Editor – Page 119 – Cursor international

17 December, 2018

Jiyad: Uneven Development in Iraq Petroleum Sector

By Ahmed Mousa Jiyad.

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

Restraining the Game-Changer:

A Decade of Uneven Development in Iraq Petroleum Sector

The development of the Iraqi petroleum sector during the period 2008-2018 represents, from all related aspects, a distinct phase in the sector and in its role in the national economy.

Sector-wide petroleum comprises three different but organically liked sub-sectors through critical forward-backward linkages:

Upstream (including exploration, field development and production);
Midstream (pipeline, storage, export terminals and related infrastructures);
Downstream (mainly, crude oil refining, gas processing, petroleum product distribution and petrochemical industries).

Though the “State” has been the dominant actor in petroleum sector development, the post 2003 period witnessed an erosion of that role through a grand opening of the sector for International Oil Companies- IOCs; different contractual modalities, mostly reflecting the peculiarities and realities of each sub-sector, were proposed or adopted to govern the legal relations with the IOCs.

Thorough and continuing follow-up and research suggest that most of the evidenced development has taken place in the upstream sub-sector, with heavy IOCs involvement in a significant part of the country’ proven oil reserves through four bid rounds that contracted the most prized oilfields; while other two sub-sectors continue-trapped in their chronic misalignment, obsolete technologies and wasteful practices of invaluable natural resource.

Moreover, the “triple shocks”; collapsing oil prices since June 2014 (economic risks) accompanied by Da’esh (security risks) effects and Kurdistan Regional Government-KRG taking-over some of North Oil Company-NOC oilfields (June 2014-October 2017) (political risks) made matters even more devastating. And with the then prevailed notions of “the new normal” and the prospect of “lower-for-longer oil price” that contributed into further deepening the fiscal crisis of the state had elevated the “fear-factor” among Iraqi decision makers.

That, combining with apparent human, systemic and institutional capacity-gaps limitations (business risks), had resulted in:

Iraq giving important concessions to IOCs without having tangible benefits in return;
Weakened severely Iraq’s strength in any future negotiation with the IOCs;
Establishing a powerful precedent for costly domino effects.

Accordingly, the article would argue that, analytically and empirically, a sub-sector focused policy could generate triple-negativities: on the development in that sub-sector; on the entire sector itself and on the sector’s contribution to the development of the national economy.

That, obviously, is a testimony of and an indication to the absence of well thought, coherent and integrated petroleum and energy policy; and to the futility of the “indicative non- mandatory” National Development Plan-NDP.

Hence, the logical consequences and outcomes would exacerbate structural imbalances, deepen vulnerabilities to external factors and increase dependency on oil revenues, which prohibits desirable structural change, diversification and transformation; a vicious circle of dependency and uneven development.

The nature of the topic decides the research methodology. Hence, the article is a multi-disciplinary in its approach focusing on the relevant and important economic, legal, institutional, political economy and geopolitical analytical frameworks and aspects. Also, the article offers evidence-based analysis by relying on official, verifiable and crossed-checked data, information and documentation. Time-series and charts for the ten-years covered period are necessary, and available, for elaboration but avoided for space restriction.

The article adopts a holistic view by addressing the three interrelated levels of analysis: micro, sectoral and macro (national), excluding KRG. Throughout the article, many questions were posed indicating the need for further scholarly work and research investigation. Finally, because of my constant follow-up and frequent contributions on Iraqi energy and petroleum sector, this article refers heavily to some of my previous works and publications.

The article comprises two parts and concluding remarks: part one identifies and analyzes the most important milestones in petroleum upstream development while part two provides assessment of successes and failures in the petroleum sector-wide and their implications for Iraq.

The above is an edited “Abstract and Introduction” of my article published by the academic periodical-IJCIS:

Jiyad, A. M. (2018), ‘Restraining the game-changer: A decade of uneven development in the petroleum sector’, International Journal of Contemporary Iraqi Studies, 12:3, pp. 239–67, doi: 10.1386/jcis.12.3.239_1)

Kindly note that IJCIS, publishes by Intellect Books-UK, is a subscription periodical with a possibility to purchase, online, the entire issue or any of its articles; web-access link will be provided once the printed copy issue is released in the coming days.

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.

15 December, 2018

US “struggles” to convince Iraq to cut ties with Iran

By John Lee.

US Energy Secretary Rick Perry spent the last two days trying to convince the Iraqi government that it’s in its best interest to cut energy ties with Iran.

But according to a report from Washington Examiner, his efforts have had limited success.

