensive review of the energy sector of a major Middle East producer.

The IEA’s Iraq Energy Outlook finds that Iraq makes by far the largest contribution to global oil supply growth over the coming decades, with current production of 3 million barrels per day (mb/d) more than doubling by 2020 and going on to reach more than 8 mb/d by 2035. Iraq becomes a key supplier to fast-growing Asian markets, mainly China, and the world’s second largest oil exporter by the 2030s, overtaking Russia.

"This landmark study confirms the increasing importance of Iraq to the global energy system, highlighting the key role it is expected to play in meeting growing energy needs and the responsibilities it will assume as a strategic source of world oil supply. Put simply, this report shows that we all have an interest in Iraq realising its potential and revitalising its economy," said IEA Executive Director Maria van der Hoeven.

"Developments in Iraq’s energy sector are critical for the country’s prospects and also for the health of the global economy." said IEA Chief Economist Fatih Birol, the report’s chief author. "But success is not assured, and failure to achieve the anticipated increase in Iraq’s oil supply would put global oil markets on course for troubled waters."

Catching up with rising demand for electricity is a critical domestic challenge, as prolonged power cuts are still experienced on a daily basis in many parts of the country. The report estimates that, if planned new capacity is delivered on time, electricity generation will meet Iraq’s demand for power in 2015. Natural gas can play a much more important role in Iraq’s future and a vital first step will be to reduce the amount of gas that is currently flared. Once domestic needs are met, Iraq can also provide a cost-competitive source of gas supply to neighbouring countries, to European markets and to Asia, according to the report.

Meeting the anticipated levels of oil, gas and power supply over the period to 2035 will require over $530 billion in energy investment in Iraq, with the annual investment need highest in the current decade. But Iraq stands to gain much more – almost $5 trillion in revenues from oil export over the same period (an average of $200 billion per year). Revenues of this magnitude can transform Iraq’s future prospects, with the potential to stimulate much-needed economic growth and diversification. To achieve these ambitions, Iraq will need strengthened institutions and human capacity, a stable regulatory framework and sound long-term strategies for the energy sector, and efficient, transparent management of revenues and spending.

The Iraq Energy Outlook has been produced in close co-operation with the federal government of Iraq, the regional and provincial governments and officials across many government bodies, including fact-finding visits by the IEA team to Baghdad, Erbil and Basrah.

To download the free report, please click here.

Reuters reports that the Iraqi government has approved the exploration, development and production contract for Block 10 in the south of the country.

Russia's LUKoil, which already has an interest in the giant West Qurna-2 oilfield, won the deal for the 5,500-square-kilometer Block 10 in Muthanna and Dhi Qar provinces in Iraq's 4th round energy auction, along with partner Inpex Corp of Japan.

Lukoil has 60 percent of Block 10, while Inpex holds the remaining 40 percent. The group will be paid $5.99 for each barrel of oil equivalent it finds.

The company said the development of Block 10 will result in a synergistic effect due to the block's location a mere 100 kilometres away from the West Qurna-2 field.

(Source: Reuters)

By John Lee.

Russia's Pravda reports that Iraq may be about to buy $5 billion worth of MiG fighter jets, Russian helicopters, anti-aircraft missile systems, armored vehicles and other weapons.

Between 2008 and 2011 Baghdad purchased Russian weapons worth $246 million dollars, most of which were helicopters.

In the same period, deliveries of weapons and military equipment from the US totaled $6.56 billion dollars, according to the director of the Center for Analysis of World Arms Trade (TSAMTO), Igor Korotchenko.

The deal, if it goes through, would put Iraq among the five largest importers of Russian arms.

But Korotchenko was sceptical:

"Personally, I have serious doubts that Iraq will buy billions of dollars' worth of our weapons. They will not be allowed to do it. Iraq's foreign policy is tightly controlled by the US ... I do not expect very large contracts. Even if Iraq wants to buy a large quantity of Russian weapons, America will be opposed to it."

(Source: Pravda)

By Waheed Ghanim.

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Basra’s farmers say the oil industry is “occupying” their land – and that the one thing the Iraqi government is forgetting in its race to get oil firms in and farmers out, is the rising cost of the food Iraq can no longer grow itself.

Just over a year ago, Saleh Mohammed was farming in the Qurna area, west of the southern Iraqi city of Basra. But then the oil companies came. And today the land that Mohammed once farmed belongs to international oil giant, Exxon Mobil. And Mohammed himself works as an employee on the periphery of one of the oil production facilities.

Mohammed is 30 and his field of expertise is agriculture; he knows the ways of nature. He worked on his 2.5 hectare property planting wheat, barley and dates and everything he knew, he learned from his parents and grandparents, who had farmed the land before him. He really doesn’t know much about the oil industry. Yet, like so many others here, he too now wears the grey overalls and cap of oil facility workers.

“When the American, Russian and British oil companies started to come here, the government just wanted us to disappear,” Mohammed says. “They even offered us financial compensation to do so. Now some of us work as watchmen, some of us as gardeners and some as labourers with the oil companies for around US$600 a month. And I didn’t really have a choice in this matter – I have a wife and four children to look after.”

