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Saudi Arabia looks to Expand its Footprint in Iraq

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

Following Iraqi Prime Minister Haider al-Abadi’s two visits to Saudi Arabia last year, Saudi Crown Prince Mohammed bin Salman is set to visit Iraq soon, according to Iraqi parliamentarian Saadoun al-Dulaimi.

Although neither Riyadh nor Baghdad have officially announced the visit, Dulaimi said in a March 12 tweet that Prince Mohammed will spend two days in Iraq, first meeting with Abadi in Baghdad to “sign agreements,” followed by a visit to Najaf to meet religious leaders.

Saudi Arabia was scheduled to reopen its consulate in the oil-rich city of Basra, which is adjacent to Iran, in March, but this was delayed for administrative reasons. Some reports say that Mohammed may open the consulates in Basra and Najaf, the Shiite religious center that is home to top Shiite clerics, during his upcoming visit to Iraq.

Meanwhile, the Saudi Embassy in Iraq is in the process of setting up the consulate office at the Sheraton Hotel in Basra. The consulate was closed in 1990 in the wake of the Gulf crisis that erupted during the regime of Saddam Hussein, and remained closed as a result of tensions in Saudi-Iraqi relations.

The Saudi kingdom opened a consulate in Erbil, the capital of the semi-autonomous Kurdistan Region of Iraq, in early 2016.

The decisions to expand Saudi Arabia’s diplomatic representation in Iraq come as part of a broader framework to strengthen the official political relations between the two governments. Saudi Arabia is seeking to establish economic and social bridges between the two countries in various fields.

Abdul Rahman al-Shahri, head of the Saudi delegation responsible for the establishment of the consulate in Basra, said that these measures are carried out to “provide services and incentives to both religious pilgrims and economic delegations between the two countries.”

Abdul Aziz al-Shammari, Saudi ambassador to Iraq, said in a statement in January, “Saudi Arabia is mostly interested in developing relations between the two countries in all areas that serve their aspirations.”

In late February, a friendly soccer game was held between Saudi Arabia and Iraq in the city of Basra, the first between the two countries in three decades. The game was attended by Saudi delegations and a large crowd of Iraqi fans.

The media office of Abadi said in a statement March 5 that the prime minister had received a phone call from Saudi King Salman bin Abdulaziz Al Saud, in which the latter pledged to build a soccer stadium in Baghdad for 100,000 spectators. It was later announced that Saudi Arabia would increase the number of seats to 135,000.

The statement said that “King Salman expressed his readiness and commitment to expand the positive relations between Iraq and Saudi Arabia at the economic, commercial, popular and cultural levels, as well as all levels of interest to both countries.”

Saudi companies, most recently the Saudi Basic Industries Corporation, one of the world’s leading petrochemicals companies, have been opening offices in Baghdad and Basra to expand economic exchange between the two countries.

Saudi Arabia is focusing its attention on Basra because it is the richest city in Iraq with the country’s largest oil fields and gateway to the Persian Gulf. It is also the most populous city after Baghdad, is adjacent to the Iranian border and home to an overwhelming majority of Shiites who share the same tribal and ethnic origins with Saudi tribes. In addition, many Saudi and Basra families are linked through marriage.

Saudi Arabia is also receiving Shiite figures who are viewed as independent of Iran. These include Sadrist movement leader Muqtada al-Sadr, who visited Saudi Arabia last year and met with King Salman and Prince Mohammed. He was warmly received amid much fanfare.

Saudi news sites, most notably Al-Arabiya, are refraining from criticizing supreme Shiite cleric Ali al-Sistani, because his views are independent from those of Tehran and has broad influence among Iraqi Shiites.

All this has been a matter of concern for Iran, which has allegedly mobilized parties to raise banners in Basra condemning the opening of the Saudi Consulate and the various economic and sporting activities.

The State of Law Coalition led by former Prime Minister Nouri al-Maliki, who is close to Iran, opposes Saudi Arabia’s opening of a consulate in Najaf.

Iraq is seemingly determined to pursue rapprochement and cooperation with Saudi Arabia, and is organizing regular visits by political, economic and media delegations. These included Abadi’s visit to Saudi Arabia last October, during which the memorandum of establishment of the Saudi-Iraqi Coordination Council was signed to develop relations between the two countries.

