Custom Search

By John Lee.

Rigzone reports that the Iraqi oil ministry is planning to auction the giant 'Nasiriya Integrated Project' -- which involves the development of a $4.4-billion oil field and the building of a 300,000 bpd refinery in southern Iraq -- on 19th December.

At a workshop in Amman, Jordan, for international companies interested in the billion-dollar project, Abdul Mahdy al-Ameedi, head of the Petroleum Contracts and Licensing Directorate (PCLD) said a total of 52 international oil companies would be able to take part in the bidding round; those are the 45 firms already qualified from previous bidding rounds, plus the seven companies shortlisted last month.

Ameedi added that the ministry is also processing documents from a further five companies: Daelim; Essar; GS E&C; Pak-Arab Refining; and Maurel et Prom.

Mr. Ameedi briefed the companies on a preliminary draft contract prepared by the PCLD. According to the draft, terms will be different from the technical service contract awarded to companies during previous bidding rounds for oil and gas fields. The changes include amendments to investor costs and a pay-per-barrel remuneration fee.

Unlike the previous contract, the new one will offer investors a share in project revenues, but only when production begins. The ministry will pay recovery costs from the date of commencement of work, which differs from the previous contract where the costs were only paid when the contractor raised production by 10%.

According to Rigzone, investors would have to pay some 35% taxes on the profit they made from Nassiriya project, the same amount as in previous deals.

Oil firms have complained that the terms of ministry's previous contracts were tough and fell short of their expectations. They prefer production sharing contracts rather than the technical service deals that Baghdad previously signed with many of them.

Mr. Ameedi said Total was allowed to invest in the Nassiriya refinery but it wouldn't be allowed to work in the field unless it cancels its projects in Kurdistan. If Total and its partners win the Nassiriya project, it will be allowed to operate the refinery but not the field, he added.

Iraq's three aging refineries, Baiji [Beiji, Bayji], Doura [Daura] and Basra, are producing 560,000 bpd, or 70 percent of capacity, which is enough to meet 60- to 70 percent of Iraq's total needs.

(Source: Rigzone)

By Omar al-Shaher for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

There were conflicting accounts of the reasons for the rise in the value of the US dollar against the Iraqi dinar earlier this month. Politicians and economists have said that Iranian companies boosted the value of the dollar against the dinar by entering the Central Bank of Iraq’s (CBI) auction for hard-currency sales and buying large quantities in order to smuggle them into Iran. On the other hand, a former senior official at the CBI said the rise is linked to increased government revenue from oil sales, leading to an increase in government spending.

The weekly bulletin released by the CBI says 1,260 Iraqi dinars are now trading to the dollar, a level not been reached since last year.

A member of the Iraqi parliamentary finance committee said the value of the dollar increased against the dinar because some Iraqi banks have stopped converting dinars to dollars and have sold dollars to exchange companies at prices favorable to the banks.

Hussein al-Yasiri said some banks have stopped selling dollars to regular customers and instead have been selling them to exchange companies. This has prompted Iraqis to buy dollars from the exchange companies at prices favorable to the companies. The exchanges are not subject to government monitoring.

Ahmed al-Alwani, head of the Iraqi parliament’s economic committee, said Iran’s need for hard currency as a result of international sanctions has prompted Iran to mobilize Iraqi partners to help the country get dollars through the CBI auction.

By Omar al-Shaher for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The controversial Iraqi Sunni politician Ahmed al-Alwani, who is president of the Economic Commission in the Iraqi parliament, ridiculed the notion that if Anbar province gains autonomy, its economy will be weak because the province lacks essential economic resources. He said that large Iraqi provinces can attract a lot of investment.

Alwani proudly claims to be “the godfather of the Anbar [autonomy] project.” He said that “whoever says that Anbar wishes to become an [autonomous] province in order for it to throw itself into the arms of neighboring Sunni Arab states is getting his information from [the wrong sources].”

Alwani is considered to be at the forefront of the Anbar protest movement that started more than two months ago and spread throughout Sunni-dominated areas in Iraq to oppose Prime Minister Nouri al-Maliki’s policies. The protests turned into an open-ended sit-in on the international highway that passes through Anbar and connects Iraq to both Syria and Jordan.

Alwani gained fame when he was reported to have accused Iraqi Shiites of being subservient to Iran and working to serve its interests in Iraq, but he has denied saying that.

