Thread: Archive Latest News - Think Tank - 01/01/08 - 14/04/08

This is a very long article, but I found it a fascinating read and worth posting.

Three Arab Oil Phenomena in 2008

The year 2008 has been characterized by three Arab oil phenomena with significant future implications. These are summed up in the noticeable expansion in crude oil and natural gas production capacity, the significant increase in the capacity of refineries, and the ongoing establishment of private Arab oil companies.

With respect to the first phenomenon, negotiations are currently underway with major international oil companies to explore new oil and gas reserves and to expand production capacity in Iraq, Libya and Algeria. If these negotiations succeed, it may be possible to increase crude oil production capacity by approximately half a million barrels per day in Iraq within one year only by improving the productivity of currently exploited fields, especially if the security situation stabilizes in the south.

Potential increases are also possible in Algeria where state-owned Sonatrach has been able to increase crude oil production from 750,000 barrels per day in the early 1990s up to almost 1.4 million barrels per day with the help of international firms. This is not to mention the noticeable increase witnessed in the production of oil fluids and natural gas. Sonatrach has been able to make these achievements despite the security apprehension dominating the country throughout the period.

In Libya, the Libyan National Oil Company is working on doubling production capacity from 1.6 million barrels per day which has been the capacity over the past two decades as a result of international blockade and embargo.

As it is known, it was extremely difficult and even prohibited for international companies to invest in these three countries until recently. The increase in production capacity will increase the collective importance of oil-producing Arab countries.

There are also intensive efforts by local oil companies to rent or acquire as many drills as possible to explore additional energy reserves, either to compensate the amounts of oil produced or to increase the overall reserves. This is already witnessed in most oil-producing Arab countries, especially in the case of Saudi Aramco which is diligently working on increasing its crude oil production capacity to reach over 12 million barrels per day by the first half of the coming decade in comparison to nine million barrels which is the current actual production level.

Both development and capacity increase in Saudi Arabia can bring an end to the hypothetical assumptions in the west about "peak oil" in Arab countries, assumptions that have triggered fears about oil drying up in the foreseeable future and consequently led to an irrational price hike.
Qatar Petroleum, meanwhile, is implementing plans to expand its production capacity of liquid gas to 77 million tons annually by the end of 2010.

The second phenomenon is depicted in the building of refinery plants in the same producing countries. Ten projects are under study involving the construction of new refineries and the expansion of existing plants in the Gulf States. The total capacity of these products is equivalent to 3.5 million barrels per day. These projects are allocated as follows: Three plants in Saudi Arabia in Jazan, Jubayl and Yonboh in addition to expanding the Ras Tanoura plant; the Zour plant in Kuwait; the Roweis and Fujairah plants in the UAE; the Msei'eid and Ras Laffan in Qatar; and the Duqm plant in Oman.

This phenomenon emerges at a time when construction costs are doubling from one year to another, not to mention the depreciation of the dollar which requires the continuous review of the feasibility of such massively expensive projects vis-à-vis their normal costs. The decision to build these refineries is made at the beginning of a global economic recession triggered by the loss of approximately a trillion dollars in the US sub-prime mortgage crisis. The impact of these losses on growth rates in industrial countries and hence on the levels of future energy consumption is yet to be seen.

However, these refineries are constructed at a time of record hikes in regional fuel consumption estimated at five percent annually, a rate that is close to the average annual rate of increased consumption in major industrial Asian countries such as China. The increase in Arab consumption is attributed either to the rise in living standards triggered by the rise of oil rents or fuel subsidization which keeps local prices relatively low in comparison to high global prices.

There is also the delay in constructing refineries in consuming western countries as a result of environmental and other factors which, among other consequences, has led to the rise in global oil prices.

It is expected that Saudi Aramco will lead local oil companies in the Gulf with respect to building new refineries in terms of total capacity for refineries intended for construction.

As far as the third phenomenon, the noticeable increase in establishing private Arab oil companies with Arab capital and Arab expertise in general, it is remarkable that most of these companies are enlisting their stocks in local bourses. The majority of these companies operate in the exploration and development of oil fields. Their operations are also characterized by high risk, especially in the case of smaller companies with limited capitals which specialize in oil exploration.

These new companies have attempted to benefit from the high monetary liquidity levels in Gulf countries and the financial bubble that followed in the regional stock markets, and hence they were established with high capitals. According to a survey by the weekly oil bulletin MEES, 18 private companies were established in the UAE, ten in Kuwait, eight in Bahrain, one in Qatar, and six in Saudi Arabia.

