Custom Search

The Kurdistan Regional Government (KRG) will immediately pay $1 billion to the Pearl Consortium, including Dana Gas, and its partners to settle a long-running legal dispute.

In a joint press release, the Kurdistan Regional Government and Pearl Consortium announced the "full and final settlement" between the two parties.

Below is the full press release:

Settlement Agreement between Kurdistan Regional Government of Iraq (the “KRG”) and (i) Dana Gas PJSC; (ii) Crescent Petroleum Company International Limited; and (iii) Pearl Petroleum Company Limited (“Pearl”); together (the “Consortium”)

The KRG and the Consortium, together (the “Parties”), signed a Heads of Agreement onc and Chemchemal fields on 4 April 2007 (the “HoA”). Subsequently a dispute arose between them concerning certain matters under the HoA, and they referred this disputeon 21 October 2013 to an arbitration under LCIA case reference number 132527 (the “Arbitration”) for decision by an arbitral tribunal (the “Tribunal”) in London.

The Parties have mutually agreed to fully and finally settle all their differences amicably by terminating the Arbitration and related court proceedings, and releasing all remaining claims between them, including the substantial damages asserted by the Consortium against the KRG; implementing a mechanism for settlement of $2,239 million awarded by the Tribunal to date ; and proceeding with immediate further development of the HoA’s world class resources for mutual benefit as well as the benefit of the people of the Kurdistan Region and all of Iraq.

The agreed settlement highlights are as follows:

• The KRG will immediately pay Pearl a sum of US$600 million.
• The KRG will also immediately pay Pearl a further US$400 million to be dedicated for investment exclusively for the aforesaid further development to substantially increase production.
• Pearl will increase gas production at Khor Mor by 500 MMscf/day, a 160% increase on the current level of production (the “Additional Gas”). The Additional Gas, together with significant additional amounts of condensate, is expected to begin production in approximately two years.
• The balance of sums awarded by the Tribunal ($1,239 million) is no longer a debt owed by the KRG and will be reclassified as outstanding cost recoverable by Pearl from future revenues generated from the HoA areas.
• The profit share allocated to Pearl from future revenues generated from the HoA areas are adjusted upwards to a level similar to the overall profit levels normally offered to IOCs under the KRG’s Production Sharing Contracts. This adjustment reflects the larger investment risks and costs involved in the development of natural gas resources compared to oil developments. After the recovery of costs and a return on investment by the Consortium, 78% of revenues generated from the HoA areas will be for the account of the KRG, and 22% for the account of Pearl.
• The Parties have clarified the Khor Mor block boundary coordinates and the KRG has awarded the Consortium investment opportunities in the adjacent blocks 19 and 20, and added these to the HoA areas, with commitments by the Consortium to make appraisal investments on these blocks, and developments if commercial oil and gas resources are found.
• The KRG will purchase 50% of the Additional Gas on agreed terms to boost the gas supply to power generation plants in the Kurdistan Region. The other 50% of the Additional Gas (250 mmscf/d) will be marketed and sold by Pearl to customers within Iraq or by export, or can be sold to the KRG as well to further boost power generation within Iraq.
• Pearl will also expand its local training and employment programs towards achieving maximum localization and content, as well as supporting local communities through its active Corporate Social Responsibility (CSR) programmes.
• The Parties have exchanged mutual releases, waivers, and discharges in relation to all claims in relation to the Arbitration and related court proceedings.
• The Parties have also amended and clarified the HoA language and terms, including extension of the term of the contract until 2049.

The Parties are very pleased with their settlement and and look forward to working together to maximise the full potential of the HoA areas, for their mutual benefit as well as that of the people of the Kurdistan Region and all of Iraq.

Under the settlement, the people of the Kurdistan Region and Iraq will enjoy additional revenues and improved electricity supply. The Parties believe that this settlement agreement confirms to international investors that the Kurdistan Region of Iraq offers an attractive and secure environment for investment.

H.E. Dr. Ashti Hawrami, Minister of Natural Resources of the KRG, said:

"The companies’ investment and production to date has already delivered substantial benefits for the Kurdistan Region through enabling cost-effective power generation. We are delighted by the outcome of this settlement which opens a new chapter in the relationship between the parties and will take the development of the important natural gas sector to new heights."