Anbar is majority Sunni and the largest of Iraq’s provinces, covering a third of the country. It borders Syria, Jordan and Saudi Arabia and has one of the largest untapped gas fields in Iraq, the Okaz field.

Alwani said that “establishing a province does not mean secession. According to the constitution, [Anbar] should receive a portion of the state budget to manage its affairs, as happens with the Kurdistan region.” He added that “the Iraqi constitution provides for the formation of [autonomous] regions, but it also provides for the existence of federal ministries, such as finance, defense and foreign affairs. This is to ensure the success of the [autonomous] regions project.”

By Omar al-Shaher, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Privately held Iraqi banks have almost entirely relinquished their traditional functions — such as giving out loans, lending credit and issuing letters of credit — due to default risks. Instead, they are resorting to profit making through participation in the currency auction regularly held by the Iraqi Central Bank.

Iraqi banks demand exaggerated guarantees for the granting of any loans to local investors, for fear of defaults on payments. According to banking experts, the value of some loans does not cover more than 40% of the guarantees the privately held banks are demanding, leading to a decrease in the number of loan operations conducted by these banks to a bare minimum.

A lack of local confidence in privately held banks has contributed to their reluctance to enter the market. According to banking expert Dr. Ahmad Brayhi, “Members of the public are depositing their money in government owned banks because they feel that they will honor their commitments towards them.” He also added, “The public does not have much confidence in local banks, which is why it does not trust them with its money.”

Bank brokers affirm that most privately held banks have either closed — or chosen not to open — branches in Iraqi provinces and restrict their activities to their main branches in Baghdad, due to a reluctance to engage in real banking transactions.

Out of a total of 23 privately held banks operating in Iraq, only two are located in the city of Erbil and one in Mosul, whereas 20 are located in Baghdad.

By John Lee.

Iraq has approved the deal under which Kuwait Energy would replace Turkey's state-owned Turkiye Petrolleri AO (TPAO) on the Block-9 exploration contract.

Abdul-Mahdy al-Ameedi, director of the ministry's contracts directorate, told Reuters:

"Kuwait Energy has acquired the stake of the Turkish company TPAO, and now it's holding 70 percent of the contract, and Dragon Oil PLC will hold 30 percent."

A consortium of companies, comprising Dragon Oil (30%), TPAO (30%) and Kuwait Energy (40% and operator), was awarded the exploration, development and production service contract for the 900-square-kilometer (350-square-mile) Block 9 in Iraq’s fourth bidding round in May. The bid for Block 9 was awarded on the basis of a remuneration fee of US$6.24 per barrel of oil equivalent.

As a result of the deteriorating relations with Turkey, caused by the closer links between Turkey and Iraqi Kurdistan, and not helped by the situation in Syria, Iraq asked Kuwait Energy last year to acquire TPAO's shares in the block.

The oil ministry plans to sign the final deal on 27th January.

(Source: Reuters)

By John Lee.

The former head of the South Oil Company (SOC), Fayadh Hassan Nima [Niama], has been named to replace Ahmad Shamaa [Ahmed al-Shamma] (pictured) as Deputy Oil Minister.

Shamma, whose responsibilities included downstream activities and overseeing the Basra Gas Company -- the  joint venture between Shell, Mitsubishi and the South Gas Company -- had been in the job since shortly after the US-led invasion in 2003, and had reached retirement age.

Nima was removed from his position the the SOC in 2009 following his public criticism of Baghdad's auctioning of oil and gas fields to foreign energy giants, arguing instead that the SOC should be given the task of exploiting the fields in southern Iraq with only technical assistance from foreign companies.

(Sources: The National, Iraq Oil Report, AFP)

A new report from Deloitte, entitled "Mergers and Acquisitions in the Oil and Gas Industry -- Current upstream M&A issues and transaction considerations", looks at the factors affecting investment in Iraq:

"Iraqi production, which has now passed the 3 million barrel per day level, is benefiting from foreign investors with the expertise to exploit these resources.

"The question remains as to whether these nations will achieve optimum production levels or whether they will continue to face constraints due to outdated infrastructure, political challenges (such as in Iraq), policy uncertainty and continued security threats.

"The fiscal terms being offered by governments have been on the top of the agenda for contractors with assets in countries affected by the Arab Spring and consequent regime change. This issue has been under the spotlight recently in Iraq and the semi-autonomous Kurdistan Regional Government (KRG) in the north.

