By John Lee.

Oil Minister Adel Abdel Mahdi [Adil Abd Al-Mahdi] met on Sunday with a delegation from the French oil company Total, lead by Mr. Pascal Carrier.

The Minister confirmed that Iraq is keen to foster relations with companies such as Total, and aims to expand cooperation in the field of oil and energy to develop and increase the production.

The company is involved in development of Iraq’s Halfaya oil field.

(Source: Ministry of Oil)

Moody’s Investors Service has today assigned a provisional rating of (P)Caa1 to Government of Iraq’s planned USD-bond issuance, with a stable outlook.

The rating was initiated by Moody’s Investors Service and was not requested by the rated entity. It is being assigned ahead of planned issuance of USD-denominated debt by the Iraqi government in the United States under Rule 144A. Moody’s expects to remove the provisional status of the rating upon the closing of the proposed issuance and a review of its final terms.

The (P)Caa1 issuance rating reflects the following underlying key factors:

  1. Iraq is a sizable economy with robust growth prospects, which are based on the country’s large oil wealth, but are counterbalanced by a lack of economic diversification.
  2. Very weak institutional strength as reflected in very weak governance indicators and issues regarding the availability of fiscal and economic data.
  3. Moderate fiscal fundamentals, as debt-relief since 2004 has lowered the government’s debt burden, while at the same time facing challenges from a low oil price environment and rising debt burden.
  4. Very high susceptibility to event risk, which is predominantly driven by the challenges posed by deeply entrenched sectarian and ethnic tensions, and the ongoing insurgency by the Islamic State of Iraq and the Levant (ISIL).

RATINGS RATIONALE

Moderate economic strength: a sizable but undiversified economy with robust growth prospects

Iraq is oil-rich and has a lot of potential for economic development and growth. According to the BP Statistical Review of World Energy 2015, Iraq’s proven oil reserves were 150 billion barrels in 2014, the fifth largest in the world, accounting for 8.8% of global proven reserves.

Real GDP growth has averaged 7.7% between 2008 and 2013, making it the 15th fastest growing economy in the world based on IMF data. According to Moody’s estimates, growth was particularly strong in the oil sector, which expanded by almost 12% on average, whereas non-oil real GDP grew much more slowly, by around 5.5% on average. In 2014, real GDP declined by 2.1%, driven by a sharp contraction in non-oil growth, whereas oil production continued to grow by around 4.5%.

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Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 17th Sept 2015).

Please click here to download a table of listed companies and their associated ticker codes.

Note: There will be no trading session at the ISX from September 23, 2015 to September 27, 2015 due to the national holiday, Eid Al-Adha. The next session will be held on Monday, September 28, 2015.

The RSISX index ended the week at ID1,176 / $1,231 (-1.2%) (weekly change) (-15.6% and -16.9% YTD change, respectively). The number of week traded shares was 2.7bn and the weekly trading volume was IQD3.8bn ($3.1mn).

