By John Lee.

Basra Oil Company (BOC) has signed two contracts for new drilling at the giant Majnoon oil field.

China’s Hilong Oil Service & Engineering Company is to drill 80 oil wells at a cost of $54 million, while the Iraqi Drilling Company (IDC) will drill 43 oil wells at a cost of $255 million.

Oil Minister Thamir al-Ghadhban said the contracts are part of BOC’s plan to increase the production at Majnoon to 400,000 barrels per day by 2022.

(Source: Iraqi Ministry of Oil)

By Ahmed Mousa Jiyad.

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

The Ministry of Oil and the “Odious Contract’ Trap” with ExxonMobil’ Consortium

Talks have intensified recently about the continuation of negotiations between the Ministry of Oil (MoO) and ExxonMobil/CNPC consortium that might lead to the signing of a contract for the “South Iraq Integrated Project (SIIP)” at an estimated cost of $53 billion and a duration of 30 years, but no official confirmation or indications on the fundamental contractual provisions that were agreed on and those still pending.

In the light of the available information, material evidence, actual examples, international geopolitical considerations and comparative analysis, a detailed evidence-based research and Report* was done on the project and related negotiation.

The report on SIIP’ possible contract comprises:

  • A necessary introduction and caveat;
  • Political and geopolitical implications of ExxonMobil behavior and its apparent link to the “deep state” based on many evidences that actually and factually had negative consequences on oil projects, for example, in Russia and in Iraq.

In Russia, ExxonMobil caused a delay of almost four years in the development of the Pobeda oil discovery in the Kara Sea when ExxonMobil withdrew, in late 2014, from its deal with Rosneft due to imposing US sanctions on Russia.

Iraq had three bad experiences with this company in recent years. The first, when ExxonMobil negotiated secretly and concluded, against declared government policy, deals with KRG in 2011 soon after the company secured West Qurna 1 contract through first bid round with the federal ministry.

That move led to excluding ExxonMobil from leading Common Seawater Supply Project (CSSP), reduce its Participating Interest in WQ1 and blacklisting it from any upstream project.

The second and third bad experience occurred this year when the company evacuated, unilaterally and without government consent, all its foreign staff from WQ1. All these three incidents caused tremendous damage to Iraqi economic interest.

  • Potential strategic risks, of an enormous scale, on SIIP that could be generate from the growing deterioration of the American-China relations as evidenced from the blacklisting of two major state oil companies, i.e. Zhuhai Zhenrong Corp and Sinopec. US escalating tension against Iran adds further geopolitical risks;
  • Analyses of what would be SIIP contract was premised on what was reported by national and international sources that are originally based on information given by unnamed Iraqi officials. That was due to the absence of clarity and lack of transparency of the ministry regarding essential contractual terms and conditions.

Based on the analyses and findings of the report, I am compelled to clearly alert and strongly, frankly and loudly warn both the Prime Minister and the Minister of Oil of the danger of pushing Iraq into a “trap of an odious contract” and by specifying ten of its most grave risks and disadvantages:

  1. ExxonMobil, as the consortium leader, is granted a monopoly position that allows the company directly controlling all vital oil projects in southern Iraq, and thus the entire national economy, for thirty years;
  2. It poses a multiplicity of major threats to national security and economic interest due to what can be called contractually-connected high strategic and geopolitical risks, since SIIP comprises many critical and vital projects such as Common Seawater Supply project-CSSP (for water injection), pipelines, storage tank-farms, export facilities, gas processing units and two oilfields;
  3. It contravenes the fundamental premises of the Iraqi Constitution because the contract requires “mortgaging/ reserving/ booking” two oilfields, with a combined plateau production of 500kbd, exclusively for the two foreign oil companies, i.e. ExxonMobil and CNPC, for the entire term of the contract- 30 years;
  4. It offers “Profit-Sharing Contract”, which, in reality, represents the monetary side of a “Production Sharing Contracts”, which, is impermissible by the Constitution;
  5. The announced astronomical cost (of $30bilion) increased already by $11billion in less than ten weeks while negotiating!;
  6. It offers all rent (windfall) resulting from oil price increases exclusively to the two foreign companies, nothing for Iraq!;
  7. It prevents SOMO (the only State Oil Marketing Company) from performing its role in marketing crude oil from the “mortgaged” two oilfields; this contravenes established policy, undermines annual state budget laws and weakens almost 50 years of SOMO’s function;
  8. It reduces the “national efforts” in the development of oilfields, thus, contradicting declared Ministry policy, weakens Iraq’s flexibility to comply with OPEC decisions through “swing fields”;
  9. Inconsistent with the regulations for tendering and contracting government projects;
  10. It lacks both transparency and competitiveness.

