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Baghdad Increases Pressure on KRG with Budget Cut

By Omar Sattar for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News. 

The first draft of Iraq’s federal budget for 2018, approved by the government at the start of the month, envisions slashing the Kurdish region’s share from 17% to 12.7% of the total.

The cut is one of several “punitive” constitutional measures that followed the Sept. 25 Kurdish referendum on independence. Those measures also saw Baghdad seize control of disputed areas, border crossings and air bases, and demand that the Kurdistan Regional Government (KRG) transfer taxes and other public revenues to the central government.

This is the first time that the KRG’s share of the budget has been subject to review since 2005, when the government of then interim Prime Minister Ayad Allawi allocated 17% to the Kurdish region, despite the fact there has not been an official census in Iraq since 1997.

“There have been no negotiations so far with Baghdad on the budget or other pending issues, despite the KRG’s desire for talks,” said parliament member Najiba Najib of the Kurdistan Alliance. “The central government is still refusing to receive the Kurdish delegation.”

“Iraq still doesn’t currently have official statistics,” she added. “Even data from the Ministry of Trade is inaccurate. It’s not reasonable to believe that the population of the Kurdish region has stayed at just 5 million, as the United Nations said in 2003 when it recommended the KRG receive 13% of the national budget.”

She said the central government has felt “arrogant and powerful” since it regained control of Kirkuk.

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SOMO Awards Diesel Tenders

By John Lee.

Sources have told Reuters that China’s state-run Zhenhua Oil will supply diesel (500 parts per million (ppm) sulphur) to Iraq’s State Oil Marketing Organization (SOMO) through a term contract for the first time.

It will supply 600,000 tonnes of the 2.37 million tonnes sought by SOMO in a tender for delivery in the 2018 calendar year.

The company is part of defence conglomerate China North Industries Group Corp (NORINCO).

BB Energy, Litasco (the international marketing and trading arm of Russia’s Lukoil) and Lima Energy (a joint venture between Litasco and SOMO) will also supply about 25 percent each.

(Source: Reuters)

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ShaMaran Petroleum Announces Results

ShaMaran Petroleum has announced its financial and operating results for the three and nine months ended September 30, 2017. (Unless otherwise stated all currency amounts indicated as “$” in this news release are expressed in thousands of United States dollars).

HIGHLIGHTS AND DEVELOPMENTS

Operations

  • Oil production on the Atrush Block commenced in July 2017. Atrush is currently producing at approximately 26 thousand barrels of oil per day (“bopd”). In order to address certain production constraints the facilities were shut down in the beginning of October. These constraints have now successfully been resolved.
  • One of the four production wells, Atrush 4, (“AT-4”) is currently shut in. The well was back-producing drilling fluid lost during drilling operations. In order to not upset the production system it was decided to clean up the well via temporary facilities upon the receipt of a flare permit from the Kurdistan Regional Government (“KRG”). This operation is now planned for Q4 2017.
  • In October and November 2017 the Company received payments totalling $2.5 million representing its entitlement share of the $9.7 million in total payments received by the Atrush Non-Government Contractors from the KRG for July and August oil sales from Atrush and reimbursement instalments of the Atrush Exploration Costs receivable. 703 thousand barrels of oil were exported from Atrush for the months of July and August with an average netback price1 of $35.3 per barrel of oil. Total oil produced and exported from Atrush over the third quarter was 1.3 million barrels resulting in an average of 14.6 thousand barrels per day. The average netback price over the quarter was $36.86 per barrel and the average lifting cost was $8.54 per barrel.
  • The Chiya Khere-7 (“CK-7”), which was spudded on September 17, 2017 reached a final depth of 1,861 metres in early November 2017. The reservoir section was encountered approximately 114 metres shallower than prognosis. The well was drilled on time and under budget. Testing and completion of the well will be performed in 2018 to coincide with installation of flow lines between the Production Facility and the Chamanke E location were the well is located. The main objectives of the well are to appraise the commercial potential of the Mus formation, to help reduce the uncertainty in the location of the medium to heavy oil transition zone and to serve as a further producing well.
  • In September 2017 an agreement was concluded between the Atrush Non-Government Contractors and the KRG for the sale of Atrush oil whereby the KRG will buy oil exported from the Atrush field by pipeline at the Atrush block boundary based upon the Dated Brent oil price minus approximately $16 for quality discount and all local and international transportation costs. This discount is based on the same principles as other oil sales agreements in the Kurdistan Region of Iraq.
  • The Final Completion Certificate for the Atrush Feeder Pipeline (“FCC”) was issued on October 31, 2017 which completes the obligation of the Non-Government Contractors to fund the KRG’s share of development costs and triggers the commencement of repayment of both the Atrush Feeder Pipeline Cost Loan and the Atrush Development Cost Loan. The first loan repayment instalments are due later in November 2017.
  • Following the independence referendum held in Kurdistan on September 25, 2017, operations in the Atrush field in Kurdistan are continuing in a normal, safe and secure manner. Exports from Atrush are continuing via the Kurdistan Export Pipeline system and drilling operations on the CK-7 well are progressing as planned. Nevertheless, events since the referendum suggest an increase in the potential for political instability within the region.