Mohammed is not alone. It’s estimated that there are 43 billion barrels of oil under the ground in this region. Almost all of Iraq’s oil currently comes from here. All of which clearly means big business, not only for the oil companies, but also for the Iraqi government.

By John Lee.

Iraq's cabinet has approved three oil and gas contracts awarded to foreign firms in the 4th round energy auction in May.

Government spokesman Ali al-Dabbagh (pictured) said cabinet approved an initial gas exploration contract with Pakistan Petroleum for gas Block 8, another deal led by Russia's Lukoil along with Inpex of Japan to develop oil Block 10, and the deal with Russia's Bashneft to develop oil Block 12.

Approval of a contract with a consortium led by Kuwait Energy, along with Dragon Oil and Turkiye Petrolleri, to develop oil Block 9 on the Iranian border has been delayed until the oil ministry "completes some of its procedures," added Dabbagh.

(Sources: Bloomberg, Reuters)

Our Expert Blogger Ahmed Mousa Jiyad talks to Robert Tollast about Iraq’s energy revolution.

RT: The involvement of major US IOC’s such as Exxon and Chevron in Iraqi Kurdistan has sparked a war of words between Baghdad and Erbil. Possibly concerned about a breakdown in relations between the KRG and Baghdad, the US State Department has warned US IOC’s to be cautious, as a US State Department spokesperson recently said:

We speak about it in Iraq. With regard to our own companies, we continue to tell them that signing contracts for oil exploration or production with any region of Iraq without approval from the federal Iraqi authorities exposes them to potential legal risk, and we continue to tell them – obviously, they’ll make their own business decisions, but unless and until we have federal legislation in Iraq governing these things, something that we’ve been urging, that there are risks for them. So that’s our message to our companies.

This has provoked a furious response from Kurdistan’s Minister for Natural Resources, Ashti Hawrami. Is it correct to say that US IOC’s should pay more attention to Iraqi politics and be a lot more careful?

AMJ- This question covers a plethora of issues.Firstly, it is my humble view that all IOCs should be careful and refrain from getting involved in the internal politics of any country, especially Iraq, and this is particularly true for IOCs with an unfavourable image in the national memory of Iraqis. They are oil companies and they should work as operators to develop the upstream petroleum sector as stipulated in their related service contracts, and thus should not assume any political or diplomatic function- it is not their job to do so. Politics should not be their preoccupation especially when their involvement in domestic politics will add more “fuel on the fire,” to borrow the title of an excellent book by Greg Muttitt.

Second, there is nothing new in the above position of the American administration on the issue under discussion. This citation reconfirms the content of a letter from the American President to Mr. al-Maliki answering the request of the latter for intervention in the ExxonMobil case with the KRG. However, misquotation, misinterpretation and different interpretations become probable depending on who reads this statement, how and why; and this applies to both sides of the isle. Nevertheless, this does not change the fact that production sharing contracts signed by IOCs with the KRG carry serious and daunting legal risks and face very serious uncertainties.

Third, with regards to ExxonMobil I believe the company might have made a grave error of judgement. The views expressed by my contacts among many Iraqi and non-Iraqi professionals suggest that ExxonMobil acted probably out of arrogance, short-sightedness, a misreading of Iraqi national memory and a disrespect for sovereignty with a covert and overt agenda.

We have to remember that ExxonMobil (along with Shell) did not win West Qurna 1 (giant Iraqi oil field- WQ1) during the first bidding round held in June 2009. It did so only after its competitor (Russia’s Lukoil) announced its decision to accept the ministry of oil’s remuneration fees of $1.9/barrel in October 2009. Then and only then ExxonMobil acted quickly by accepting the same term, which it refused in June, and proposed a higher production plateau target or PPT of 2.350 million barrels a day (mbd.) The ministry favoured ExxonMobil over Lukoil!

By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Iraqi Ministry of Oil confirmed in late July that Russia’s Bashneft had accepted the ministry’s maximum acceptable remuneration fee (MARF) for exploration Block 12, which was offered in the fourth bid round that took place at the end of May (MEES, 4 June). This is in line with what I anticipated in my assessment of the results of the fourth bid round.

This ‘newcomer’ to Iraq post-2003 upstream petroleum would consolidate further the position of the Russian companies and strengthen their presence and role in the country’s oil production. This also manifests clearly a petroleum asset seeking strategy and demonstrates that there has been a learning curve from previous bid rounds.

The Russian position could be consolidated even further if the speculation about the possible entry of another Russian company, Rosneft, materializes – but Gazprom might rock the boat.

Please click here to read Ahmed Mousa Jiyad's report.

Mr Jiyad is an independent development consultant, scholar and Associate with Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: [email protected]).

By John Lee.

The China National Petroleum Corporation (CNPC) is reported to be in talks with Russia's OAO Lukoil about joining the company’s West Qurna-2 project in Iraq.

Lukoil is seeking a partner for a 30 percent stake in the project following the exit of Norway's Statoil’s, Nefte Compass said, citing Andrei Kuzyaev (pictured), head of Lukoil Overseas.

(Source: Bloomberg)