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Iraqi Prime Minister Nouri al-Maliki said on Sunday that the process to re-evaluate the Iraqi dinar has to do with economic conditions that have to be strengthened.

“The Iraqi dinar has every reason to grow stronger thanks to an increase in revenues and development of the economy,” Maliki said in response to questions through the National Information Center.

“The government would not rush matters but would rather work on finding guarantees to render this measure a success. The Central Bank of Iraq (CBI) is currently entrusted with drawing up a study on the whole issue and would give its decision soon,” said the Iraqi premier.

The Iraqi dinar’s exchange rate is suffering from low value against foreign currencies as a result of decades of wars and economic embargo that brought the local currency’s exchange rate to the rock bottom from three dinars per dollar in the late 1970s and 1980s to 3,000 dinars per dollar after the 1990 invasion of Kuwait, followed by a 13-year crippling sanctions regime.

The exchange rate fell even more after 2003 to reach 1170 dinars per dollar due to the CBI’s policy of daily auction, in effect for more than five years now.

The policy was lambasted by several economists on the grounds that these auctions do not give the real value of the country’s local currency.

(Aswat Al Iraq)

Iraq's Oil Ministry is negotiating with China's CNOOC (China National Offshore Oil Corporation) for a service contract for the 2.5 billion barrel Maysan oilfield complex, Iraqi oil officials said on Monday.

Oil Minister Hussain al-Shahristani said the Chinese company, which he did not identify, had accepted the government's proposed remuneration fee of $2.30 for every additional barrel of oil produced.

Another Iraqi oil official, who asked not to be identified, said the company was CNOOC, which together with Sinochem made an unsuccessful bid for Maysan's three fields in Iraq's first auction of oilfield contracts last year.

"After the big success we achieved the Chinese company returned back to us and said 'we accept your offer of $2.30'," Shahristani told al-Salam television channel.

According to Reuters, the deal could join a series of contracts that Iraq has signed in a bid to boost its output capacity in seven years to 12 million barrels per day, from around 2.5 million bpd now.

( Reuters )

The New York Times reports on how terrorist attempts to derail the auctions of Iraqi oilfield development rights have failed, and the process went ahead as planned. “The terrorists tried to send a message to the oil companies through the bombings,” the oil minister, Hussain al-Shahristani, declared on Iraqi television. “But this message was not delivered.”

After decades of decline, Iraq’s oil industry looks set to recover its place among the world’s leading producers, perhaps even to challenge Saudi Arabia for the top spot by the end of the decade.

“[If the IOCs] are reasonably successful in delivering on the commitments we’ve made, it is quite likely we will see Iraq increase its production to around 10 million barrels per day within about 10 years,” Tony Hayward, chief executive of BP, told the World Economic Forum at Davos, Switzerland, last month. “[Absent unforeseen political events] the resources there are relatively easy to bring on-stream.”

But Associated Press quotes a more sceptical source from the International Petroleum Week conference in London as saying "I haven't found a single person who finds that target [12 million bpd] achievable … it's much lower than that, but even so, Iraq is a complete game-changer, even if it delivers half of that."

And the oil services companies are set to benefit hugely from all this. The success of the auction in December “implies a huge amount of service activity over the next two or three years,” said Andrew Gould, chief executive of Schlumberger, the oil field services giant.

Repairing pipelines, rebuilding terminals, and upgrading all the other infrastructure needed to get the oil to the market should be worth billions to the likes of Halliburton, Schlumberger and Bechtel.

(Sources: New York Times, Associated Press)

The Central Bank of Iraq’s (CBI) dollar sales reached $185.485 million in its daily auction on Monday, compared to $130.669 million in the previous session.

“Demand hit $14.08 million in cash, covered at an exchange rate of 1,170 Iraqi dinars per dollar, and $171.405 million in foreign transfers outside the country, covered at an exchange rate of 1,173 Iraqi dinars per dollar,” according to a CBI news bulletin received by Aswat al-Iraq news agency.