ScreenHunter_2029 Sep. 21 11.30

ISX Company Announcements

  • On September 16, the media published the draft of 2016 budget law which will be presented by the Ministry of Finance to the Cabinet.
  • According to the CBI announcement to all private banks related with the instructions of providing funds for small and medium enterprises (SMEs), the CBI stated that the goal is to accomplish the economic and social development, and support SMEs and employ the man power with special skills by giving loan for the projects of SMEs. The funds will be provided to SMEs in the following sectors: agricultural sector, industrial sector, housing sector, commercial sector, health, educational, and tourism sector. The amount allocated for the projects will not be more than IQD 1.0trln and the interest rates and administrative margins over the loan amount should not exceed the interest rate of %5.5 in total.
  • Original shares of Elaf Islamic Bank (BELF) will resume trading on Sep. 21, 2015 after they approved 2014 annual financial results, increasing its capital from IQD200bn to IQD250bn through 2.50% bonus and 21.95% rights issues at premium price.
  • Al-Ameen Estate Investment (SAEI) will hold its AGM* on Oct. 5, 2015 to discuss and approve 2014 annual financial results and electing new board members. ISX will suspend trading of SAEI starting on Sep. 28, 2015.
  • New shares of Dar Al-Salam for Insurance (NDSA) from the capital increase to IQD3.509bn through 10% bonus issue will resume trading on Sep. 20, 2015.
  • Ashur International Bank (BASH) announced that the bank has begun distributing dividends for 2014 starting on Sep. 15, 2015.
  • Baghdad Hotel (HBAG) will hold its AGM* on Sep. 20, 2015 to discuss and approve 2014 annual financial results, electing new board members and distributing cash dividend. ISX suspended trading of HBAG starting on Sep. 13, 2015.
  • Investment Bank of Iraq (BIBI) resumed trading on Sep. 13, 2015 after they approved 2014 annual financial results and distributing 8% cash dividend (IQD0.08 price per share).
  • ISX is requiring the following companies to complete their listing procedures on the ISX: International Development Bank for Investment and Finance, Region Trade Bank for Investment and Finance, Silsilat Al-Thahab for Money Transfer, Iraqna Company for Money Transfer, Fences Company for Money Transfer, Al-Taib Company for Money Transfer and Tigris and Euphrates River Banks Company for Money Transfer.

Iraqi government-backed militias carried out widespread destruction of homes and shops around the city of Tikrit in March and April 2015 in violation of the laws of war, Human Rights Watch (HRW) said in a report released on Sunday.

Militiamen deliberately destroyed several hundred civilian buildings with no apparent military reason after the withdrawal of the extremist armed group Islamic State, also known as ISIS, from the area.

The 60-page report, “Ruinous Aftermath: Militia Abuses Following Iraq’s Recapture of Tikrit,” uses satellite imagery to corroborate accounts of witnesses that the damage to homes and shops in Tikrit, and the towns of al-Bu ‘Ajil, al-Alam, and al-Dur covered entire neighborhoods.

After ISIS fled, Hizbollah Battalions and League of Righteous forces, two of the largely Shia pro-government militias, abducted more than 200 Sunni residents, including children, near al-Dur, south of Tikrit. At least 160 of those abducted remain unaccounted for.

“Iraqi authorities need to discipline and hold accountable the out-of-control militias laying waste to Sunni homes and shops after driving ISIS out,” said Joe Stork, deputy Middle East director. “Abusive militias and their commanders acting with impunity undermine the campaign against ISIS and put all civilians at greater risk.”

Ahead of the campaign, Shia militia leaders had promised revenge for the June 2014 massacre by ISIS of at least 770 Shia military cadets from the Camp Speicher facility, near Tikrit. In videos of home demolitions, Shia militiamen curse Sunni residents and invoke Shia slogans.

The militias are part of the Popular Mobilization Forces, consisting of several dozen Shia militias, which the government created in response to the rapid ISIS advance across Nineveh and Salah al-Din provinces in June 2014.

Canada’s SNC-Lavalin has announced the award of a contract to Kentz, a member of the SNC-Lavalin Group, by ExxonMobil, for a new oil processing facility to increase production at its West Qurna 1 oil field in Iraq.

Kentz, with its regional partner, is providing the front-end engineering design (FEED), detailed design engineering, procurement, fabrication, construction, commissioning and start-up of the new facility, capable of producing an annual average of 100,000 stock tank barrels of crude oil per day.

The facility, located in the province of Al Basra, will be designed to process full well stream fluids from the production wellhead area and separate them into associated gas, untreated produced water, and stable product crude for export.

The project will be executed out of the company’s Abu Dhabi engineering hub, with support from its Dubai operations and is expected to be completed in 26 months. This project is critical for the West Qurna 1 overall development plan and this contract highlights key advantages that the integration brings to the company’s overall capability to service key clients.

Christian Brown (pictured), President, Oil and Gas, SNC-Lavalin, said:

We are delighted to continue our relationship with ExxonMobil, a client we’ve provided services to for many years.