Therefore, I suggested to the Ministry of Oil not to continue on wasting time and causing further delays: it should officially declare that it is not in Iraq’s economic interest and national security to award SIIP to ExxonMobil-CNPC (and for this matter to any one consortium) and end, immediately, all and any related negotiations.

In the event that the Ministry of Oil and/or the Government insist on going ahead with this Odious Contract with ExxonMobil-CNPC, it becomes inevitable to refer the matter to the Federal Supreme Court to invalidate the contract on the bases of incompatibility with the Constitution; for eradicating the highest interest of the Iraqi people, including future generations (principle of inter-generational equity)  and for returning Iraq to what looks like abhorrent concessions of the, colonial, past.

*A brief of the original Arabic text of the entire report was circulated widely within many networks and was published by and posted on many websites, and accessible on the following links:

الحذر يا وزارة النفط من “فخ العقد البغيض” مع شركة اكسون موبل

https://www.akhbaar.org/home/2019/8/261291.html

http://www.tellskuf.com/index.php/mq/83987-as174.html

http://www.sahat-altahreer.com/?p=49115

Click here to download the full article in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former 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: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad’s biography here.

By John Lee.

A Chinese company has reportedly signed a $1.39-billion construction contract in Iraq.

According to Xinhua, China Construction Third Engineering Bureau will implement civil engineering projects and infrastructure in southern Iraq, including low-cost housing, education, medical centres, and facilities projects in governorates of Najaf, Karbala and Basra.

(Source: Xinhua)

By John Lee.

The study Technical and Environmental Efficiency of Wheat Farms in Saline Irrigated Areas of Central Iraq investigates the impact of soil salinity on technical efficiency (TE) and environmental efficiency (EE) in wheat production in central Iraq, where 360 farmers interviewed in winter season 2015-2016.

In developing countries, even though irrigated agricultural land covers only 20% of all arable land, it accounts for 47% and 60% of all crop and cereal production respectively. In total, 11% of irrigated area is affected by salinity (Pakistan, China, United States, and India present more than 60% of this percentage).

The removal of salts from the soil through leaching and drainage increases the salinity of drainage water, which then might be up to 50 times more concentrated than irrigation water, in which surface water supplies 62% of the irrigated area. Irrigated area disposal can raise the salinity of receiving water bodies to levels that make them no longer usable.

The Iraq Salinity Initiative, funded by the Australian Centre for International Research (ACIAR), AusAID and the Italian Government was designed in 2010 for the Government of Iraq and for the Iraq farmers by a group of international agencies led by ICARDA to solve the problems of Iraq’s salty soils and salty irrigation water.

More here.

(Source: ICARDA)

By John Lee.

The state-owned Trade Bank of Iraq (TBI) is reported to be planning to expand its operations in China and the Gulf.

Chairman Faisal al-Haimus [al-Haimus] told Reuters that the bank want to increase revenues from retail banking and international operations from 25 percent to 30 percent by 2022.

He added that it plans to open a representative office in China in 2020, and will upgrade its license in Abu Dhabi from a “representative office” to “asset management company“.

More here.

(Source: Reuters)

Germany’s Siemens has received an order to supply the key components and long-term power generation services for the 840-megawatt (MW) Maisan combined cycle power plant in Iraq.

CITIC Construction Co., Ltd., the Chinese engineering procurement and construction firm building the plant, and Iraqi developer MPC, part of Raban Al-Safina for Energy Projects (RASEP) awarded the contract valued at more than EUR 280 million to Siemens.