Interior Minister Qasim al-Araji also visited Saudi Arabia last year, and Abadi insisted on receiving Saudi delegations even if they were not high level. In February, for instance, he received the Saudi media delegation that visited Iraq at the invitation of the Iraqi Journalists Union.

In October, Saudi Arabia resumed its flights to Iraq after 27 years, and it opened in October 2017 its border crossing in southern Iraq to expand economic travel and increase tourist and religious travel between the two sides.

The first initiatives to expand relations between the two countries were directly sponsored by the United States with Secretary of State Rex Tillerson attending the meeting of the establishment of the Saudi-Iraqi Coordination Council in Riyadh in October.

The Iraqi-Saudi rapprochement appears to take place in the context of the new US policy that followed the support garnered by President Donald Trump from the US allies in the region to form a united front to counter Iran’s rise in the Middle East.

Saudi Arabia has seemingly made great progress in achieving rapprochement with Iraq and expanding its areas of influence within the last year. Such rapprochement is likely to get stronger should Abadi manage to keep his seat for another term in the elections scheduled for May.

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Former PwC Partner joins AMAR Management Team

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Chris Frost, the Chairman of the AMAR International Charitable Foundation’s Finance Committee, has retired from the position after five years at the helm.

Since he began his Chairmanship, Mr Frost has skilfully overseen AMAR’s already excellent financial arrangements.

A frequent visitor to Iraq and the wider Middle East region during his many years as a Partner at the multi-national professional services business, PwC, he has brought enormous experience and vast knowledge to the role.

Mr Frost, who was also a founder Board member of the Iraq Britain Business Council (IBBC) – AMAR’s sister organisation, recognised the vital importance of AMAR’s work to the Iraqi people.

However, he will not be leaving the AMAR family. Now that he has fully-retired from PwC, Mr Frost has been asked, and has accepted, a full-time position at the charity.  He will start as Treasurer on April 1st.

Mr Frost’s brief will be to oversee AMAR’s continued growth and development and strengthen the charity’s core principles; Good financial management, transparency, accountability and low administrative costs with high field output to defined, professional world class standards.

AMAR Chairman, Baroness Nicholson, said today that she was “absolutely delighted” to have persuaded Mr Frost to stay within the AMAR family:

“People of Chris’s standing in the financial world are not available very often, so we had to strike while the iron was hot. He has done a fantastic job with our Financial Committee over the last five years, so we are very much looking forward to him working here on a full-time basis.”

“Chris will also travel to Basra, Baghdad and the North of Iraq regularly to meet and work with the local financial teams to develop an understanding of their working practices and help them work more effectively and efficiently.”

Baroness Nicholson added:

“His particular background also allows us to implement our long-held plan to breakout with new fundraising approaches to funding institutions and city guilds.”

(Source: AMAR)

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IBN Welcomes New Expert Blogger

By Padraig O’Hannelly.

This week at Iraq Business News, we are delighted to welcome a new Expert Blogger to our ranks:

Elena Kornienko (pictured), has more than 15 years of professional experience in contracts, procurement and tendering in various roles from demand-identification to contract close-out.

She has worked on major international oil and gas projects, including the Sakhalin-1 and Sakhalin-2 fields in Russia, and Iraq’s West Qurna-2. Now based in Dubai, she provides consultancy services to the oil and gas industry.

Elena is a fluent English and Russian speaker, and a graduate of the Moscow State University of Commerce, holding a degree in Economics. She also graduated with distinction from the School of Business Administration at Portland State University and holds a CIPS diploma.

You can read her first blog here, and we look forward to reading more of her perspectives on procurement and tendering in Iraq over the coming weeks and months.

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KRG, Pearl agreement to boost Electricity Generation

The Kurdistan Regional Government (KRG) and Pearl Petroleum have signed an agreement to increase production of gas from the Khor Mor field later this year, to boost much needed electricity generation for the people of the Kurdistan Region and Iraq as a whole.

