Thread: Iraq/Dinar News Up until April 5th 5PM CTZ.

Appreciation of Iraqi dinar called 'commendable' at IMF meeting
30 March 2007 (PortAl Iraq)
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The Executive Board of the International Monetary Fund (IMF) has completed the third and fourth reviews of Iraq's performance under its economic program supported by a Stand-By Arrangement. The IMF arrangement is being treated as precautionary by the Iraqi authorities, and no purchase is planned.

The Stand-By Arrangement in an amount equivalent to SDR 475.36 million (about $714.7 million) was approved on Dec. 23, 2005. In completing the latest reviews, the Executive Board also approved the authorities' request for a six-month extension of the arrangement through Sept. 28. Additionally, the Board also approved the authorities request for a waiver of the non-observance of a structural performance criterion.

Following the Executive Board's discussion of Iraq, Deputy Managing Director and Acting Chair Takatoshi Kato said:

"Iraq is entering a crucial period in its economic recovery. Despite very difficult political and security circumstances, the Iraqi authorities have taken important measures to keep their economic program on track. The maintenance of fiscal discipline, as well as the tightening of monetary policy and the appreciation of the dinar, are commendable. The increase of official domestic fuel prices and the enactment by the Council of Representatives (CoR) of a law liberalizing the import of fuel products are important steps. The amendments to the pension law were submitted to the CoR; we look forward to their early passage into law. The government's approval of a new oil and gas law augurs well for the future of the oil sector. Progress is also being made in financial sector reform.

"Inflation, however, remains high. While this is to an important extent due to the prevailing difficult security situation and supply disruptions, the Central Bank of Iraq (CBI) may need to take further steps in order to prevent high inflation from becoming entrenched and to de-dollarize the economy. Fiscal policy should be supportive by keeping current spending, including the wage and pension bill, in check. At the same time, it is important to increase government investment, especially in the oil sector. The government also needs to reduce supply bottlenecks, especially of fuel products. To that end, actions are needed to facilitate the importing of fuel products by the private sector. The pace of structural reforms needs to be increased. Efforts to modernize the chart of accounts and the budget classification need to be stepped up, and the Financial Management Information System should be implemented rapidly. It is important to complete the census of public sector employees by mid-year. While the restructuring effort on the two largest banks is commendable, efforts should be made to restructure the four other state-owned banks. The modernization of the payments system needs to be expanded to cover all banks."

"The CBI's efforts to implement the recommendations of the Interim Safeguards assessment report and the Ernst and Young 2005 audit report are encouraging. The Ministry of Finance is strongly encouraged to recapitalize the CBI as soon as possible.

"Progress in settling arrears with private creditors is commendable. However, further progress is needed towards resolving non-Paris Club official claims," Kato concluded.

Appreciation of Iraqi dinar called 'commendable' at IMF meeting | Iraq Updates

Iraq's economic growth discussed at Center for Strategic and International Studies
30 March 2007 (PortAl Iraq)
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Earlier this month Under Secretary of Commerce for International Trade Franklin Lavin visited The Center for Strategic and International Studies (CSIS) to deliver a speech entitled "Opportunities and Challenges for Economic Growth in Iraq."

In the address, Under Secretary Lavin shared observations from his recent trip to Erbil, Iraqi Kurdistan and described the U.S. Commerce Department's economic policy priorities for Iraq.

In addition to launching the U.S.-Iraq Business Dialogue, Lavin also aimed to work on the Iraq Gateways Initiative, "which is simply to encourage companies that are looking at Iraq – are looking at doing business in Iraq – to think about particular locales that might be more fruitful environments for starting a business," Lavin said.

Regarding the Iraqi dinar, Lavin commented: "I think probably an underreported story is a very stable currency, so at least trade and normal economic decision-making can be facilitated."

The presentation Lavin gave to Iraqi Government officials and private sector leaders to launch the U.S.-Iraq Business Dialogue can be viewed here, heard here, or read here.

Iraq's economic growth discussed at Center for Strategic and International Studies | Iraq Updates

DNO ASA - Update on the activities in Kurdistan
In line with oilfield practices and with DNO's environmental policies, oil flaring will be avoided.
30 March 2007 (Huginonline)
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- An extended production test of Tawke # 5 delivered a maximum flow rate of 9,860 bopd

- Tawke development wells are now being subject to extended production testing in preparation for permanent production as well as to gain reservoir data

- Oil produced during extended flow testing is being collected in storage tanks

- Pre-commissioning and final testing of the first phase of the Tawke Early Production facilities is expected to commence shortly

- First oil production from Tawke will commence less than 3 years since DNO was first awarded the license and less than 12 months since the company announced the Tawke discovery.