The independent power project is expected to deliver first power by March 2021 and enter full combined cycle mode by early 2022. The plant will supply sufficient electricity to meet the needs of more than three million Iraqis, while also supporting the industrial sector.

The Siemens scope of supply includes two SGT5-4000F gas turbines, oneSST5-4000 steam turbine, and three SGen5-2000H generators, along with the SPPA-T3000 control systems, transformers and related electrical equipment, and the fuel gas system.

Saadi Saihood, Chairman of Raban Al-Safina Group, said, “Maisan combined cycle power plant project will be one of the unique projects in a series of power generation projects in Iraq’s history that will stand out due to its combining innovative German technology with an experienced Chinese EPC service provider. We are confident that such a strong team will enable us to deliver a successful project that will benefit millions of Iraqis.”

“Iraq is undergoing an economic transformation, and as the country embarks on a series of ambitious infrastructure projects, efficient and reliable electricity will be essential to powering this development,” said Dietmar Siersdorfer, CEO of Siemens Middle East and UAE. “With a presence in the country that dates back more than 100 years, we are proud to support the generation of half of Iraq’s power supply. We are also committed to providing vocational training for up to 1,000 Iraqis in order to develop a pipeline of talented local employees who can contribute to the new Iraq.”

New Maisan power plant to supply electricity to 3 million Iraqis

The Maisan combined cycle power plant in Iraq will add 840 megawatts to the grid and provides a reliable power supply for more than three million Iraqis.

“This project will mark an important power generation milestone in Iraq. The state-of-the-art power island that will be installed by Siemens, including the latest technology of F-class gas turbines, will turn the Maisan power plant into the most efficient gas-fired combined cycle power plant in Iraq. This is very critical for the economics of the long-term operations and the effective utilization of fuel,” said Karim Amin, CEO of Power Generation at Siemens Gas and Power. “In addition, the long-term service agreement is designed to ensure increased efficiency and maximum availability of the power plant while also providing technical training for local Iraqi staff on the operation and maintenance (O&M) front. This will support skills development and knowledge transfer to the Iraqi people.”

Siemens will also utilize its Power Diagnostics Services (PDS), part of the Omnivise Digital Services portfolio. The company’s PDS solution combines asset data with industry expertise to deliver information that allows faster and accurate predictive analysis for effective decision-making. This enables improved operational planning to increase availability, mitigate risks, and optimize operational costs.

Siemens and the Ministry of Electricity of the Republic of Iraq recently signed an implementation agreement to kick off the actual execution of the roadmap for rebuilding Iraq’s power sector. As part of the implementation agreement, the two agreed on the awarding of contracts valued at approximately EUR 700 million for phase 1 of the roadmap. This includes the EPC construction of a 500 MW gas-fired power plant in Zubaidiya, the upgrade of 40 gas turbines with upstream cooling systems, and the installation of thirteen 132 kV substations as well as 34 transformers across Iraq.

(Source: Siemens)

By John Lee.

Iraq’s Minister of Transport, Abdullah Luaibi [Abdul Allah al-Leibi], has said that Iraq is actively seeking to join China’s Belt and Road Initiative [“One Belt, One Road (OBOR)“].

In statements on Monday, the Ministry confirmed that the Minister met with China’s Ambassador to Iraq, Zhang Tao, to discuss the plan.

It added that Iraq wants to accelerate the process of joining the Asian Infrastructure Investment Bank (AIIB).

(Source: Ministry of Transport)

There can be no doubting Iraq’s oil credentials. It is Opec’s number two oil producer, second only to Saudi Arabia, and holds the world’s fifth-largest proved oil reserves. Production is on the rise, having nearly doubled over the past decade, averaging around 4.5 million barrels per day in 2018.

Almost 90 per cent of the country’s output comes from giant oilfields in the southern part of the country. The remainder is largely pumped from oilfields in the northeast, in the semiautonomous Kurdistan Region of Iraq (KRI), which is under the control of the Kurdistan Regional Government.

This is good news for a country that is heavily dependent on revenues from its oil exports, which, according to the IMF, accounted for almost 90 per cent of total government revenues in 2017. The rise in oil prices, despite recent wobbles in the face of US-China trade tensions, has certainly been a boost to the country’s coffers and provides further impetus for investment in development and infrastructure.

