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Speech by British Ambassador, Michael Aron at the Kurdistan-Iraq: Oil & Gas Conference

Mr Chairman, Prime Minister, Ladies and Gentlemen. Thank you for inviting me to speak at Kurdistan-Iraq Oil & Gas 2011. The timing could hardly be better.. as the country with greatest potential for increasing conventional oil production in the medium term, the trajectory of Iraq’s future oil and gas production is of considerable importance to global energy markets. British Companies are actively involved in Iraq and I look forward to hearing their perspective, and the views of Ministers and others, on doing business here and their expectations for the future.

Oil is of course central domestically to Iraq. It currently accounts for around 65% of GDP and 95% of federal budget revenue. Oil will be the single largest source of government revenue for years to come. But Iraq’s oil production – currently around 2.8mbd - is still only a fraction of its potential. Of this, around 2.2mbd is currently being exported. On IEA figures – that is without April’s increase in audited reserves to 143 billion barrels - Iraq has the fourth largest proven reserves of oil in the world. While the government’s declared aim to increase production to 12mbd by 2017 will be challenging, it demonstrates the level of ambition and scale of opportunity for companies and investors.

Oil grabs the headlines, but development of Iraq’s gas fields is also crucial and time sensitive. Once domestic demand is satisfied, the huge gas resources in Iraq give Baghdad and Erbil the opportunity to set a long-term strategic energy relationship with Turkey and Europe through the Nabucco pipeline and other southern corridor routes. European energy demand for gas is growing and Nabucco and others can make a significant contribution to European energy security.

Development of the oil and gas sector will drive the wider reconstruction of physical and human capital that Iraq needs. This is important for domestic stability. A combination of stability, economic development and the creation of a competitive private sector offer huge opportunities for international and Iraqi business. And it puts Iraq right back at the centre of the global economy it left 20 years ago.

Bloomberg reports that the United Transformers Electric Company of Saudi Arabia, and the Turkish unit of Siemens AG, have signed contracts to supply transformers to Iraq.

United Transformers (UTEC) will provide 1,250 units with a total capacity of 400 kilovolts for $11.6 million, while Siemens Turkey will provide another 1,250 with a total capacity of 31.5 kilovolts for $1.7 million, Electricity Ministry spokesman Masaab Serri told reporters on Wednesday in Baghdad.

(Source: Bloomberg)

The following article was published by Reidar Visser, an historian of Iraq educated at the University of Oxford and currently based at the Norwegian Institute of International Affairs. It is reproduced here with the author’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

In a recent opinion piece for CNN, Christopher Hill, the former US ambassador to Iraq who served there from April 2009 to August 2010, discusses the legacy of the Iraq War in light of the recent US decision to not seek a continued military presence beyond 2011. Among his key points is that it would be wrong to plunge into a discussion about “who lost Iraq”.

In defence of his position, Hill makes several arguments.

At times, Hill is telling us that the Iraq War was not truly winnable – in the sense that establishing a stable democracy there could be inherently problematic. The reason, according to Hill, is Iraq’s deep-rooted sectarian conflict. In Hill’s words, “the Shiite-Sunni divide in Iraq has been a fact in Iraq that has never gone away. Facts, so the expression goes, are stubborn things. Thirteen-hundred-year-old facts are especially stubborn things.”

At other times, Hill tells us that nonetheless, the United States did in fact win the war, since they installed Nuri al-Maliki as prime minister. In Hill’s view, Maliki will form some kind of anti-Iranian bulwark based on widespread anti-Iranian sentiment among the masses of Iraq’s Arab Shiites. Again, according to Hill, “Maliki is, to be sure, tough-minded and not easy to convince of things. But the notion that he is an Iranian sympathizer - as opposed to a highly nationalistic Iraqi - is based on no evidence at all…”

According to The Saudi Gazette, the Iraqi government has earmarked an estimated $50 billion for airport development projects in Iraq over the next few years.

Iraqi Airways is scheduled to add new 55 Boeing and Bombardier aircraft to its fleet soon.

The emerging markets of China, Russia, India, the Middle East, and Africa are forecast to be among the growth leaders in airport infrastructure development spending over the next few years.

Abdulmunaim M. Ismail and Ghaml Darweesh Al Isuozah, special advisors to Benkin Regane, Iraq's Deputy Minister for Technical Affairs with Ministry of Transport , will make a presentation on Iraqi government's plan to spend $150 billion for the infrastructure program related to airports, sea ports and railways. Special focus will be on ongoing and new transportation projects in Baghdad, Basra, Dohuk, Karbala, Salhaddin province etc. The Umm Qasr seaport expansion and country-wide railway network projects will also be highlighted.

"The presentations by Iraqi authorities will provide an overview of business opportunities available at the airports in Iraq, assesses challenges and obstacles with a view to mitigating them, leading to business opportunities for all," said Raj Menon, General Manager of Arabian Reach, the organizers of the conference. "We were happy to have them as our featured speakers and are even happier to note that EMASC 2011 is on the road to becoming one of the largest airport suppliers event ever held in the Middle East."