DRILLING AND TESTING STATUS

Tawke # 5:

Tawke # 5 was successfully drilled as an oil producer on the Tawke Field and is located some 1.1 km east of the Tawke # 4 well. After the well reached total depth, the well was completed as an oil producer and the drilling rig was released and moved to the Tawke # 6 location some 2.7 km south-west of Tawke # 5. Tawke # 5 was then production tested.

At the initial stage of the test, the well was tested for maximum flow capacity at a rate of 9,860 bopd. In order to obtain information about the reservoir characteristics of the Tawke field, an extended flow test at lower rates was then undertaken of the Tawke # 5 well. The well was flowed for several days and produced at a stable rate of approximately 4,500 bopd during two flow periods.

Three additional wells will now be started for clean-up and extended flow tests, with the same objectives as for Tawke # 5, and as part of the preparations for the oil to be processed by the permanent production and export facilities installed at the Tawke Field. The duration of the extended test campaign of the three wells is expected to last several weeks.

In line with good oilfield practices and with DNO's environmental policies, flaring of oil will be avoided during the extended testing. The oil is therefore collected in storage tanks.

Tawke # 6:

The Tawke # 6 was initially designed as a water injector. The well has now reached total depth, and production testing will be undertaken of the main Tawke producing reservoir. If movable oil at commercial rates is confirmed, the well will be completed as an oil producer.

If Tawke # 6 turns out as an oil well, then the oil/water contact has yet to be defined within the Tawke main producing reservoir. In this case a new well will be immediately drilled further down-dip from the Tawke # 6 location. If this well penetrates the water zone, it will be completed as a water injector.

Tawke # 3:

The Tawke # 3 is designed as an exploration / appraisal well at the eastern extension of the Tawke area. The well objectives are to penetrate both of the oil producing intervals confirmed at the main Tawke structure, as well as the deeper oil bearing intervals in Tawke # 1, which were not properly tested. The well is expected to reach total depth during the next two weeks.

In addition, a small carrier rig will soon arrive at the Tawke location and will be used for testing the deeper reservoir intervals of Tawke # 1.

TAWKE EARLY PRODUCTION PLAN

The Central Processing Facilities (CPF) arrived at the Tawke area during February, and the installation and hook-up work as well as preparation for pre-commissioning and testing is well progressed.

Installation of the pipeline connecting the Tawke oil production to the main northern pipeline is nearly completed. However, certain technical information and issues require further clarifications with the pipeline Operator, before the pipeline from Tawke can be permanently tied into the northern pipeline.

Tanks and trucking loading stations are also in the process of being installed both at the CPF as well as at the pipeline tie-in point. Pre-commissioning and final testing of the first phase of the Tawke Early Production facilities is expected to commence within a short period of time. This accomplishment is less than 3 years since DNO was first awarded the license and less than 12 months since the company announced the Tawke discovery.

Whilst finalising the Tawke facilities, the development wells drilled to date will be subject to extensive flow testing and reservoir pressure testing in order optimise future production. As reported above the oil produced during testing is collected in storage tanks.

Commenting on the results Managing Director Helge Eide says:

"We are very pleased with our achievement in Kurdistan to date. We made the Tawke oil discovery in our first exploration well, and delivering first oil production within less than one year from this discovery demonstrates our capability to undertake fast-track exploration and development

Completing the first stage of the Tawke Early production Development will mark a new important milestone to Kurdistan Regional Development and DNO."

DNO ASA - Update on the activities in Kurdistan | Iraq Updates

Originally Posted by Gloribee

Sorry for posting here. Started a poll on Doc Daves revalation. Never started a poll before, so if you read my post before I posted the poll, Im sorry. Its now up and running and would really like the members here to give there Input. Even if you dont comment, please take the poll. Im really interested in how everyone thinks.

Gloribee

Hi Gloribee! Glad to see you've come out of the secret cultroom -OOPS -I mean chatroom to be among us at RC again. We have missed you and your posts about your contacts in Iraq and hope that you will once again share with us when you hear from them.Please tell all our secret chatty friends not to be strangers and come up for air and visit us and share news like they used too! Give a big love & hugs to Removed -neno, and all the rest! Tell them that we'll crash their party in Laughlin if they will crash ours in the Caymens!!