The 10-year gas sales agreement will enable gas production from Khor Mor field to increase by 25% later this year, from 320 million cubic feet per day currently to 400 million cubic feet per day.

Dr Ashti Hawrami, KRG Minister of Natural Resources, said:

“We are pleased to see the further commitment of expansion and investment by the companies and the anticipated growth in gas supplies will make a positive contribution to the growing domestic needs for more electricity.”

As part of a final settlement of arbitration in August 2017, Pearl Consortium, which is led by Crescent Petroleum and Dana Gas, committed to expanding their investment and operations in the region.

The companies plan a multi-well drilling program in the Khor Mor and Chemchemal fields, as well as installation of new gas processing and liquids extraction facilities. The overall aim is to increase gas production by a further 125% within two years, to 900 million cubic feet per day.

KRG also welcomes Dana Gas and Crescent Petroleum’s expansion of their local training and employment programs, as agreed in the arbitration settlement. The companies employ close to 500 full-time local personnel representing over 80% localisation, and have training programmes to increase this figure further.

See also the Dana Gas press release on the Gas sales agreement (external link)

(Source: KRG)

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Genel Energy Returns to Profit

Genel Energy has announced a return to profit.

In its audited results for the year ended 31 December 2017, Murat Özgül (pictured), Chief Executive of Genel, said:

“Another year of consistent payments by the KRG and a disciplined capital allocation strategy helped to generate material free cash flow in 2017. This was enhanced in the latter part of the year by the Receivable Settlement Agreement, from which Genel expects to generate sustainable and significant free cash flow going forward.

“The strong financial performance of 2017, and the promise of more to come, facilitated the successful refinancing in December, which solidified a significant improvement in the balance sheet and provides a strong platform for growth.

“We will continue with our strategy of maximising free cash flow as we focus investment on our producing assets, specifically on the Tawke PSC, where the performance of Peshkabir remains highly encouraging. Prudent expenditure will also be made on the other assets within our portfolio that provide material value creation opportunities.

“We will continue to construct the building blocks for value creation from Bina Bawi and Miran, while cost-effectively progressing our exploration assets in Africa.”

Results summary ($ million unless stated)

2017

2016

Production (bopd, working interest)

35,200

53,300

Revenue

228.9

190.7

EBITDAX1

475.5

130.7

  Depreciation and amortisation

(117.4)

(128.9)

  Exploration expense

(1.9)

(815.1)

  Impairment of property, plant and equipment

(58.2)

(218.3)

  Impairment of receivables

–

(191.3)

Operating profit / (loss)

298.0

(1,222.9)

Cash flow from operating activities

221.0

131.0

Capital expenditure

94.1

61.2

Free cash flow before interest2

141.8

59.1

Cash3

162.0

407.0

Total debt

300.0

674.6

Net debt4

134.8

241.2

Basic EPS (¢ per share)

97.1

(448.6)

1.     EBITDAX is earnings before interest, tax, depreciation, amortisation, exploration expense and impairment which is operating profit / (loss) adjusted for the add back of depreciation and amortisation ($117.4 million), exploration expense ($1.9 million) and impairment of property, plant and equipment ($58.2 million)

2.     Free cash flow before interest is net cash generated from operating activities less cash outflow due to purchase of intangible assets and purchase of property, plant and equipment (oil and gas assets only)

3.     Cash reported at 31 December 2017 excludes $18.5 million of restricted cash

4.     Reported debt less cash

Highlights

  • $263 million of cash proceeds received in 2017 (2016: $207 million), with strong free cash flow generation of $142 million (2016: $59 million)
  • Year-end net debt of $135 million, a 44% reduction year-on-year (2016: $241 million)
  • Year-end gross debt of $300 million, a 56% reduction year-on-year (2016: $675 million), with debt extended until 2022 and interest cost reduced by 40%
  • Receivable Settlement Agreement resulted in cash benefit of $26 million in Q4 2017
  • Focused capital allocation – 66% of capital expenditure was spent on cash-generative producing assets, and has been cost recovered
  • Drilling success at Peshkabir, with gross production rising to c.15,000 bopd at year-end
  • Taq Taq field production stabilised in H2 2017, with Q4 average of 14,035 bopd in line with Q3 average of 14,080 bopd
  • In January 2018 Bina Bawi and Miran CPRs confirmed c.45% uplift to gross 2C raw gas resources to 14.8 Tcf