None of the 14 banks that participated in today’s session offered to sell dollars.

The Central Bank of Iraq runs a daily auction from Sunday to Thursday.

Iraq plans to knock three zeros off the nominal value of bank notes to facilitate currency transactions, a central bank official said on Thursday.

Iraq is trying to revamp its economy and boost oil production after the effects of the war with crude deals that may vault it to one of the world's top oil producers.

"The goal is to improve the payment and receiving system in the country and consequently to reform cash management," said Mudher Kasim, a senior advisor at the central bank.

Iraqi payment systems rely almost exclusively on cash.

Iraq has 25 trillion dinars in circulation, officials say and hopes to have the new currency in circulation by the end of the year.

An Iraqi cabinet committee ordered the change in 2007, but the central bank did not think it appropriate until recently, Kasim said. The dinar's value will remain unchanged, he said.

The dinar is managed through foreign exchange auctions, and traded hands at 1,170 per dollar at the last sale.

Iraq's oil minister Hussain al-Shahristani just made it clear at a press conference that Iraq is gunning to knock Saudi Arabia out of the top slot for oil production.

Markets won't to wait too long for this to happen either, and OPEC better not try to stop them:

Hellenic Shipping News: “We can’t find a reason to prevent Iraqi production becoming higher than any other OPEC state or even states outside OPEC. We expect that to happen in the next six to seven years with co-ordination and agreement with other OPEC producers,” he said. Iraq has signed a series of oilfield development deals with global oil firms – which bid on prime fields at two energy auctions last year – in a nation with the world’s third largest crude reserves, emerging from years of conflict and sanctions.

Unlike OPEC’s 11 other members, Baghdad is not subject to the output targets the group uses to set supply levels. OPEC exempted Iraq in the 1990s, when it was under sanctions. “Iraq has been deprived of having a fair export level over the last years, during which we were not able to produce or export oil while other states got benefit from this and were able to export at higher levels,” Shahristani told reporters.

“Opec should put into consideration Iraq’s need for oil revenues to rebuild its economy and country. Iraq has a definite need for these revenues.”

Iraqi Oil Minister Hussain al-Shahristani yesterday said he expected Iraq to become the world’s top oil producer in six to seven years, and that OPEC should take into account Iraq’s need to rebuild its economy.

Emerging from the shadow of war and keen to generate petrodollars to rebuild, Baghdad looks set to lift capacity to 12mn barrels per day in six or seven years, strengthening its hand for future negotiations on output quotas with OPEC.

“We can’t find a reason to prevent Iraqi production becoming higher than any other OPEC state or even states outside OPEC. We expect that to happen in the next six to seven years with co-ordination and agreement with other OPEC producers,” he said.

Iraq has signed a series of oilfield development deals with global oil firms – which bid on prime fields at two energy auctions last year – in a nation with the world’s third largest crude reserves, emerging from years of conflict and sanctions.

A consortium led by Exxon Mobil and Royal Dutch Shell on 25 January signed a contract with the Iraqi government to redevelop and expand the West Qurna field – one of Iraq’s biggest oil fields. The Exxon team said it would boost production at the field to 2.325 million barrels a day, up from just 279,000 barrels a day currently. The field has estimated reserves of 8.7 billion barrels. Exxon, which is the operator of the project, has the bigger stake in the venture with 80%, while Shell holds the remaining 20%.

"I am happy to conclude this contract with these two major companies to develop the giant West Qurna oil field," Iraqi Oil Minister Hussein al-Shahristani was quoted as saying by the press at the signing ceremony in Baghdad.

However, Iraq has been witnessing violence-related incidents frequently since the 2003 US-led invasion of the oil-rich country. Rainer Winzenried, a Shell spokesman, told New Europe on 26 January that “security is a concern. It was also in the past when we engaged in Iran.” He noted that the company would take additional precautions and “would not risk of risk the life of employees in the future so we have to be very careful.”

Winzenried reminded that Shell is now involved in three projects in Iraq – two oil fields and one gas field. “West Qurna is the third project. All and all it can become an important part in our portfolio,” he said.