Thanks
Mike

Iraq Reforms Needed To Free Up Cash
The New York Sun - [30/03/2007]

America is requesting billions of dollars to help train Iraqis to spend the money they already have.

That was the message this week in testimony before the House Foreign Relations Committee from the State Department's senior Iraq coordinator to explain why Iraq would need $4 billion to help spend the $12.5 billion the Iraqi government already has in its accounts.

Speaking before the House Foreign Relations Subcommittee on International Organizations, Human Rights and Oversight, David Satterfield said building what accountants call "budget execution capacity" was a top priority now for his provincial reconstruction teams.

"Why couldn't Iraq spend these monies? Why couldn't the oil [minister] spend the $3.5 billion in his capital investment budget? Only some 6% was actually spent," he said. "The answer is not corruption. It's not politics. It's not security. It is literally the lack of mechanisms, the lack of the experience and capacity to spend funds which exist in Iraqi hands."

Current and former American financial advisers to the Iraqi government explain that the problem of budget execution has persisted for the Iraqis since June 2004, when the Coalition Provisional Authority officially disbanded and turned over the country's coffers to an interim government led by Iyad Allawi.

Hit hardest in the Iraqi government is the ministry of oil and the ministry of defense. While salaries of employees and soldiers are often paid on time, capital investments like new wells and new bases are not being made. The inability of Iraq's military to spend money on new investments worried one military consultant who yesterday said that it could prevent necessary spending for the maintenance of bases, equipment, and vehicles the American military is giving Iraqis as part of its efforts to rebuild the Iraqi military. "There needs to be a certain amount of money spent each year on just the maintenance of this stuff," this official said. "If they don't have the capacity to spend this money, then it will turn into junk."

One problem, according to a former Treasury official, is that there is no electronic system to count expenses and income for the individual ministries, local police stations, and even the military. "Every ministry has been functioning with a sturdy pencil, with handwritten paper records. I wish there was even carbon triplicates," this former official said. "They take a great big white sheet of butcher paper and draw lines and columns."

The lack of an electronic system has facilitated corruption, such as the over-billing of dummy contractors — a practice that has been the target of some prosecutions in Iraq. Less dramatically, it has slowed progress, causing orders to spend money to take days to process through the finance ministry. To this day, most Iraqi salaries are paid in cash that is delivered to local offices from the banks.

A consulting company, Bearing Point, has had a contract since 2004 to develop an electronic financial management system for Iraq's government, but it has been slow going. To this day, most of Iraq's provincial government offices are not connected to ministry of finance. The hope is that when this system is established, Iraq will have the banking infrastructure for automated teller machines.

Another problem facing the Iraqis is that there are hardly any accountants. Part of the American reconstruction effort will go to training procurement officers, accountants, and budget experts to be attached to local police stations and military units.

The former staff director for what is now the House Foreign Relations Committee, Hillel Weinberg, said Congress began quietly to ask questions about the accounting systems in 2005. He said, "Budget execution is extremely difficult. What everyone says about Iraq, is that people have a difficult time making decisions. It used to come from the top. One of the problems, their structure, the infrastructure, how you do this is lacking. It is not something that we have been able to get a handle on."

Lawmakers in the House at least appear to be losing patience. Rep. Gary Ackerman, a Democrat from New York, on Tuesday chastised the Iraqis for spending only 20% of the $6 billion they had budgeted last year for reconstruction projects. "The United States has invested $2 billion in Iraq's oil infrastructure, an important investment, I'm sure. But for reconstruction to be successful, we can't want it to succeed more than do the Iraqis," Mr. Ackerman said.

Mr. Ackerman voted Friday for a supplemental budget bill that gave the Bush administration most of the $4 billion it requested for Iraq reconstruction. But that bill, like the Senate's this week, contains a timeline for withdrawal certain to draw the president's veto. The maneuvering will mean that Congress will have to draw up another supplemental funding bill sometime when they return from spring recess after April 15, the date when the military will run out of money for the Iraq war and be forced to make cuts in training and vehicle maintenance.

http://www.iraqdirectory.com/DisplayNews.aspx?id=3525

Why You Should Care About the World Bank and Iraq
by Bank Information Center
Just - [30/03/2007]

Reports that a World Bank staffer was shot at an Iraqi checkpoint surfaced in late February. The Bank apparently suppressed the news for several days, presumably in an effort to quell concerns about Bank President Paul Wolfowitz's recent push to re-open a World Bank office in Baghdad. What should the Bank be doing in Iraq? Following is an overview of current Bank involvement in the country, and some reasons why you should be concerned.