It is worth mentioning that among the first private oil companies in the Gulf is the Independent Petroleum Group which was established in Kuwait in the late 1970s and which specializes in the marketing of petroleum products and offering fuel-related services such as constructing reservoirs at ports and airports in addition to participating in the building of pipelines. The company, moreover, is registered in the Kuwait exchange market.

Among new companies, Dana Gas is the most famous. In recent months, the company has expanded its operations, acquiring assets in a foreign company that operates in Egypt and produces crude oil. It has also obtained a contract to produce gas from the government of Iraqi Kurdistan.

These private Arab oil companies are operating under very difficult conditions. On the one hand, oil and gas reserves are owned by the state companies, and hence they are difficult to compete against. On the other hand, the major international oil companies possess the technology and access to the markets which makes competition very difficult for private Arab companies.

These two obstacles, however, have not prevented private Arab companies from finding small and lucratively rewarding markets. They attempt to operate with other oil companies (which involves sharing the risks) in countries other than those where they were formed as the case is with the UAE company Aabar which is exploring for oil in South Asia after acquiring a foreign company operating there.

As it is well-known in the oil industry, each of these three phenomena requires many years of preparation, consultation and establishment, then negotiation and finally implementation. Hence, the year 2008 is nothing more than another juncture for these projects which, in the event of their success, will leave their marks on the future of the Arab oil industry. What matters most for this year is that the majority of these projects have reached the launching stage after years of preparation and planning.

Dar Al Hayat

Iraq fully restores Southern Oil Flow
Iraq has fully restored 100,000 barrels per day (bpd) of oil output from three fields that were shut down after a bomb attack on a pipeline in late March, Iraqi oil officials said on Sunday.

The attack on a pipeline on March 27 was the first to affect southern oil exports since 2004. The attack shut the Bazargan, Majoon and Bin Umar oilfields, which had been pumping around 100,000 bpd.

The Bin Umar field restarted about a week ago, one official said. The Majnoon and Bazargan fields had resumed pumping earlier.

"Everything is flowing fine now," another official said.

Iraqi engineers connected a pipeline by-pass to allow output from the fields to restart despite extensive damage to a branch of the line from Bazargan.

Iraq used oil storage at both the fields and its main southern oil Basra terminal to minimise the impact on shipments.

Iraq's southern oil exports flowed at around 1.68 million bpd on Sunday, up from around 1.44 million bpd on Saturday, a shipping source said.

Sunday's flow was at the top end of the typical pumping range from Basra of 1.2 million bpd to 1.7 million bpd. (Reuters)

Iraq fully restores southern oil flow - Energy - ArabianBusiness.com

Economic losses suffered by Iraq in the past five years

On the fifth anniversary of the fall of the former regime, President of the Integrity Body, Judge Musa Faraj, revealed that Iraq's losses during this period amounted to two hundred and fifty billion dollars as a result of financial and administrative corruption. Faraj said in statements that the Secretariat of the Cabinet is the most dangerous hotbed of corruption after the abolition of the Economic Affairs Committee which powers has been transferred to the Secretariat. He considered the formation of an anti-corruption council is actually stealing the Integrity Body's tasks. Faraj explained that Iraq has also lost during this period forty-five billion dollars due to smuggling crude oil and another forty-five billion of oil derivatives, in addition to the burning of six hundred million cubic meters of gas annually without benefit. He pointed out, "the past five years did not witness the construction of any refinery in spite of the tempting offers made by international companies to establish such projects. The Ministry of Defense, which came on top in financial and administrative corruption according to the Integrity official, did not present its accounts especially in relation to contracts including the purchase of old armament helicopters unfit for work and old rifles rejected by the Iraqi Committee but were imposed by the American company manufactured them. He added that the worse of all is the ministry's attempts to hide and impose confidentiality on its files and refrain from delivering them to the Integrity Body. In the electricity sector, seventeen billion dollars were spent over the past five years, according to Faraj; as for the Ministry of Trade, its officials have concluded contracts with local merchants in the market and opened themselves offices abroad to export to Iraq all that is corrupt and unfit for use. The Integrity official said that in the Interior Ministry, fifty thousand fictitious salaries were discovered; as for the health status, he described as being tragic, pointing out that %90 of the ***** circulated in pharmacies has not been tested.

http://www.iraqdirectory.com/DisplayNews.aspx?id=5891

Maliki: referring issues with Kurdistan into ministers

PM Noori Maliki declared referring outstanding issues with Kurdistan region govt. to involved ministers to set suitables solutions as energy committee at parliament disclosed that it would raise oil law before the legislative council if political leaders fail to solve this issue, though they agreed on 75% of its articles.

PM confirmed that constitution controls political process and keeps all Iraqis' rights and the political parties' support to the Govt.'s security measures gave strong position in favor of the process.