Mr. Majid Jafar, CEO of Crescent Petroleum and Managing Director of the Board of Dana Gas PJSC, added:

"We have always expressed our commitment to amicable resolution of matters to enable proper development of the Khor Mor and Chemchemal fields. We are pleased with this definitive agreement which follows constructive dialogue with the KRG and promises to generate significant value for all concerned. The settlement of all debts and restoration of full cooperation gives a positive outlook for further investment and full realization of the enormous resource potential of the HoA areas."

(Sources: KRG, Dana Gas)

Germany's Siemens has expanded an existing service agreement with KAR Group in Iraq to provide comprehensive operations and maintenance (O&M) for two newly added SSC5-2000E power plant units at the Khormala plant in the Kurdistan region.

The 930-megawatt (MW) natural gas-fired power plant meets nearly 30 percent of the power demand targeted by the Kurdistan Regional Government (KRG), supplying more than four million Iraqi people with reliable electricity.

According to a statemengt from the company, "the extension of the service agreement is set to improve operational flexibility, availability, and performance of gas turbines for the next 15 years."

The Mena Power Report 2017 says the current power demand in Iraq stands at 21GW and is growing faster than supply. The Kurdistan Regional Government plans to increase capacity by building new power plants and increasing the efficiency of existing facilities.

Gianluigi Di Giovanni, Senior Executive Vice President of Siemens Power Generation Services in the Middle East, commented:

"The plant is truly a landmark project, supporting the development goals of the Kurdistan region. That's why we are proud to expand our collaboration with KAR Group to deliver reliable and stable electricity supply to people's homes."

The Khormala multi-year agreement with Siemens covers the operation and maintenance of six SGT5-2000E gas turbines, six SGen5-100A generators along with the associated auxiliary and ancillary systems. It also includes the implementation of Siemens Power Diagnostics®, which is part of the company's "Digital Services for Energy" portfolio, to improve asset visibility, reliability and availability.

Siemens data-driven services enable valuable data from different assets to be analyzed. From there, data is transformed into actionable insights—such as diagnostics, troubleshooting and condition forecasting—that can help improve plant reliability and reduce downtime. In addition, the data processed by Siemens Power Diagnostics® can help balance maintenance costs, improve inspection intervals and provide invaluable insights into operational risks.

Siemens has managed the operation and maintenance of Khormala since 2013 under a multi-year services agreement. Currently, the company has more than 40 personnel on-site managing the power plant on behalf of KAR Group.

(Source: Siemens)

On August 5, the Japan International Cooperation Agency (JICA) under the Government of Japan signed a loan agreement with the Government of the Republic of Iraq in Baghdad to provide a Japanese ODA loan of up to 21.556 billion yen (equivalent to approximately USD 191 million[1]) for the Hartha Thermal Power Station Rehabilitation Project (Phase 2).

At the signing ceremony at the government palace in Baghdad, the loan agreement was signed between Dr. Maher Hammad Johan, Acting Deputy Minister of Finance and Mr. Yuho Hayakawa, Chief Representative of JICA Iraq office in the presence of H.E. Dr. Haider Al-Abadi, Prime Minster of Iraq, Mr. Kentaro Sonoura, Special Advisor to the Prime Minister of Japan, and H.E. Mr. Fumio Iwai, Japanese Ambassador to Iraq.

This concessional ODA loan, with the interest rate of JPY LIBOR +0.05% (variable) for the main portion and fixed 0.01% for the consulting services and with the repayment period of 15 years (including 5 year grace period), is provided based on the Exchange of Notes between Iraqi and Japanese Governments just signed on the same day.

The Hartha Thermal Power Station, with four units of 200 megawatts (MW) each, was originally built to generate 800 MW in total.  The power station was constructed as one of the largest power plants in Basrah Governorate by the Japanese companies with Japan’s financial assistance in 1982.

However, due to aging as well as serious damages during the wartimes in the past, operations of the two units, out of the total four units in the station, have been fully suspended for years.  The remaining two units, that is, Unit No. 1 and No. 4, have continued their operations by great maintenance efforts of the staff of Ministry of Electricity in spite of huge deterioration of their generation capacities and frequent disruptions of power production.

By Adnan Abu Zeed for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News. 