“The combined expertise and resources in our Oil & Gas business allows us to offer an even a broader range of high-quality services, and in the Middle East we have a strong team of over 8,000 people in the region that can deliver for clients.”

(Source: SNC Lavalin)

The Iraqi Ministry of Planning has opened a new Procurement Help Desk to streamline the tendering process.

Speaking at the opening of the facility, US ambassador Stuart E Jones (pictured) made the following statement:

Thank you for those excellent remarks and thank you for your support to the USAID and embassy teams that have been working so closely with the Ministry of Planning.

“I’m really honored and pleased to be here today with you. And, I’m delighted to celebrate the opening of the Procurement Help Desk; this, of course is a project of the Ministry of Planning in partnership with the U.S. Government.

“Let me tell you about the way things used to be. Before this Help Desk, private contractors and government entities had no place to turn to for guidance on public procurement. Each ministry had its own specific methods of procurement. These processes were often confusing and opaque – and overwhelmed in red tape.

“Let me share this one example. Previously, the Ministry of Electricity applied a complicated procurement process that required 28 steps, this involved more than 15 departments, and took 10 months, and this was for every tender to be prepared and awarded. International suppliers lost confidence in the procurement system and, as a result, spare parts were not delivered on time or were of inferior quality. Vital electricity projects were stalled.

“It doesn’t have to be this way. Now, thanks to the Minister of Planning and his team, there are multiple layers of support for government procurers. The Help Desk provides a library of internationally accepted and common standard bidding documents for other ministries to use. Now, Ministry of Planning staff can ensure that all local and central government authorities apply international standards to contract tenders.

“So, going back to the Ministry of Electricity; with support from the Help Desk, the Ministry of Electricity was able to cut out 23 of the 28 steps in its procurement process. Total procurement time went from 10 months to two months.

“This is a game changer. It sends the message that the government of Iraq is a reliable partner, it sends the message that government bidders are going to get fair treatment, and it sends a message that projects are going to get completed in a speedy fashion.

“Already now, 30 pilot tenders with 17 government institutions have benefited from the Help Desk.

“Transparent procurement creates jobs. Transparent procurement means completion of priority capital investment projects. It means the infrastructure that Iraqi citizens need and use every day – roads, buildings, and power plants – can be contracted fairly and completed more quickly and delivered to higher standards.

“This is exactly the kind of reform that his Excellency, Prime Minister Haider al-Abadi has called for. This is exactly the kind of reform that the people of Iraq want. The Help Desk is now fully in Iraqi hands. And, this is only the beginning of the quest to limit corruption and improve business and investment in Iraq.

“So, your Excellency, I want to thank you for your leadership, for your guidance, for your energy behind this project. I want to thank the team here at the Ministry of Planning for guiding this, for driving this and I want to thank my colleagues at USAID and the Tarabot team for supporting the Ministry of Planning in achieving this objective.”

(Source: Embassy of the United States)

By John Lee.

Bloomberg quotes Iraqi Central Bank Governor Ali Mohsen Ismail (pictured) as saying that Iraq has enough foreign reserves to maintain its currency peg, but didn’t rule out a minor devaluation to shore up government revenue hurt by the slump in oil prices and the war on Islamic State militants.

He said reserves are sufficient to cover more than six months of imports, higher than what is typically needed to maintain the exchange-rate.

There is no fear for the dinar,” he said, but added “[if] the pressure remains, we could marginally change the exchange rate to increase revenues of the finance ministry … This is just an option that needs to be carefully studied because we don’t want to give away what we have achieved in terms of the inflation rate, which is perfect now.

Consumer prices rose 2.6 percent in July.

(Source: Bloomberg)

By John Lee.

Genel Energy has announced that it signed a definitive sale and purchase agreement with OMV to acquire its 36% operated stake in the Bina Bawi field. Completion of the acquisition is subject only to government approval, which is expected shortly.