Outlook

  • Combined net production from the Tawke and Taq Taq PSCs during 2018 is expected to be close to Q4 2017 levels of 32,800 bopd, unchanged from previous guidance
  • Genel expects to continue the generation of material free cash flow in 2018
  • Tangible steps to be taken to further de-risk gas resources and unlock value from Bina Bawi and Miran, including the high-value oil resources
  • Capital allocation discipline to continue, with ongoing prioritisation of spend on cash-generative producing assets. Capital expenditure guidance unchanged at c.$95-140 million net to Genel
  • Opex and G&A cash cost guidance unchanged at c.$30 million and c.$15 million respectively

More here.

(Source: Genel Energy)

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Obtaining Second Citizenship: Which Programmes Are Affordable?

Press Release

We live in a very uncertain world, currently fraught with geopolitical tensions, social upheaval and economic ups and downs. For these reasons – and more – people around the world, and especially in the Middle East, are increasingly looking for second citizenships to protect their assets and, more importantly, ensure a secure and prosperous future for themselves and their families.

The motivations for seeking a second citizenship are ranging from a desire to avoid difficult and often painfully long visa application processes to a desire for the peace and stability that often eludes many countries.

Jeremy Savory, founder & CEO, Savory & Partners, one of the largest companies in the Middle East that provides citizenship-by-investment programmes, commented:

“There are certain countries in the world where it’s legal to obtain citizenship, provided you meet certain criteria, one of which is the financial contribution you need to make, [through] real estate, financial products, or a one-time investment, which is non-refundable.”

“Right now, there are a lot of countries in this region where people don’t feel like they can travel freely into the Schengen zone in Europe, or to the UK or the US,” he says.

Other cases, however, are more unique. Savory & Partners has helped a Bedoon, one of the more than 100,000 officially “stateless” individuals that call the GCC home.

“This wasn’t about getting a second passport. It was actually this person’s first passport. Trying to prepare a file for someone that doesn’t have much to go on in terms of showing they exist is very tricky,” he says of the case.

For some, having a second passport is nothing more than a sound financial decision. “We’ve had royal family members come to us and say that whenever they want to buy a property, they submit their passport copy, it says “HRH” on it and the price goes up,” Mr. Savory notes. “The cost of getting the passport will save that price increase.”

Citizenship and residency programmes around the world are vastly different, each with their own requirements, benefits, timeframes and obligations.

Citizenships from St Lucia and Dominica, for example, can be obtained in a few months with investments from as little as $100,000 without any obligation to live there for any amount of time.

Permanent residency from countries such as Spain and Portugal, on the other hand, require investments of €500,000 ($623,000) and can take as long as ten years to process.

Perhaps understandably, the most in-demand citizenships are those for countries in the European Union.

“The benefits that come with it [EU citizenship] are innumerable. Having said that, it’s priced accordingly,” Savory says.

In Malta you’re looking at not less than €1m ($1,23m) worth of investments when it’s all put together of which typically 55 percent – 75 percent is non-recoverable whereas Cyprus is €2m ($2.45m) in real estate of your choice as long as the paperwork process is correct.

An individual’s chosen second citizenship is largely based on their particular needs. An ultra-high net worth individual, for example, is likely looking for more than ease of travel.

An important distinction – which consultants at Savory & Partners often find themselves explaining to potential clients – is between citizenship programmes and residency programmes.

A residency programme, for example, will only lead to citizenship if one actually resides in the country and is able to demonstrate both a tangible physical presence in the country as well as a fiscal presence. In some cases, applicants need to pass language tests. These types of programmes can often take significant amounts of time to complete.

People should be transparent in the application, and there should be nothing to hide. That’s never truer than in today’s times when the topic of sovereignty is highly sensitive.

Additionally, Savory & Partners is very straightforward with potential clients about their chances of success – even if there aren’t any – which differentiates it from the many companies operating around the world that promise what they can’t deliver.