On July 21, farmers complained about a gas pipeline dredging their farmlands. The pipeline carries gas from Iran to Baghdad through Bismayah, which is located in southeast Baghdad.

Meanwhile, reports on May 22 revealed that the pipeline caused damage to an archaeological site under which it passes.

On March 17, 2016, Iran announced the completion of a 100-kilometer (62-mile) Iranian gas pipeline. It starts at the South Pars gas field and continues to Baghdad to provide fuel for the electricity stations. As part of the project, the Oil and Energy Committee of the Iraq Council of Ministers decided to extend the pipeline through Bismayah to provide gas for electricity stations there.

Many residents in Bismayah were happy at first. However, their happiness did not last as they were forced to vacate parts of their land for the project. According to testimonies documented in a video report broadcast by an Iraqi channel on May 22, a farmer said that a military force stormed onto his land and forced him to accept the extension of the pipeline into his land without providing any documents, which he considered a violation of his rights and of applicable laws.

On July 12, Al-Monitor contacted the Nahrawan police directorate, which said, “The security force securing the site has orders to protect the project of extending the Bismayah gas pipeline and remove any constraints that may hinder its accomplishment.”

The Ministry of Electricity has announced an investment opportunity to build a plant on a BOT basis to produce gas oil from heavy fuel oil in Al Musayab gas turbine station.

Tender No. MOE- HQ11/ 2017

Tender subject : constructing a plant 3200 m³ / day of heavy fuel oil

Closing date : Sunday 10.09.2017

Time : 12:00 pm Baghdad local time

Estimated cost : (6,5 dollar/ barrel) for produced gas oil.

• The interested parties requested to attend MOE Headquarter – Investment and Contracts office/ Tenders Section in Al- Mansour District – Baghdad / Alnaqabat Street to get the investment opportunity documents against non refundable amount of (500,000) ID five hundred thousand Iraqi Dinar to be paid against a receipt with valid official authorization letter of the interested party.
• The Technical, commercial and financial offers shall be submitted in three separated stamped sealed envelopes one for technical the second for commercial containing price depend on section 4 from the document and the third containing financing offer , you have to write on it :address including (website, e mail address, authorized person’s name and phone number) presented offer should be true and correct without additions or correction written with Arabic language stamped by company stamp on all pages .
• You may submit your offer by hand or by DHL (offers sent by email will be rejected) to Ministry of Electricity, headquarter, Investment and Contracts office/ Tenders Section in Al- Mansour District – Baghdad not later than the dead line on Sunday 10.09.2017 before 12:00 pm Baghdad local time, if the day of closing date is holiday, the next day will be the closing date.
• Winner bidder bears the cost of advertisement and any related cost if any.
• MOE has the right to choose the appropriate offers regardless of the offered price.
• Technical and commercial proposals not substantially responsive will be neglected.
• Any question, explanation do not hesitate to contact [email protected] or call Mobile 07901935786

(Source: National Investment Commission)

Advertising Feature

Key figures of the Iraqi Government and Ministries have confirmed their attendance at the annual Basra Oil, Gas & Infrastructure Conference due to take place on 30-31 October in Beirut, to highlight the current investment projects available in Basra’s multiple industries and facilitate a direct dialogue towards promoting further business in Iraq’s Economic Capital.

The official meeting is held under the high patronage of the Basra Governorate and the Basra Council, with the support and participation of Iraq’s Ministry of Oil, Basra Oil Company, and Lebanese Ministry for Energy & Water and the Petroleum Administration for the Lebanese Republic.

Distinguished Speakers include:

• E. Dhia Jaffar, Deputy Minister, Ministry of Oil, Federal Government of Iraq
• E. Cesar Abi Khalil, Minister of Energy & Water Resources, Lebanese Republic
• E. Thamir Ghadhban, Former Oil Minster & Advisor to Iraq’s PM, Federal Government of Iraq
• E. Engineer Mohammed Al Tamimi, First Deputy Governor of Basra Governorate of Basra, Federal Government of Iraq
• MP Dr Jamal Abdul-Zahra Muhammadawi, Member of the Parliament Representing Basra, Federal Parliament of Iraq
• Wissam Zahabi, Chairman of the Board, Petroleum Administration, Lebanese Republic
• E. Abbas Omran Mousa, Deputy Minister, Ministry of Transportation, Federal Government of Iraq
• Ali Shadad Al Fares, Head of the Energy Committee, Basra Council, Federal Government of Iraq
• Ihsan Abduljabbar Ismaael Al - Saade, Director General of the South Gas Company, Ministry of Oil, Federal Government of Iraq
• Nafaa Abdulsada Ali Al-Hmidawi, Director General of Training & Development Office, Ministry of Electricity, Federal Government of Iraq
• Naser Muhsin Muhan, Head of Licensing & Contracts, Basra Oil Company, Ministry of Oil, Federal Government of Iraq