Iraq hopes the contracts will make Iraq among the largest oil producers in the world. Iraq, which relies on the 2.5 million barrels per day it produces for more than 90% of its government revenue and about 60% of its gross national product, landed key deals during its second round of postwar oil auctions in December. On 22 January, Iraq signed a contract with a consortium led by Italy's Eni to develop the giant al-Zubair oil field in the southern province of Basra. The signing follows an agreement reached last year between the oil ministry and Eni to develop the four-billion-barrel oil field.

US super major ExxonMobil and its Anglo-Dutch peer Shell, today signed a final contract for the development of Iraq's 8.7-billion-barrel West Qurna Phase One oilfield

The partners, who will work with an Iraqi state-run oil company, won the right to develop the super giant field in negotiations with the Oil Ministry last year following Iraq's June oilfield auction, the first since the 2003 US invasion, a Reuters report said.

ExxonMobil's regional vice president Richard Vierbuchen and Shell Gas & Power vice president Mounir Bouaziz signed the deal in the presence of Iraqi Oil Minister Hussain Shahristani in Baghdad.

The companies plan to increase output from the oilfield to 2.325 million barrels per day from its current level of 279,000 bpd.

It is one of several deals following two oil contract auctions last year that have the potential to take Iraqi capacity to 12 million bpd - rivaling top producers Saudi Arabia and Russia - from 2.5 million bpd now.

Awash with oil, Iraq is poised to ink several mega oil deals that will vault it into the top ranks of world oil producers, but the war-shattered country is back to grappling massive power shortages after a brief respite.

Peak winter consumption of electricity due to heaters being run has resulted in what appears to be a near collapse of the public power supply - those without generators to light their homes are only getting a few hours of electricity per day.

"Citizens have to reduce their consumption if they want more hours of power," Aziz Sultan, a spokesman of the Electricity Ministry, said on Thursday. "Now we are experiencing the peak electricity load of the winter season. Citizens are consuming double our electricity output."

Years of war, sanctions and underinvestment have severely degraded Iraq's power grid and plants. Intermittent electricity, especially in the searing heat of the Iraqi summer, is a source of endless anger for Iraqis who live on top of the world's third largest oil reserves.

The Electricity Ministry has often borne the brunt of complaints over shoddy public services for failing to fix the shortages almost seven years after the 2003 U.S.-led invasion.

For a while during the fall, it seemed as if the power problems had been cured. Public electricity had been running for what seemed like most of the day and the usual steady throb of generators faded into the background as cooling demand faded.

But in the past two weeks the situation has returned to the bad old days as demand for heating surges, meaning the generators only fall silent for a few short hours per day.

That has coincided this week with Iraq's second auction of oilfield development contracts since the fall of Saddam Hussein.

Ten largely untapped oilfields, including some of the world's biggest, will be offered to global oil companies on Friday and Sunday, potentially helping to catapult Iraq to third place among global oil producers from 11th now.

IRRITATING CONTRAST

For many Iraqis, the promise of so much oil wealth contrasts irritatingly with the state's failure to give them electricity.

"The power cuts are destroying us. It's more than six years after the war and it's as if we are in the first year of it," said Baghdad resident Mohammed Muhsin. "Electricity is our lifeline. Without it life becomes so difficult."

Sultan said the public power grid's capacity to produce 7,000 megawatts falls far short of demand of 12,000 megawatts. Multibillion-dollar deals for new electricity turbines from General Electric and Siemens AG capable of adding 9,000 megawatts of capacity are still in the pipeline.

He declined to say how many hours per day of electricity were being provided, but said supply had also been constrained by the need for routine maintenance before next summer on power plants.

"The people are not helping us. In winter, oil and gas are available (for heating) and they could use them, but they insist on using electricity," he said.

Sultan said the ministry planned to implement a rationing system to encourage people to conserve energy.

Any household consuming more than around $45 worth of power every two months would be cut off. They would have to pay to be reconnected.