1 This includes a discount to Dated Brent for oil quality and all local and international transportation costs.

Corporate

  • On January 30, 2017 the Company completed the issue of 360 million common shares of ShaMaran on a private placement basis (the “Private Placement”) at a price per share of CAD 0.10 (equal to SEK 0.67) which resulted in gross proceeds to the Company of $27.3 million ($26.4 million net of transaction related costs). Zebra Holdings and Investments SARL, Lorito Holdings SARL and Lundin Petroleum BV, the Company’s major shareholders, subscribed for 43,463,618 shares, 16,984,621 shares and 17,800,000 shares, respectively, in the Private Placement.
  • In February 2017 the Company reported estimated reserves and contingent resources for the Atrush block as of December 31, 2016. Reserves and resource estimates have remained unchanged from those reported for the prior year. Total discovered oil in place in the Atrush Block is a low estimate of 1.5 billion barrels, a best estimate of 2.1 billion barrels and a high estimate of 2.8 billion barrels, with Total Field Proven plus Probable (“2P”) Reserves on a property gross basis estimated at 85.1 MMbbl and Total Field Unrisked Best Estimate Contingent Resources (“2C”) on a property gross basis estimated at 304 million barrels oil equivalent (MMboe). 2 3

2 “MMbbl” means million barrels and “MMboe” means million barrels of oil equivalents. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 million cubic feet (“Mcf”) per one barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

3 This estimate of remaining recoverable resources (unrisked) includes contingent resources that have not been adjusted for risk based on the chance of development. It is not an estimate of volumes that may be recovered.

OUTLOOK

Operations

• In the fourth quarter of 2017 it is planned to produce the AT-4 well until clean via temporary facilities and bring Atrush production up to the facilities’ design capacity of 30,000 bopd.
• Plans for Atrush for 2018 include:
• continue with program to identify bottlenecks in order to maximise output from the Production Facility;
• testing and completion of the CK-7 well;
• install the CK-7 flow line and bring CK-7 into production;
• drilling, testing and completion of Chiya Khere (“CK-10”), a sixth development well;
• drilling and completion of Chiya Khere (“CK-9”), a dedicated water disposal well; and
• conducting extended testing of the CK-6 well which is located on the eastern side of the Atrush Block and which is outside the 2P reserve area of Atrush. This would involve the installation of temporary production facilities near the Chamanke–C well pad and the delivery by truck of oil to the main Phase 1 Production Facilities.
• Following the results of the CK-7 and CK-10 wells, the extended well testing in CK-6 and sustained production from the Phase 1 Production Facilities the Company expects to be in a position to further assess the significant undeveloped Atrush resource base.
• The political situation in the Kurdistan region will be monitored continuously and the market will be appraised of any material impact on operational activity.
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Who will Govern Kirkuk?

By Nahwi Saeed for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

Although Baghdad imposed its authority on Kirkuk on Oct. 16 and appointed a new temporary governor, Kurds still hope to reach an agreement with Baghdad that will allow them to appoint a Kurdish governor in the disputed province between Baghdad and Erbil.

In the latest development, the Patriotic Union of Kurdistan (PUK) nominated a Kurdish candidate (the former head of the provincial council, Zarkar Ali) on Nov. 12, and demanded that the provincial council hold a meeting to vote on the new governor.

The Kurds’ proposal is one of several options on the table.

The first option is appointing a military governor. Some members of the Arab and Turkmen communities in Kirkuk proposed this before and after the Kurdish referendum. For Kurds, appointing a military governor, even if for a while, means Kirkuk’s restoration to the pre-2003 era and the reminder of bitter memories when the Kurds were the most aggrieved and affected group in the city.

The central government may be powerful enough to hold Kirkuk for now, but appointing a military governor would push the Kurds to one side, which is likely to prove both provocative and unsustainable. Election results indicate that the Kurds are larger than other groups in the province, although there has been no official and reliable census for some time.