"Whilst some E&P companies have been involved in the auctions for new exploration rights during the first half of 2012, the fee-based service contracts on offer by the Government of Federal Iraq, rather than the production sharing framework, have discouraged many investors who have been required to price in additional risk as seen in the fourth Iraq licensing rounds in May 2012.

"Contracts on offer by the KRG that require more development expenditure are offering production sharing arrangements which are attracting more interest, although there is pressure from Baghdad on IOCs and super-majors from operating in Kurdistan; however, this has not prevented ExxonMobil, Total, Gazprom and Chevron from entering into such agreements.

"Although Iraqi oil is generally regarded as ‘Easy oil’ (low cost to produce), IOCs have been reluctant to commit to costly exploration projects on the terms on offer, especially as a Federal Oil Law has yet to be ratified and adopted.

"Recent press coverage about Exxon Mobil’s intention to leave the giant West Qurna-1 project in Federal Iraq is conceivably a result of less attractive terms currently on offer."

Please click here to download the full report.

(Source: Deloitte)

By John Lee.

Sinan al-Shabibi (pictured), the former head Iraq's Central Bank who was removed for suspected mismanagement and currency manipulation, has dismissed the charges against him as baseless and trumped up.

Speaking to AFP, he said authorities had compromised the bank's independence to access its reserves, adding that the government had been "spoiled" by a stable exchange rate for several years.

He said a warrant for his arrest had blown relatively minor foreign exchange fluctuations out of proportion.

While diplomats and analysts have interpreted the move as a power grab by Nouri al-Maliki, the premier's office has reportedly nsisted it was not behind the moves.

Speaking from Geneva, Shabibi said:

"Since 2009, they wanted to fire me, and they wanted money from the reserves ... I think the main problem... is basically the reserves, because they thought we have a lot of reserves, and they want to use it for financing ... The government wanted some money from the central bank... Of course, the law does not allow that, the central bank law.

"And of course, they say that there are differences in exchange rate policy. I don't think these differences require firing the central bank governor."

Asked if the warrants for him and other officials affected the bank's independence, Shabibi replied: "I'm sure, yes."

By John Lee.

The Iraqi cabinet has expelled Turkey's state-owned Turkiye Petrolleri AO (TPAO) from the consortium that was granted the rights to explore energy block 9, and has asked Kuwait Energy to take over the shareholding.

Abdul Mahdi Al Ameedi, director of the oil ministry’s Petroleum Contracts and Licensing Directorate (PCLD), said:

"For reasons to do with non-technical issues and outside the responsibility of my office and me personally ... the Turkish company TPAO was excluded from the consortium ... This decision is final, there is no approval to sign the contract for Block 9 ... The decision (to expel TPAO) is from the cabinet."

A consortium of companies, comprising Dragon Oil (30%), TPAO (30%) and Kuwait Energy (40% and operator), was awarded the exploration, development and production service contract for the 900-square-kilometer (350-square-mile) Block 9 in Iraq’s fourth bidding round in May. The bid for Block 9 was awarded on the basis of a remuneration fee of US$6.24 per barrel of oil equivalent.

The change would mean Kuwait Energy's holding would increase to 70 percent.

TPAO also has a 7.5 percent holding in the Badra oil field development, and along with Kuwait Energy, was awarded the contract for the Siba gas field in October 2010.

The explusion comes at a time of political tensions between Baghdad and Ankara, with Turkey refusing to extradite Deputy Prime Minister Hashemi to Iraq where he has received four death sentences, and with the two sides taking opposing views on the crisis in Syria.

Earlier this week it was reported that Turkey had signed a major contract to drill oil wells in Iraq.

(Sources: AFP, Reuters)

Iraq has signed a deal with Russia's LUKoil, and Inpex Corp of Japan, to explore the 5,500-square-kilometer (2,100 square mile) Block 10 in Muthanna and Dhi Qar province.

Under the contract, the two firms must invest at least $100 million and will be paid $5.99 for each barrel of oil equivalent it finds.

"This contract represents the resumption of exploration work which stopped in the 1970s," said Abdul Mahdi Al Ameedi, director of the oil ministry’s Petroleum Contracts and Licensing Directorate (PCLD). "We hope it will result in added reserves of oil, which is important for Iraq."

Lukoil and Inpex won the contract in the 4th round energy auction held in May.

(Sources: Middle East Online, NINA)