Perry tweeted:

“In bilateral meetings with Iraqi President @BarhamSalih, Prime Minister Abdul-Mahdi, and Speaker Mohammed Al-Halbousi I reaffirmed that the U.S. stands ready to assist the Iraqi people in transitioning from Iranian energy dependence to using their full domestic energy potential.”

Iran is Iraq’s neighbor and an important supplier of the natural gas that fuels the nation’s electric grid, which is crucial to Iraq’s economy and oil industry.

More here.

(Source: Washington Examiner)

14 December, 2018

Dana Gas Increases Production in Iraq

Dana Gas PJSC, the Middle East’s largest regional private sector natural gas company, announces that as a result of the ramp up of production from its debottlenecking project in the Kurdistan region of Iraq, its group production reached 70,000 barrels of oil per day (boepd) on the 19 November and has since been sustained above that level.

The Company’s principal operations are in the Kurdistan Region of Iraq (KRI) and Egypt, where the drilling of the Balsam-8 well has also led to a sharp increase in overall production. Current group production, in excess of 70,000 boepd, represents a significant increase compared to the Company’s 9M 2018 average of 62,250 boepd.

Dr Patrick Allman-Ward, CEO, Dana Gas, said:

“Production in excess of 70,000 barrels oil equivalent per day is a great achievement for Dana Gas. At the start of the year, we planned a drilling programme in Egypt and a debottlenecking project in the KRI that would significantly increase production. We have successfully delivered both projects. The increase in production will help offset the lower realised hydrocarbon prices that have impacted the oil industry in the last quarter and support growth in our revenue and net profit figures for the full year 2018 and beyond.

“We remain excited about the long-term future of our world-class assets in the KRI. Further investment is underway to double current production to 900 MMscf/d over the coming three years, together with an increase in condensate to 36,000 bpd and LPG to 1200 MTpd.”

In the fourth quarter 2018, Dana Gas Egypt completed the drilling of the Balsam-8 well and tied it in to the network. The well was completed ahead of schedule and under budget, adding over 5,000 boepd to the Company’s output.

In the KRI, the Company announced a 30% increase in production capacity at the Khor Mor field (pictured), which it jointly operates on behalf of Pearl Petroleum. The expansion of the gas processing plant consisted of a series of plant additions and modifications to de-bottleneck throughput, raising output capacity from 305 MMscf/d of natural gas to 400 MMscf/d, with over 15,000 barrels per day of condensate. This is expected to add up to $50 million annually to the top line without incurring any additional operational costs.

The Company recently posted a strong set of quarterly financial results. 9M 2018 revenue increased 6% to $351 million (AED1,287 mm) from $330 million (AED1,210 mm) over the same period last year and 9M 2018 net profit was $41 million (AED149 mm) versus a net loss of $6 million (AED22 mm) in 9M 2017, excluding one-off items.

(Source: Dana Gas)

13 December, 2018

Iraq’s GDP to Grow 4.1%

By John Lee.

GDP growth in Iraq is expected to hit 4.1 percent in 2019, up from 2.8 percent this year, acccording to data from Moody’s.

The gain is based on an expectation of oil prices averaging $75 per barrel, and would be the highest level since 2016’s 13.1 percent expansion.

The National quotes the report as saying:

“Higher oil prices and output, as well as an expected increase in investment spending because of the improved security situation, have bolstered Iraq’s economic outlook … However, oil price volatility and potential further social unrest that could weaken Iraq’s economic infrastructure, as well as Iraq’s vulnerability to environmental risks, exacerbated by outdated infrastructure are continued risks to growth.”

More here

[In April, Fitch predicted 4.5 percent growth for 2019. – Ed.]

(Source: The National)

13 December, 2018

Increased Oil Production at Halfaya

By John Lee.

Production at Halfaya oilfield has reportedly increased by 100,000 barrels per day (bpd) to a total of 370,000 bpd.

Adnan Noshi, head of Maysan Oil Company, told Reuters that output rose after the completion of a new oil processing facility.

A further increase to 470,000 bpd is expected next quarter.

(Source: Reuters)

13 December, 2018

Deloitte report on Kurdistan Oil and Gas – Q2, 2018

Fourth Deloitte report on Oil and Gas Review in the Kurdistan Region, Iraq – Q2 of 2018

Today, Regional Council for Oil and Gas Affairs has published new verified data on the Kurdistan Region’s oil exports, consumption and revenues, covering the period from 1 April 2018 to 30 June 2018, after a review of the sector by the international “Big 4” audit and consulting firm, Deloitte.

The Regional Council for Oil and Gas Affairs acknowledges the positive feedback received from stakeholders, including the international community, and reiterates its commitment to the people of Kurdistan that the two international audit firms, Deloitte and Ernst & Young, will continue to independently review the oil and gas sector, inclusive of all the streams.