What the Bank is doing in Iraq

The World Bank's stated mission for Iraq is to "help Iraq build efficient, inclusive, transparent, and accountable institutions for stability, good governance, and sustainable economic prosperity." Activities are guided by a 2006-7 Interim Strategy Note (ISN) and based on four pillars: restoring basic service delivery, enabling private sector development, strengthening social safety nets, and improving public sector governance. The Bank is currently providing both lending and technical advice to the country. It also administers one part of the International Reconstruction Fund Facility for Iraq: the World Bank Iraq Trust Fund (the UN's Development Group Trust Fund is the other part).

* Lending: The ISN provides a framework for up to $500 million in IDA resources. Another $500 million in IBRD resources may also be available, contingent upon improvements in creditworthiness. The Bank's website lists three active IDA projects with commitments totaling almost $300 million. The IFC, the Bank's private-sector arm, is supporting four private investments in the country totaling $297 million, including a SME-based project involving a Jordanian bank and a Commercial Bank project involving the National Bank of Kuwait (which is also, incidentally, part of a consortium managing the Iraq Trade Bank).

* Analytical & Advisory Services: The Bank is also providing policy reform papers on key issues and sectors, and organizing policy dialogues. Examples of Iraq reform paper topics include: economic reform, investment climate, and state-owned enterprises. One WB policy reform paper (United Nations and World Bank Joint Needs Assessment: Investment Climate (October 2003)) urges Iraq to quickly develop institutions and laws in favor of private and foreign investment. The Bank is also the lead adviser to the IMF's Iraq program on sectoral strategies including, inter alia, the oil sector.

* Iraq Trust Fund: Through the World Bank Iraq Trust Fund, the Bank finances at least 15 active and completed projects totaling over $400 million, primarily in the Water/Sanitation, Transportation, and Education sectors.

* Office: Bank activities in Iraq have been directed through an office in Amman, Jordan since shortly after the fall of Saddam Hussein. Country Director Joseph Saba is based in Washington, DC. However, Paul Wolfowitz has recently made moves to beef up the Bank's presence in the country, negotiating a contract with a new resident country director to be based in Baghdad's "Green Zone".

So what's the big deal?

1. The Bank's rush to re-engage is premature

Some argue that by preparing an ISN and approving lending to the country, the Bank is going against its own conditions for engagement, as outlined in the 1998 "Framework for World Bank Involvement in Post-Conflict Countries" and Operational Policy (OP) 2.30: Development Cooperation and Conflict. The OP states that an Interim-Strategy Note (ISN) may be prepared to guide short to medium-term operations when "active conflict has diminished sufficiently for Bank staff to be able to travel to the area for the purpose of identifying and supervising Bank-supported countries" and "there is a reasonable expectation of continued stability or of a sustainable &cease fire."

Active violence continues, there is no reasonable expectation of stability and World Bank staff cannot travel safely in the country. Sectarian violence is not only ongoing, it has intensified since the Bank prepared the ISN in 2005. And as the February shooting shows, staff is clearly not safe operating in the country. "In the simplest financial terms, there is no functioning banking system, the government does not control its territory and it cannot guarantee loan repayment. Any emergency or social funding in Iraq should come from donors' grants, not loans," Bea Edwards of the Government Accountability Project recently commented. Without stability and security, how can World Bank lending be properly implemented or supervised?

2. If I want your opinion, I'll give it to you&

Wolfowitz has the power to re-appoint a resident country director for the Baghdad office, regardless of staff and management concerns. But should he? Word is that Middle East Vice-President Christiaan Poortman resigned after a falling-out with Bank management over the issue. German ED Eckhard Deutscher has also publicly raised concerns. "Mr. Wolfowitz says he was simply following staff advice 'for a modest, incremental upgrading of our presence' in Iraq and that the plans have board approval, but current and former officials say he and his staff were the driving force for change," Greg Hitt wrote in the Wall Street Journal last year. At the very least, recent developments highlight ongoing tensions between Wolfowitz's team and the Bank's Board. Many are wondering if these tensions will in turn hamper the President's ability to successfully raise funds during the upcoming IDA-15 replenishment.