(Source: The Saudi Gazette)

A railway connecting Syria and Iraq will begin operations next year, according to a report from Kuwait’s KUNA news agency.

In addition, a direct line connecting Syria’s eastern Deir Al-Zor-Al-Bukamal station to Iraq has been completed, the director general of the Syrian rail company has said.

“The rail link is a direct line that will guarantee smooth transport of commodities from Syria toward Iraq,” he said, adding that continuing work in building the Deir Al-Zor-Al-Bukamal station is a part of the project.

Iraq and Syria began the railway project to link both countries and transfer freight from southern Europe to the Gulf region.

The Iraq-Syria project came after confirmation of a Jordanian plan to resurrect a $6 billion railway project linking the port hub of Aqaba in Jordan to Syria, via Amman and Zarqa, including links to Saudi Arabia.

In May 2011 Iraq and Jordan also signed a preliminary agreement to build a railway connecting Baghdad and Aqaba with the aim to strengthening commercial ties.

The railway is expected to be 150 kilometers long, and the trains will travel at speeds of up to 140 kilometers per hour.

(Source: Al Arabiya, KUNA)

Iraq's South Oil Company has awarded Italy's Saipem the EPIC contract for the Iraq Crude Oil Export Expansion Project – Phase 2, within the framework of the expansion of the Basra Oil Terminal (ABOT), off the Al Faw Peninsula in the Arabian Gulf, approximately 550 kilometres south-east of Baghdad.

The contract encompasses the engineering, procurement, fabrication and installation of a Central Metering and Manifold Platform (CMMP), to be installed in a water depth of 28 metres, along with associated facilities.

Fabrication of the CMMP topsides will be carried out at Saipem’s yard in Karimun (Indonesia), while the jacket and piles will be fabricated at the Saipem Taqa Al-Rushid (STAR) yard in Dammam (Saudi Arabia). Offshore activities will be performed in the third and fourth quarter of 2013.

(Source: Saipem)

Iran and Iraq will be major target markets for Dubai’s newest engineering consultancy, Whitby & Mohajer, says the company’s MEP director.

While the usual target markets of Saudi Arabia, Qatar and the UAE will still be areas of interest, Louise Collins told MEP Middle East said that the intense competition for MEP contracts in those markets was a deterrent.

“A lot of the bigger companies are wary of Iraq right now, but it’s got a lot of money and is looking to rebuild. The Americans are already in there, it seems to be the British and European companies that are hanging back, (being) a little bit more insecure. But there’s certainly a lot of money out there,” she said.

Whitby and Mohajer are currently working on two major projects in Iraq, one a six hundred bed hospital and the other the Council of Ministers building.

“There’s a lot of iconic stuff in Iraq, but we have to be careful how many projects we take in that region. In Iran, it’s the same thing. But you’ve got to spread your risk when you’re going into those kinds of places.”

“Kuwait and Saudi Arabia are flying along and we’re getting a lot of fit outs here in Dubai, so that’ll sustain smaller companies (like us) for a while. There’s going to be a lot of fighting for big projects in Abu Dhabi by the bigger companies, but that’s not going to pick up for a while,” Collins said.

(Source: Construction Week Online)

A Scottish manufacturer of prefabricated buildings has embarked on a major push into the Middle East as it targets construction projects in countries such as Libya and Iraq.

Powerwall, which runs a ten-acre production site in Wishaw and employs about 80 staff, is also locked in talks with potential partners in a string of markets, including Egypt and Syria.

The firm’s fabricated structural frames, reaching up to 22 storeys, can be used in housing developments, schools and hospitals and are said to offer major time and cost savings over traditional building techniques. Its concerted push east comes on the back of two deals in the region.

The company, which began developing its modular building technology in the early 1990s, has just formed a partnership with a Saudi group to form Powerwall Arabia.

It will manufacture and market products under a licensing arrangement in Saudi Arabia and Qatar.

Powerwall has also entered into a partnering agreement with the Al Badie Group in Abu Dhabi to market its building system in a number of “key locations” in the Middle East.

Global sales director Joe Pacitti said the region in general was in a growth phase, with older infrastructure in need of upgrading or replacement. “The whole of the Middle East is looking to increase investment in quality housing, hospital, schools, hotels and the like,” he said.

Powerwall’s global sales director told Scotland on Sunday earlier this year he was confident the firm could build up between £50 million and £100m of international business over the next five to ten years.

Powerwall’s “volumetric” building system is also said to have attracted interest from oil and gas explorers operating in remote regions.

In addition to its main plant near Glasgow, the company has a facility in Udine, in Italy, and employs up to 40 sub-contractors. It turns over some £15m, but is projecting growth of 60 per cent-plus in the next couple of years as the number of licensees multiplies.