As part of our arrangement with international auditing firms, it was agreed that both auditing firms will assist Kurdistan Regional Government in training and developing local resources. The Regional Council for Oil and Gas Affairs, in coordination with Deloitte, arranged a 3-days Oil and Gas training workshop, from 23-25 October 2018, which was attended by 15 participants from Board of Supreme Audit.

This was the first batch from Board of Supreme Audit receiving industry training and a plan is being prepared for more training of selected candidates from Board of Supreme Audit to equip-them with modern auditing techniques and oil and gas industry knowledge.

Deloitte’s report for the second quarter of 2018 is accessible through this link (PDF), in Kurdish, Arabic and English.
Frequently asked questions handbook (PDF) in Kurdish, Arabic and English to help readers better understand different sections of the report.

The report for Q1 can be found here.

(Source: KRG)

12 December, 2018

EU, World Bank support Iraq Energy Sector Reforms

In the framework of the financing agreement signed yesterday by the Government of Iraq (GoI) and the European Union (EU) committing €14 million (US$15.8 equivalent) to support the government’s efforts to ensure increased and more reliable energy access for the Iraqi population, the EU and the World Bank Group (WBG) have signed today a €12.85 million (US$14.5 equivalent) implementation agreement to provide the needed technical assistance.

The initiative complements the ongoing and upcoming World Bank interventions in support of the GoI’s energy sector reforms, including those embedded in the budget support operations series (Development Policy Financing programs – DPFs), the Reimbursable Advisory Services (RAS) for structuring the Gas Value Chain and Gas Marketing in Iraq, and the support to subsidy reforms funded by the ESMAP’s Energy Subsidy Reform Technical Assistance Facility (ESRAF).

Supporting Iraq’s private sector enabling energy sector reforms is a priority development objective in the country both for the EU and the WBG. In a country where the energy sector accounts for more than 90% of central government revenues, addressing energy sector challenges is an essential and complementary action to any public finances related reforms, an area in which the European Union and the World Bank are also partnering in Iraq.

The country is also the world’s 3rd largest exporter of oil and its untapped natural gas reserves are the 12th largest in the world, yet it is forced to import fuel to meet its domestic energy demand, which imposes significant economic and fiscal strain on public finances. Equally important, Iraqi citizens are regularly faced with power shortages and have to resort to more expensive and pollutant sources of energy.

Efficiency in the management of public resources and delivery of services are critical to the achievement of public policy objectives, especially for a resource-rich upper-middle income country like Iraq, as well as fundamental to restore the trust and social contract between Iraqi citizen’s and the country’s institutions, especially in a post-conflict era of stabilisation and reconstruction. “As pledged in the Kuwait Conference, the European Union is committed to help Iraq’s reconstruction efforts and economic and political reforms to secure a better future for its citizens,”

(Source: Relief Web)

12 December, 2018

Video: Improving Healthcare in Iraq

UNDP is rehabilitating Tikrit Teaching Hospital and improving access to healthcare for millions of Iraqis in areas that were under ISIL control.

11 December, 2018

Latest threat to Displaced Children in Iraq: Winter

As Nadia Murad (pictured), the Yazidi activist and survivor of gender-based violence is honored with the Nobel Prize for Peace, UNICEF is calling attention to the plight of hundreds of thousands of internally displaced children in Iraq whose lives are threatened by freezing temperatures and floods that have affected large parts of the country.

“As the world celebrates Nadia Murad’s incredible story of survival and her work for human rights, let us remember that there are many vulnerable children in Iraq who still need our support, even if the worse of the violence may be over” said Peter Hawkins, UNICEF Representative in Iraq.

Winters in Iraq are harsh. It rains and snows and temperatures can fall below zero in the northern part of the country, where a majority of Yazidi and other displaced children live. Most displaced families live below the poverty line, in dilapidated housing with poor heating, or in camps with little protection from the cold. It impossible to afford fuel for heating and winter clothing to keep their children warm.

“The devastating floods have made this winter even more difficult for displaced children who are extremely vulnerable to hypothermia and respiratory diseases. No child should be subjected to such risks. Every child deserves to be warm and healthy,” added Mr. Hawkins.

UNICEF is providing winter clothes, including boots, scarves, and hats to approximately 161,000 children in Sinjar, Erbil, Dohuk, Ninawa, Anbar, Diwaniya, Basra, Salaheddin, Baghdad and Suleimaniah, including through cash support.

UNICEF’s winter campaign aims to reach the most vulnerable children aged between three months and 14 years living in camps for the internally displaced and in hard-to-reach areas.

(Source: UN)