3. Wolfowitz's conflict of interest

In addition to exacerbating tensions within the institution, many see Wolfowitz's actions as confirming longstanding fears that the President will use his role to promote US geopolitical interests. His rush to establish an office might very well be interpreted as a move to instill greater confidence in other donors involved in reconstruction efforts in Iraq. Some might even go so far as to suggest the move might be laying the groundwork for ushering US private-sector interests back into the country. How can an architect of the Iraq war be truly objective in guiding the country's reconstruction?

4. No 'development cancer' in post-conflict environments?

Paul Wolfowitz has made the fight against corruption a defining theme of his presidency thus far; the Governance and Anti-Corruption Strategy (GAC) is expected to be finalized at next month's Spring Meetings. Yet the GAC's ambitious list of expectations and conditions for tackling corruption in borrowing countries and Bank projects seems oddly matched with lending to Iraq. Numerous reports have highlighted the level of corruption in the country. The Bank apparently grants special exceptions for countries in conflict. But what is appropriate? Many have criticized the GAC's spotty treatment of corruption in post-conflict environments. Given the astounding amount of debt previously incurred by corrupt regimes, and current calls to cancel these "odious" debts, how can the Bank reasonably turn a blind eye to corruption in post-conflict situations? Wolfowitz and the Bank must walk the talk with respect to corruption and Iraq.

5. Iraq: Open for business!

IMF lending and debt relief to Iraq is in part contingent upon the country's development of a petroleum law. Stipulated in an agreement signed before the election of the new government, and without meaningful public scrutiny, the law is currently being debated by the Iraqi Parliament. It will establish a Federal Oil and Gas Council, staffed in part by Big Oil executives. "The new law would grant the council virtually all power to develop policies and plans for undeveloped oil fields and to review and change all exploration and production contracts," Juan Gonzalez reported in the Daily News on Feb 21. Conveniently, it would seem, these companies will be some of the very same US and British companies formerly excluded from Iraq's oil industry due to US sanctions against the country; the Iraqi National Oil Company won't have any advantage over these foreign companies. "Since most of Iraq's 73 proven petroleum fields have yet to be developed, the new council would instantly become a world energy powerhouse," Gonzalez wrote. Contracts with international companies will likely be similar to controversial production-sharing agreements, which could prolong and exacerbate poor governance by allowing investors in the oil and gas sector to effectively bypass the weak or absent legal and regulatory frameworks.

What's the Bank's role in all of this? The institution is advising the IMF in the development of the oil sector strategy. More broadly, the Bank is advising Iraq on attracting foreign direct investment through quickly developing investor friendly laws and institutions and also advising on reforming state-owned enterprises. In addition, the Bank is participating in meetings with the IMF, Iraq Minister of Finance, and the International Tax and Investment Center (ITIC) on Iraq's oil sector. The ITIC is a business lobby group comprised of: BP, Chevron, Eni, ExxonMobil, Shell, and Total. A third workshop with ITIC on Iraq petroleum fiscal issues is scheduled for this Spring.

6. Post-conflict engagement: the Bank's new bread-and-butter?

Why aren't other post-conflict countries receiving the same attention from the World Bank? Comparing World Bank assistance across post-conflict countries is at times like comparing apples and oranges, but here's some food for thought:

* Iraq. Conflict status: ongoing sectarian violence. World Bank lending: Three IDA projects since 2005 totaling $300 million and four IFC projects totaling $297million. No lending 1973-2005.

* Afghanistan. Conflict status: ongoing unrest.* World Bank lending: Since 2002, 30 IDA/IBRD projects totaling $1.29 billion. No lending 1979-2002.

* Ivory Coast. Conflict status: peace process underway, disarmament started.* World Bank lending: Four IDA/IBRD projects since 2002 totaling $235 million.

* Sierra Leone. Conflict status: conflict ended in 2002.* World Bank lending: Fourteen IDA/IBRD projects approved since 2002, totaling $303 million.

* Liberia. Conflict status: civil war ended in 2003, peace agreement signed.* World Bank lending: Since 2005, 4 IDA/IBRD projects have been approved, totaling $46.5 million. No lending 1985-2005

* Central African Republic. Conflict status: fragile.* Since 1999, 4 IDA/IBD projects have been approved totaling $127 million. No new lending 1994-99 or 2001-05.