(Source: Powerwall)

By Rickie Cole of SGS, in response to our Iraq Business News article on importation inspection:

On 1^st May 2011, the Central Organisation of Standardisation and Quality Control (COSQC) in Iraq implemented the Pre-Importation Inspection, Testing & Certification of Goods to Iraq (ICIGI) programme. This programme is designed to monitor the quality of regulated goods being imported into Iraq. SGS has been mandated by COSQC to provide inspection and certification services in line with this new programme.

In the months since the programme’s implementation, SGS has been working closely with the Iraq Commercial Attaché, the Arab-British Chamber of Commerce and the Joint Arab-Irish Chamber of Commerce to ensure that UK exporters are aware of the new requirements. SGS has already assisted many companies with ensuring that their exports comply with the programme. However, despite our efforts there is still a lot of confusion surrounding the programme.

Should you require any assistance in complying with the programme, please contact SGS on +44 (0) 1276 697 773 or email [email protected].

What is Product Conformity Assessment?

With the ever present threats and risks associated with the growing international trade of sub-standard and counterfeit goods, there is a growing need for international governments to ensure that imported goods are genuine and of a suitable quality.

Product Conformity Assessment (PCA) programmes assist governments worldwide in verifying the quality of imported goods and are already popular in the Middle East & North Africa with long standing programmes in place for countries such as Saudi Arabia, Algeria, Kuwait, Kenya, Nigeria and Syria.

PCA services provided by independent third party bodies such as SGS ensure the safety and overall performance of imported goods with a view to protecting the end-users’ health, safety and security. Some clear benefits of these programmes to the government and citizens in the importing country are:

• Increased ability to monitor the quality of goods entering the country
• Assistance in reducing the incoming flow of sub-standard and counterfeit goods
• Greater assurance that imported goods are not harmful to the public or environment

Why Choose SGS?

SGS is the world’s leading inspection, verification, testing and certification company. Recognized as the global benchmark for quality and integrity, we employ more than 64,000 people and operate a network of over 1,250 offices and laboratories around the world.

SGS is constantly looking beyond customers’ and society’s expectations in order to deliver market leading services wherever they are needed. As the leader in providing specialized business solutions that improve quality, safety and productivity and reduce risk, we help customers navigate an increasingly regulated world. Our independent services add significant value to our customers’ operations and ensure business sustainability.

SGS also provide inspection and certification services in line with PCA programmes in Algeria, Kenya, Kazakhstan, Kuwait, Nigeria, Russia, Saudi Arabia and Syria – for further information please contact SGS on +44 (0) 1276 697 773, email us [email protected] or visit our website www.uk.sgs.com.

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

The international Journal of Contemporary Iraqi Studies-IJCIS has just released it is special issue on “Oil in Iraq”.

Many prominent Iraqi and non-Iraqi scholars have contributed articles to this timely and important volume, which makes it an invaluable scholarly work to understanding the complexities of oil in Iraq.

The following is my introduction, as the guest editor of this special issue of IJCIS.

Three unprecedented and interrelated developments have taken place in the Iraqi petroleum sector since the 2003 invasion. Wide openness of all petroleum sub-sectors (upstream, midstream and downstream) for foreign investment; offering, through three bid rounds, the most prized oil and gas fields for an international auction resulting in contracting almost 60 per cent of the country’s proven petroleum reserves for at least 20–25 years; and finally, these contracts would expand oil production and export capacities by fivefold in less than seven years.

Such an opening could lend support to the notion that, ‘the invasion was all about oil’ and provoke legitimate questions on why a country, with incomplete sovereignty due to the presence of occupying forces and still under Chapter Seven of the UN Charter takes such unwarranted drastic actions; how it is going to manage such a massive undertaking; and what is it going to do with the influx of huge revenues, and mitigate the consequences.

Though many, and for variety of convincing reasons and powerful arguments, doubt very much the feasibility of attaining such production targets at such a fast pace under structural weaknesses and prevailing conditions in the country. However, even with half-success, this would, by all standards, be very significant indeed, and with far-reaching implications domestically, regionally and internationally.

Expanding production (and by logic, intentions and necessity) and export capacities would lead to a tremendous augmentation of the economic rent (or windfall) for the state due to expected higher oil prices, with or without the Peak Oil argument, in relation to the comparatively low production (or extraction) cost.

Domestically, such a huge influx of foreign exchange is bound to face three interrelated and theoretically enforcing hurdles: absorptive capacity limitations, Dutch disease and resource curse attacks. Each has its own dynamics and requires policy options to mitigate consequences. Thus, Iraq needs to devise sound development policy and modalities to mange effectively the plenty generated from its depleting natural resources.

In addition to the above macroeconomics structural difficulties, weak institutional capacities, ambiguous legal and constitutional frameworks, lack of suitable infrastructural facilities and fragmented political climate, all represent formidable domestic determinants.