Kurds will reassert their claim on Kirkuk at the first available opportunity — both for the symbolic reason that many Kurds regard Kirkuk as their “Jerusalem,” and for the economic reason that control of Kirkuk’s oil would play a big role in any future Kurdish independence bid.

The upshot is that Kirkuk was and remains a “disputed territory”; as a US State Department statement said Oct. 20, “The reassertion of federal authority over disputed areas in no way changes their status — they remain disputed until their status is resolved in accordance with the Iraqi constitution.”

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Pope auctions Lamborghini to help Iraqi Christians

Pope Francis was presented with the keys to a brand-new Lamborghini Huracan on Wednesday by officials from the luxury car maker.

The special edition car, however, will be auctioned off by Sotheby’s in London and the proceeds given to four charities in Pope Francis’ name.

Pope Francis blessed the car and signed the hood after receiving it in front of his Casa Santa Marta residence.

Sporting the papal colors – white with yellow-gold detailing – the Lamborghini Huracan’s base price usually start at 183,000 euros but the specially-made papal car should bring far more at auction.

A statement from the Holy See Press Office said some of the proceeds will go to the papal charity “Aid to the Church in Need” towards rebuilding homes, churches, and public buildings in Iraq’s Nineveh Plains. These funds, the statement said, will help Christians who had taken refuge in Iraqi Kurdistan “to finally return to their roots and recover their dignity.”

(Source: News.va)

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WHO Assistance for Earthquake Patients

WHO delivers urgent health assistance for earthquake trauma patients

In response to the recent earthquake in the border region between Islamic Republic of Iran and Iraq, the World Health Organization (WHO)’s office in Iraq has deployed a medical team supported with 3 ambulances, 4 tents and emergency lifesaving supplies to Sulaymaniyah governorate in northern Iraq.

The health supplies, sufficient for 200 surgical operations, have been prepositioned at the Emergency Hospital in Sulaymaniyah governorate.

An interagency assessment mission to Sulaymaniyah governorate reported that 8 people had been killed, more than 500 people injured and 3 health facilities damaged, 2 of which remain nonfunctional as a result of the earthquake.

WHO’s support is in response to a request from the Directorate of Joint Crisis Coordination Centre, Ministry of Interior, Kurdistan Regional Government and the Directorate of Health Sulaymaniyah.

On Sunday, 13 November 2017, an earthquake measuring a magnitude of 7.3 on the Richter scale struck approximately 32 kms from the city of Halabja, Iraq. The earthquake was felt across Iraq, including in the cities of Baghdad, Erbil, Sulaymaniyah, Kirkuk and Basra. Five districts in Sulaymaniyah were struck the hardest.

WHO and health partners continue to closely monitor the situation and will continue to deliver assistance to health facilities receiving patients affected by the earthquake. This emergency response by WHO has been made possible with funds from European Union Humanitarian Aid (ECHO) and the Office of U.S. Foreign Disaster Assistance (USAID/OFDA).

(Source: UNSMIL)

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KCA Deutag Wins New Iraq Drilling Contracts

By John Lee.

UK-based drilling and engineering contractor KCA Deutag has announced that it has been awarded a one year contract for two rigs to carry out land drilling operations in Southern Iraq.

Its T-210 rig (pictured) will move from Oman to work along with the T-601, bringing the company’s total number of rigs in Southern Iraq up to three.

This new contract, along with deals for another three rigs in other territories, have a combined contract value of $48 million.

Commenting on these awards, Simon Drew President of Land said:

“These contract wins, which come in a tough environment in the wider oil industry, are very important to the Land Business Unit and KCA Deutag as a whole.  They have been won against intense competition and I would congratulate all our staff on delivering these contract successes.  We look forward to delivering value to our clients through exceptional well construction performance.”

(Source: KCA Deutag)

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Plans to increase Kirkuk Oil Output to 1m bpd

By John Lee.

Oil Minister Jabar Ali al-Luaibi [Allibi, Luiebi] (pictured) has said that Iraq plans to increase oil production at the Kirkuk oilfields to one million barrels per day.

According to Reuters, exports from Kirkuk have been on hold since Iraqi forces took back control of them from the Kurds last month.

At least three months will be needed to repair the old pipeline to Ceyhan port in Turkey. The main 600,000 bpd Kirkuk-Ceyhan pipeline had been offline since March 2014 following insurgent attacks.