* Haiti. Conflict status: free and fair elections in 2006.* World Bank lending: Nine IDA/IBRD projects since 2005, totaling $165 million. No lending 1996-2005.

Source: "Semi-Annual Monitoring Report on Conflict-Affected Countries, December 2005-May 2006". The World Bank.

Moving forward...

The World Bank's involvement in Iraq provides critical fuel for analyzing the institution's engagement in post-conflict situations. As intrastate violence has increased, so the Bank has stepped up its involvement in virtually all aspects of "peacebuilding". Do privatization and conditionality in post-conflict lending really enhance prospects for peace? What is the proper role for the Bank? The World Bank, governments, and civil society must actively engage with these and other questions in the years to come.

The IFIs must tread carefully in resource-rich countries. Iraq's oil may in fact be a "resource curse", given the correlation between abundant mineral wealth (in Iraq's case, oil) and negative economic and political consequences. An even more central concern is whether the liberalization and privatization of Iraq's economy will alleviate or exacerbate the conflict, given the country's current inability to successfully distribute resources and profits. The IFIs must provide thoughtful development assistance, not use their influence to drum up business in a barely stable post-conflict environment. And the main beneficiaries must be Iraqis, not international consulting firms, international oil companies, the IMF or World Bank.

http://www.iraqdirectory.com/DisplayNews.aspx?id=3527

Iraq Mission February 2007
International Trade Administration
23 Page Report

http://www.csis.org/media/csis/event...esentation.pdf

By Mohammed Dargham off
Baghdad - (Voices of Iraq)
A statement issued by the Central Bank of Iraq that the bank will continue to sell and buy dollars next Sunday, the first of April, which would be the holiday occasion of the Prophet's birthday-Sharif yesterday, Thursday, the same price.

The exchange rate adopted on Thursday in the auction had reached 1273 dinars to the dollar selling and buying dinars in 1271.

He said Mr. Ali Yasiri, one dealing with the Iraqi Central Bank News Agency (Voices of Iraq) today, Friday, the Independent on Sunday will not undergo a normal auction, but the sale will be directly under the exchange rates adopted at the auction last Thursday that the sale will be open full quantities required, as well as the bank buy before any amount of foreign currency sold by banks to the bank.



HOLIDAY, NO NORMAL AUCTION, BUT DIRECTLY SELLING AND BUYING UNDER CURRENT RATE!!!

WHY NO AUCTION IF THEY STILL SELL AND BUY???

MAYBE READY FOR A NEW RATE AND OTHER SYSTEM!!

Originally Posted by kiko

By Mohammed Dargham off
Baghdad - (Voices of Iraq)
A statement issued by the Central Bank of Iraq that the bank will continue to sell and buy dollars next Sunday, the first of April, which would be the holiday occasion of the Prophet's birthday-Sharif yesterday, Thursday, the same price.

The exchange rate adopted on Thursday in the auction had reached 1273 dinars to the dollar selling and buying dinars in 1271.

He said Mr. Ali Yasiri, one dealing with the Iraqi Central Bank News Agency (Voices of Iraq) today, Friday, the Independent on Sunday will not undergo a normal auction, but the sale will be directly under the exchange rates adopted at the auction last Thursday that the sale will be open full quantities required, as well as the bank buy before any amount of foreign currency sold by banks to the bank.



HOLIDAY, NO NORMAL AUCTION, BUT DIRECTLY SELLING AND BUYING UNDER CURRENT RATE!!!

WHY NO AUCTION IF THEY STILL SELL AND BUY???

MAYBE READY FOR A NEW RATE AND OTHER SYSTEM!!

Now, can anyone take a shot at this?? What does it mean? I am lost...It would be the first day of the implementation of the new policy? So what's the policy? Current rate of 1271? "DIrect selling & Buying of Currency"? Is that Forex style now?

by Adam Smallman and Oliver Klaus FWN Financial News Thursday, March 29, 2007


ABERDEEN, Scotland, Mar 29, 2007 (Dow Jones Commodities News via Comtex)
Energy giant Royal Dutch Shell PLC (RDSB.LN) confirmed Thursday that it has been in talks with oil officials from the Iraqi government over the development of the country's gas industry.

Speaking on the fringes of an oil and gas conference in Aberdeen, Scotland,

Shell's Executive Vice President for Development and Technology in Exploration and Production Matthias Bichsel confirmed representatives of his company met with Iraqi officials in Oman to explore opportunities for the development of Iraq's largely untapped gas reserves.