View full list of speakers here: http://www.cwcbasraoilgas.com/speaker/

The Basra province in the south of Iraq is home to 70% of Iraq’s gas reserves and 59% of its oil, offering valuable investment projects in a variety of sectors and providing a secure environment for developers to enter and operate in Iraq. Its strategic location with access to Persian Gulf via the ports of Al Maqal and Umm Qasr, provides huge advantages in the development of Basra and its numerous industries: oil, gas, power, petrochemicals, infrastructure, construction, transport, logistics and others.

The renowned Conference will address opportunities, projects and tenders in each one of these industries through its 2 day Strategic Programme. With an easy to follow guide on which sectors are covered in each session, attendees can expect the following topics to be discussed:

• Current updates on Basra’s oil fields,
• Infrastructure Contracts
• Procurement processes for accessing tenders
• Developing the transport and logistics sector
• Ultimate gas utilization
• Electricity projects
• Reconstruction of Iraq Tenders

View the full programme here: http://www.cwcbasraoilgas.com/programme/

Swiss-based ABB has won an order to supply and install a substation at the 3,000 megawatt (MW) Rumaila power plant, located in the Basra region of southern Iraq.

The completed power plant will be operated by Shamara Holding Group (SHG), one of Iraq’s largest private industrial conglomerates and an independent power producer.

The Rumaila power plant is expected to increase power generation capacity by about 20 percent and address acute shortages of electricity, hampering economic growth in the country. The order was booked in the second quarter of 2017.

The 3,000 MW from the Rumaila power plant will add to Iraq’s current generation of 13,000 MW, which is short of the country’s peak load demand of about 23,000 MW. Iraq balances its high power demand and low supply capacity through load shedding, which means power is only available to its 34 million citizens for about 15 hours each day. The addition of new generating plants will increase electricity supply, and support economic growth.

ABB will design, engineer, supply and install the 400 kilovolt (kV) air insulated switchgear (AIS) substation, which will be equipped with technology and instrument transformers from ABB. The substation will also be equipped with advanced digital control, protection and telecommunication systems.

Claudio Facchin (pictured), president of ABB’s Power Grids division, said:

“Our advanced substation solution will help bring much needed electricity to the region by expanding capacity and strengthening Iraq’s power infrastructure, bringing much needed power to consumers.

“This project adds to our extensive installed base in the region and supports our Next Level strategic thrust on growing markets.”

(Source: ABB)

The Executive Board of the International Monetary Fund (IMF) has completed the second review of Iraq’s three-year Stand-By Arrangement (SBA), which is designed to support Iraq’s economic reform program and restore fiscal balance over the medium term.

The completion of the second review allows the authorities to draw the equivalent of SDR 584.2 million (about US$ 824.8 million), bringing total disbursements to SDR 1494.2 million about US$ 2109.7 million.

The SDR 3.831 billion arrangement (about US$5.34 billion at the time of approval of the arrangement) was approved in July, 2016 (See Press Release No. 16/321) and the first review was completed on December 5, 2016 ( See Press Release No. 16/540).

As part of the completion of the second review, the Board also approved Iraq’s request for waivers of non-observance and applicability of performance criteria, and modification of performance criteria.

Further fiscal consolidation was achieved in 2016, but at a slower pace than programmed because of weak control of investment expenditure and humanitarian needs. To move the program forward, the authorities are implementing strong corrective measures as prior actions and are committed to further fiscal measures in 2018 to ensure external and debt sustainability.

The Executive Board today also concluded the 2017 Article IV Consultation with Iraq. A respective press release will be issued separately.