The consideration comprises an upfront payment of $5 million. A contingent payment of $70 million is payable once gas production exceeds agreed threshold volumes from the Miran and Bina Bawi fields. A further contingent payment of $75 million is payable two years after the date of the second payment.

In consideration of the Kurdistan Regional Government (‘KRG’) agreeing to the transfer of OMV’s stake in the Bina Bawi field, on completion of the acquisition Genel will offset US$25 million against monies owed by the KRG to Genel in respect of past expenses incurred on the Miran field.

(Source: Genel Energy)

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

Iraq’s government, society struggle with widespread bribery

With shocking innocence, Ali al-Sultani from Babil, a city 100 kilometers (62 miles) south of Baghdad, told Al-Monitor what he does to have official documents dealt with in state agencies.

“I often carry large sums of money and hand them over to employees in the state agencies, where I go to take care of my affairs such as transferring the ownership of a property, obtaining civil status cards for my children or amending their school grades,” Sultani said.

Sultani does not consider what he is doing “bribery,” but described it as “a token of gratitude for the employee who gives me special assistance.”

Bribery is considered morally wrong in Iraq, and it is against the law and social and religious norms. For this reason, the word “bribery” is often replaced with less offensive terms that legitimize the act.

Sociologist Ali al-Khafaji told Al-Monitor, “Bribery has become commonplace in Iraq, and it is covered up with justifications or special arrangements.” He added, “Many Iraqis have grown accustomed to visiting a [state agency] employee at home or in an agreed-upon place to give him a commission for expediting an administrative procedure and overcoming legal obstacles.”

Another Babil resident told Al-Monitor on condition of anonymity, “I got my driver’s license while sitting at home, after paying $600 to an employee in the traffic police department.”

The Commission of Integrity confirmed the extent to which bribery is present in Iraqi state agencies in a statement it issued Feb. 1: “Offices in Baghdad that issue driver’s licenses top the list of bribed parties. There are indications of bribery in all state agencies, and these acts exceed 3% of the [regular] administrative transactions.”

To test the phenomenon of bribery, Al-Monitor met with a retired employee who was willing to help in obtaining a passport; he asked for $400 to “spare us the hassle of waiting for months as well as the trouble of [filling out] papers.”

KRG continues direct oil export despite sabotage attempt on pipeline

In August, direct oil export from Kurdistan Region continued despite sabotage and attempted theft on the export pipeline inside Turkey borders, which occurred on 27 July and extended to the first week of August.

According to the Kurdistan Regional Government, KRG, Ministry of Natural Resources Oil Export Report, in August Kurdistan Region has exported 14,657,798 barrels of crude oil, an average of 472,832 bpd, through the Kurdistan pipeline network to the port of Ceyhan (pictured) in Turkey. This is an 8.5 per cent decline comparing to 16,019,090 barrels which were exported in July.

The decline, according to the report, was due to nine days of downtime for the export pipeline which mostly occurred at the beginning of the month.

Of the exported amount, fields operated by the KRG contributed 10,958,817 barrels, an average of 353,510 bpd, while fields operated by the North Oil Company, NOC, contributed 3,698,981 barrels, an average of 119,322 bpd.

In August, the Kurdistan Regional Government delivered a total of 1,579,004 barrels, an average of 50,936 bpd, to the Iraqi State Oil Marketing Company, SOMO.

The monthly export report said that in August, the KRG “continued its direct oil sales in Ceyhan to compensate the Region for the budget shortfalls from the federal government in Baghdad and to continue to pay down debts accumulated in 2014 from pre-payments for direct oil sales” the report highlighted.”

Last week, KRG Ministry of Natural Resources confirmed that the Kurdistan Regional Council for Oil and Gas Affairs expects the first tranche of regular payments to the producing IOCs to be made available during the first half of September 2015.

In an earlier statement by KRG ministry of Natural Resources it was urged that as oil export is expected to rise in early 2016, the KRG envisages making additional revenue available to the IOCs to enable them to begin to catch up on the past receivables due under their production sharing contracts.

(Source: KRG)