(Source: Reuters)

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Dust Storms sweep across Iraq as Govt Solutions Falter

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

On Nov. 3, NASA published clear images taken by its satellites of the severe dust storm that hit Iraq recently. The climate changes sweeping Iraq are causing human casualties and economic damages. Hundreds of cases of suffocation were recorded.

The Ministry of Health announced Oct. 30 that there were more than 4,200 cases of suffocation in most governorates, including 528 in Karbala. During the dust storm, the Iraqi Civil Aviation Authority canceled its flights, and Iranian flights to Baghdad and Najaf airports were also canceled. Ninevah province recorded 1,108 cases of suffocation in the camps for internally displaced persons.

The storms also affected the course of the battles between the Iraqi forces and the Islamic State (IS). On Oct. 31, the Iraqi forces were forced to postpone the campaign aimed to retrieve the city of Qaim, west of Anbar, from IS because of the lack of visibility caused by the dust storms.

While dust storms are occurring in neighboring countries such as Saudi Arabia, Kuwait and even Iran, “Iraq is one of the most affected countries by the storm, at the level of its environment, individuals’ health and economy,” said Amer Habib of the Technical College Musayyib in Babil province and the director of a project on organic fertilizers in Babil.

“This is due to the fact that Iraq is a barren land where vegetation is scarce. Human activities have swept away orchards and agricultural lands, which also led to the decrease of the rivers’ water levels and the lack of rainfall, which resulted in the drying up of huge areas of agricultural spaces.”

In 2011, the World Meteorological Organization identified dust storms as a natural disaster. Several countries around the world have strengthened their defense strategies against this environmental threat with green belts of trees that are resistant to drought and harsh environments. The stakeholders, especially local governments in Iraq, have been following the same approach for years and have developed projects to help eliminate desertification.

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IBBC holds Successful Autumn Conference in Dubai

Iraq Britain Business Council holds successful Autumn Conference in Dubai

Following on from the first Iraq Britain Business Council conference in Dubai in 2016, the IBBC was delighted to host its Autumn Conference in the UAE once again. The event was strongly supported by the UAE authorities.

Alongside Baroness Nicholson, the UK Prime Minister’s Trade Envoy to Iraq and President of the IBBC, the conference was opened by H.E. Abdullah Al Saleh, Under Secretary for Foreign Trade and Industry, UAE Ministry of Economy.

The Minister reminded delegates that non-Oil & Gas related trade between the UAE and Iraq had already passed 11 Billion USD in 2016, with Dubai in particular being a hub for local and international companies in the region.

The Minister firmly believes that the UAE’s role in the rebuilding of Iraq will continue to expand and expressed his wish to cooperate with organisations such as the IBBC to accomplish this crucial task.

Vikas Handa, IBBC UAE Representative and the Managing Director of the Emirati Company DrillTech, warmly thanked the minister and stated that the IBBC stands ready to work even more closely with the UAE in Iraq.

The Government of Iraq sent a high calibre ministerial delegation led by H.E. Mr Qasim Al-Fahdawi, The Minister of Electricity, to the conference. The delegation included H.E. Mrs Ann Naufi Aussi Balbool, Minister of Construction Housing and Public Municipalities; H.E. Kadhim Fijan Al Hamami, Minister of Transport; H.E. Dr Sami Al Araji, Chairman of the National Investment Commission (NIC); and H.E. Mr Fayadh Hassan Nima, Deputy Minister of Oil for refining affairs.

The conference was structured around several sessions in which the Iraqi officials and international companies operating successfully in Iraq, most of which are members of the IBBC, exchanged their views and experiences.

These sessions focused on strengths, weaknesses and opportunities of the economy in Iraq, Reconstruction & Infrastructure, Transport, Power and Oil & Gas. In parallel, a series of high level round-table discussions between investors and Iraqi Government representatives took place.

The conference included for the first time a presentation on the rapidly developing Tech sector in Iraq , given by the CEO of Zain.

IBBC thanks the International Finance Corporation (World Bank) and the IMF for its participation. Thanks also go to the IBBC members who sponsored the conference: Gold Sponsor International Islamic Bank; Silver Sponsors Serco and Gulftainer; Lunch Sponsor Rolls-Royce; pre-reception Sponsor Wood; and Coffee Break Sponsors Eversheds Sutherland and KCA Deutag.

IBBC Managing Director, Christophe Michels, stated that the increasing involvement of the UAE and wider GCC with Iraq was a game changer for the country. The IBBC very much welcomes this development and is delighted to be part of it and support it. The organisation will increase its presence in the UAE and the Autumn Conference in Dubai will become a regular feature in its calendar of events.

(Source: IBBC)