“I think maybe sometimes clients come to our company because we can tell them ‘it’s not going to happen’, or that they need to do this and change that. There are a lot of companies that say ‘yes’ without actually knowing what the solution is or saying ‘yes’ and knowing full well that ‘no’ is the answer. Clients need to know they are getting qualified [expertise] and are aware of the situation,” Jeremy explains.

“We don’t take on all files because we are happy about the success rate we have and the high volume of files we have already. I don’t want to have a client that isn’t successful, especially if it’s something we could have avoided. We really invest our time and in-house due diligence policies to make sure the clients we take on get their citizenship. Contractually, if they don’t, we have to refund them the full amount of our fees.”

For those inclined to seek a second citizenship the timing is right. Affordability is there, although application checks are becoming more and more stringent. If you are rejected for a visa, then you are automatically ineligible for half the country programmes.

While this strong demand has led new countries – such as Montenegro, Armenia, Kazakhstan and others – to introduce or plan to introduce citizenship or residency by investment programmes, it has also brought with it problems that make finding the right citizenship by investment agent essential.

“It’s getting tougher to obtain a second passport definitely, but I think that gives me comfort. The higher levels of governance then the longer such programmes can continue to exist for those seeking second passports. I had to earn every government accreditation available, so I welcome increased industry scrutiny and regulation,” Mr. Savory concludes.

(Source: Savory & Partners)

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AMAR Foundation Strenghtens Financial Cmte

The Board of the AMAR International Charitable Foundation is to expand and strengthen its Finance Committee.

It will now be chaired by leading financial businessman and AMAR supporter, Mr Michael Boardman. The present Chairman, Mr Chris Frost is standing down, but will continue to advise AMAR in a different capacity.

Jonathan Ayres, the Chief Financial Officer of United Trust Bank, who has been a member of the committee for the last five years, will also stand down.

Mr Boardman will be joined on the committee by Mr Hadi Damirji, Mr Gavin Wishart, and Mr Siddik Bakir.

AMAR Chairman, Baroness Nicholson of Winterbourne; Board President, Professor Theodore Zeldin; and Board Vice-Chairman, Damon Parker, will continue in their roles on the committee.

Mr Boardman has more than 25 years’ experience of capital markets, financial management and reporting, valuation and business analysis. For 18 years he worked at Nomura Securities, the global investment banking and investment management company.

As a Managing Director responsible for Emerging Markets and a senior member of Nomura’s Global Finance team in Europe, he advised, structured and executed capital markets transactions and was personally responsible for raising over US$30 billion, in public and private markets.

For the last seven years, he has been Group CFO of Sindicatum Sustainable Resources, a high growth developer, owner and operator of renewable energy projects in the emerging markets of Asia.

Mr Boardman has been a regular speaker at industry events organised by the London Stock Exchange, Micex, Borsa Italiana and Euromoney and has published several articles about listings and public markets.

Mr Wishart, who is also a Board member of AMAR’s sister organisation, the Iraq Britain Business Council, worked at senior level in banking across Asia, the Middle East, Africa and UK during a career spanning 37 years.

Most recently he was Regional Head, Financial Institutions, Europe and Americas at the National Bank of Abu Dhabi, and before that was Chief Executive Officer, leading Baghdad, for Standard Chartered Bank.

Mr Damirji founded Optitune Plc in 2001,and is an Executive Board Member of the Massachusetts Institute of Technology’s Sloan School of Management. He was the Deputy Chairman of Trinity Group Ltd from 2007-2012 and CEO of Trinity Strategic Advisors from 2007 to 2008.

Mr Siddik Bakir is a Senior Oil Market Analyst at Saudi Aramco’s Strategy and Market Analysis Department in Saudi Arabia.

Previously, Siddik was based in London where he worked as a Senior Energy Analyst for the Middle East and South Asia and an Upstream Energy Consultant at IHS (IHS Markit).

Commenting on the Financial Committee changes, Baroness Nicholson said today:

“You can see from the bio data of the new members that the committee has been hugely strengthened. AMAR has always been rigorous in it financial dealings and we intend that always to be our trademark.”

“We believe we now have a fantastic committee to ensure the Board has the strongest possible financial leadership and support.”

(Source: AMAR)