Shell has offered to work with Iraq's government to develop a plan for building its gas industry, Bichsel said, although he said the talks are at an early stage and no formal plan has been proposed yet. Bichsel couldn't comment on whether the meeting in Oman had a positive outcome.

Managers from Shell spent much of last week with top oil officials from Iraq to discuss investment terms, people familiar with the matter told Dow Jones Newswires earlier this week.

The company hosted a week of meetings behind closed doors at a hotel in Muscat, Oman, to exchange information on prospective oil and gas joint-venture contracts and investments to upgrade Iraq's dilapidated oil industry, a person with knowledge of the talks said.

Veteran Iraqi oil expert Issam al-Chalabi, a one-time oil minister for the country, said the talks in Muscat concentrated on the gas plan, with Shell officials apparently showing their Iraqi counterparts around the company's gas projects in Oman.

The Muscat meeting follows another Shell-hosted gathering in the Netherlands recently at which Iraq oil ministry officials discussed the company's blueprint for gas development, al-Chalabi added.

The Iraqi delegation in Muscat was led by Thamer al-Ghadhban, a former oil minister and now senior adviser to Prime Minister Nouri al-Maliki, Deputy Oil Minister Abdul Jabbar al-Wakkaa, the head of the Oil Reservoirs Co. Nateq al-Byaiti, and a senior official from the Ministry of Planning.

It isn't known who represented Shell.

The efforts underpin attempts by foreign oil majors such as Shell to ensure Iraq offers them favorable investment conditions, just as lawmakers prepare to vote on a draft oil law that puts in place a nationwide framework to develop its hydrocarbons industry.

A Shell spokesman said the company has three conditions to invest in the Iraq: free elections, which have now taken place; the implementation of new oil and gas legislation; and improved security.

Shell has long expressed interest in opportunities in Iraq, where it had concessions from the 1920s until the nationalization of its oil industry in 1972.

It has already begun studies for the government with an eye to possible acreage when the oil law is passed.

Following cabinet approval last month, lawmakers in Iraq are soon to debate the oil law that is expected to open the country's 115 billion barrels of proven oil reserves, the world's third largest, to foreign investors.

But the legislation's current form fails to clarify issues critical for investment in the country, namely the terms for foreign oil companies' participation, and whether they would be allowed to take majority stakes in some Iraqi oil fields.

International oil companies have long been accused of attempting to influence the terms of oil investments in Iraq.

In the fall of 2004, the International Tax and Investment Centre, which lobbies for business-friendly legislation and is financed by companies such as BP PLC (BP) and Shell, delivered a report advocating production-sharing agreements in Iraq.

The Centre's Iraq project, which comprises BP, Shell, Eni SpA (E), Exxon Mobil Corp. (XOM), Total SA (TOT) and Chevron Corp. (CVX), is due to meet again this spring.

Shell Desperate For Iraq Success

Shell is desperate to gain a foothold in Iraq because "its current oil stakes aren't in a good situation" according to Shamkhi Faraj, a former Iraqi oil official and now an oil consultant.

Iraq, he added, "wants to diversify its investment relations with oil majors to include not only American companies but also European, like Shell, and others."

Al-Chalabi added that Shell boasts particularly strong relations with Baghdad, even during the former regime of Saddam Hussein.

Iraqi oil officials have previously said Shell was holding talks for a service contract to carry out oil-field development in Iraq as well as to develop Iraq's vast gas fields.

Since 2005, the Anglo-Dutch major has also been working on technical studies on the Maysan oil field in the south and the large Kirkuk field in the north.

Shell, like Norway's Statoil (STO), has an agreement to bring Iraqis to their overseas operations for training, a key part in developing relationships.

The pace of interest in Iraq from oil companies has quickened in recent months as the oil law moves nearer to completion.

ExxonMobil is joining the lengthening queue lining up to enter Iraq, though that day may be some way off.

"There are areas like Iraq that at some point in time we may be able to go," Stephen Cassiani, head of ExxonMobil's upstream research, told Dow Jones Newswires in Bahrain recently.

"We can't go now for obvious reasons...but that doesn't mean we're not watching it. It doesn't mean we don't understand it," he added.

RIGZONE - Shell VP Confirms Gas Development Talks with Iraq