Following the Executive Board’s decision, Mr David Lipton, First Deputy Managing Director, issued the following statement:

"The economic policies implemented by the Iraqi authorities to deal with the shocks facing Iraq—the armed conflict with ISIS and the ensuing humanitarian crisis and the collapse in oil prices—are appropriate. In the fiscal area, the authorities are implementing a sizable fiscal adjustment, mostly through retrenchment of inefficient capital expenditure while protecting social spending.

"The authorities are appropriately maintaining the peg of the Iraqi dinar to the U.S. dollar, which provides a key anchor to the economy. Performance under the Stand-By Arrangement has been weak in some key areas, but understandings have been reached on sufficient corrective actions to keep the program on track. Resolute implementation of the authorities’ program, together with strong international financial support, will be key.

"Further fiscal consolidation measures are needed in 2017-18 to keep the program on track. The composition of the fiscal adjustment should be improved over time by increasing non-oil revenue and reducing current expenditure. In addition, reforming the electricity sector and state-owned enterprises will make room for larger and more effective investment expenditure that supports growth and job creation.

"Significantly improving public financial management will be important. Arrears need to be assessed and paid following verification, and expenditure commitment and cash management should be strengthened to prevent the accumulation of new arrears.

"Measures to bolster financial sector stability include strengthening the legal framework of the Central Bank of Iraq, restructuring state-owned banks, and eliminating an exchange restriction and a multi-currency practice. Measures to prevent money-laundering, counter the financing of terrorism, and strengthen the anti-corruption legislation also need to be implemented.

"Implementation of the budget-sharing agreement with the Kurdistan Regional Government would put both the federal government and the Kurdistan Regional Government in a better position to address the shocks to the Iraqi economy."

(Source: International Monetary Fund)

Iran's deputy oil minister has said gas exports to Iraq has reached 7-8m cubic metres per day and will increase as demand is growing, the official Islamic Republic News Agency (IRNA) reported on July 28.

Hamid Reza Araqi (pictured), who is also the head of the National Iranian Gas Company (NIGC), said Iraq has suggested an increase in gas imports from Iran.

An increase in gas production, as well as boosting the country's capacities, will allow a rise in gas exports.

According to IRNA, Iran started exporting gas to Iraq on June 21 after a long pause.

The report cited security problems in Iraq as a result of armed insurgencies, had prevented gas exports before then.

The two countries have signed two contracts based on which Tehran is delivering gas to Baghdad and the Iraqi city of Basra in the south. IRNA also pointed out that Iraq continues to face severe electricity shortages and its power plants are in need of Iran's gas.

IRNA forecasts gas exports to Iraq will increase to 35m cu.m p/d in the future.

(Source: GardaWorld)

By John Lee.

The London Court of International Arbitration ("Tribunal") yesterday released its First Partial Final Costs Award, dated 17 July 2017 in the Arbitration between Peal Petroleum Company Limited, Dana Gas PJSC and Crescent Petroleum Company International Limited (the "Consortium") –v- The Kurdistan Regional Government of Iraq ("KRG").

The Tribunal ordered the KRG:

• to pay US$ 14,046,485 to the Consortium within 28 days, together with interest at LIBOR + 2% from the date of the Award; and
• to bear 85% of the LCIA Arbitration fees and Tribunal's fees and expenses up to 27 November 2015 amounting to GBP 403,055.97.

The Costs Award relates to the legal costs incurred by the Consortium up to 27 November 2015.  The legal costs incurred in the Arbitration after this date will be the subject of further Costs Awards from the Tribunal in due course.

This additional order of the costs follows the 1st, 2nd and 3rd partial final awards already received on, 2 July 2015, 27 November 2015 and 30 January 2017.

The quantification of the damages for the Delayed Development Claim by the "Consortium" will be determined by the Tribunal at a further hearing scheduled to take place in September 2017.

In a statement, Dana Gas said that it and its consortium partners have invested over US$1.2 billion so far and produced over 150 million barrels equivalent of gas and petroleum liquids, which has had a transformative positive effect on the local economy in the Kurdistan Region and in particular in providing gas to fuel affordable electricity supply.

They reiterate their continued commitment to the KRG and to the people of the Kurdistan Region and all of Iraq, and hope that any outstanding matters with the MNR will be resolved, amicably and in good faith, in the shortest possible time.

(Source: Dana Gas)