This upwards trajectory is likely to continue as the country seeks to fill the supply gap left by new US sanctions on Iran. Iraq is keen to lift production capacity to 5 million bpd this year, and to 8.5 million bpd in the coming years as it upgrades its infrastructure. The southern oilfields are key to this growth, expected to pump some 6.5 million bpd in the coming years, with the country keen to partner with international oil companies (IOCs) to secure the necessary investment to unlock its vast resource potential.

Iraq’s growing importance as a key player on the world’s energy stage will be discussed at the upcoming CWC two-day event, Iraq Petroleum, which will be held in London on June 27-28 in collaboration with the new Federal Government of Iraq. For the first time, the event is being co-located with the one-day Kirkuk & Mosul Mega-Projects event on June 29, where delegates will be first to hear government plans and investment opportunities to develop the giant oilfields in the newly liberated oil-rich areas of Kirkuk and Mosul.

The three-day event brings together key figures shaping the future of this strategically important country. The Iraqi ministerial delegation will be led by H.E. Thamir Gadbhan, Deputy Prime Minister for Energy & Minister of Oil along with the heads of the Basra Oil Company and North Oil Company, while the international oil industry is well represented, with confirmed speakers including Michael Townshend, Regional President of BP Middle East, Jeffrey T. Levy, President of Chevron Chevron Europe, Eurasia and Middle East E&P, Majid Jafar, CEO of Crescent Petroleum, and Gati Saadi Al-Jebouri, Managing Director of LUKOIL Mid-East Limited.

It’s not just oil that’s creating new investment opportunities for international partners. Oslo-based energy consultancy Rystad Energy forecasts that in terms of resoruces sanctioned for development, gas will overtake oil projects in 2019, with new projects, mainly in the Kurdistan Region, set to triple the country’s gas output from just over 1 billion cubic feet per day in 2017 to 3 billion cf/d in 2022, enabling it to meet growing domestic demand for gas and possibly even launch the country as a gas exporter for the first time. Again, it’s a topic that will be widely covered at CWC’s Iraq Petroleum event, including presentations from Dr Jaafar Oklany, commercial director of Basra Gas Company and Ali H. Khudhier Al-Saady, former director general of South Gas Company, Basra.

For anyone with an interest in Iraq’s future, and indeed the stability of the world energy mix, this is one event not to be missed.

For further information, visit https://www.cwciraqpetroleum.com/

For full programme, download the brochure

(Source: CWC)

Iraqi Foreign Minister Mohammad al-Hakim said his country would stand by the Iranian nation and government in the era of US sanctions against Tehran.

Iraq stands with Iran and is willing to act as an intermediary between its neighbor and the United States, Hakim said on Saturday speaking in a press conference with his Iranian counterpart Mohammad Javad Zarif in Baghdad.

He added that Baghdad does not believe an “economic blockade” by the US could be fruitful, according to Reuters.

Zarif, for his part, condemned the US sanctions and said Tehran would strongly defend itself against any military or economic aggression and called on Europe to do more to preserve the 2015 nuclear deal between Tehran and world powers.

In May 2018, the US president pulled his country out of the JCPOA, which was achieved in 2015 after years of negotiations among Iran and the Group 5+1 (Russia, China, the US, Britain, France and Germany).

Ever since, the EU has failed to make good on its promise to save the nuclear deal and facilitate Iran’s economic trade with the international community.

The Iranian minister also said that the Islamic Republic wanted to build balanced relations with its Persian Gulf Arab neighbors and that it had proposed signing a non-aggression pact with them.

(Source: Tasnim, under Creative Commons licence)

By John Lee.

Oil production is to increase at the West Qurna 1 oilfield, according to Reuters.

The news agency quoted Basra Oil Company (BOC) chief Ihsan Abdul Jabbar as saying on Wednesday that output will rise from 440,000 barrels of crude oil per day (bpd) to 490,000 bpd in the “next few days”.

The field is being developed by ExxonMobil (25%), PetroChina (25%), Itochu (15%), Pertamina (10%), Iraq’s state-owned Oil Exploration Company (25%)

(Source: Reuters)