PM praised at his meeting with the Kurdistan region PM, Nejervan Barzani, national attitudes of President Jalal Talabani and president of the Kurdistan region, Masood Barzani, especially at latest operation that targeted outlaws.

PM disclosed that outstanding issues like oil law and the region guards would be referred to the invloved ministers at the federal Govt. and the Kurdistan govt.

Maliki: referring issues with Kurdistan into ministers | Iraq Updates

Iraqi Kurdistan delegation briefs Talabani on talks with Maliki

Iraqi Kurdistan Region's Prime Minister Nejervan Barazani briefed Iraqi President Jalal Talabani on the outcome of his talks with Iraqi Premier Nouri al-Maliki on the pending issues between the central government and the autonomous region, according to a presidential statement on Sunday.

"President Talabani received at his residence in Baghdad Barazani and his accompanying delegation to be posted on his talks with the Iraqi prime minister to solve outstanding issues," read the statement received by Aswat al-Iraq – Voices of Iraq – (VOI).

"Talabani stressed the importance of cementing ties between the central and autonomous Kurdistani governments in a way sustaining cooperation and serving the higher interests of all groups of the Iraqi people," the statement noted.

Earlier on Sunday a Kurdish spokesman described as "positive" the Barazani-Maliki negotiations over oil contracts concluded by the Kurds with international companies to invest in the region and the possible incorporation of the Peshmerga (local Kurdish fighters) into the Iraqi army.

Iraqi Kurdistan delegation briefs Talabani on talks with Maliki | Iraq Updates

Business sluggish in Karbala due to drastic drop in tourists

Shop and hotel owners as well as small businesses have suffered heavily due to a drastic slump in the number of foreign tourists visiting the holy city of Karbala, according to Abed al-Furati, head of the city’s tourist department.

Furati said the latest upsurge in violence has driven almost all foreign tourists away, “aggravating economic and living conditions for hundreds of thousands of families in the country particularly those in religious cities.”

Furati said no foreign tourists have ventured into the country since the start of heavy fighting in Basra, Baghdad and other major Iraqi cities pitching U.S. and Iraqi troops against the militiamen of Mahdi Army.

“The flow of wave after wave of Iranian pilgrims has come to a halt. Pilgrims from Arab and other countries have stopped pouring into Karbala and other cities,” he said.

He said his department did not have exact figures on the losses but stressed that shop owners, small businesses and even factories have been affected.

Last week no Iranian pilgrims were spotted in Karbala which is usually full of them.

The absence of the pilgrims “has almost paralyzed business in the city whose packed hotels are now empty,” said Furati.

Saleh Abdulamir, a boutique owner, said his sales have slumped from nearly 1 million dinars to less than 100,000. One dollar buys about 1,000 dinars.

Alaa Jawad owner of the Saydafada Hotel said he was forced to lay off all his employees and will not rehire unless the pilgrims start coming again.

Business sluggish in Karbala due to drastic drop in tourists | Iraq Updates

Inefficient Iraq Resorts to Secret Arms Deal

An $833 million Iraqi arms deal secretly negotiated with Serbia has underscored Iraq's continuing problems equipping its armed forces, a process long plagued by corruption and inefficiency.

The deal was struck in September without competitive bidding, and it sidestepped anti-corruption safeguards, including the approval of senior Iraqi army officers and an Iraqi contract-approval committee. Instead, it was negotiated by a delegation of 22 high-ranking Iraqi officials, without the knowledge of U.S. commanders or many senior Iraqi leaders.

The deal drew enough criticism that Iraqi officials later limited the purchase to $236 million. And much of that equipment, American commanders said, turned out to be either shoddy or inappropriate for the military's mission.

An anatomy of the purchase highlights how the Iraqi army's administrative abilities — already hampered by sectarian rifts and corruption — are woefully underdeveloped, hindering it in procuring weapons and other essentials in a systematic way.

Such weaknesses mean that five years after the American invasion, the 170,000-strong Iraqi military remains underequipped, spottily supplied and largely reliant on the United States for such basics as communications equipment, weapons and ammunition.

Iraq's defense minister, Abdul Qadir, defended the arms deal, saying he had followed proper contracting protocols and had informed Prime Minister Nouri al-Maliki every step of the way.

Nonetheless, American commanders and some Iraqi officials were critical. Closer monitoring of weapons deals has been a sensitive subject since a series of tainted arms purchases totaling $1.3 billion in Iraqi government funds in 2004 and 2005. Lacking electronic banking systems at the time, Iraqi officials paid for second-rate or nonexistent weapons and equipment in cash, using middlemen to ferry duffel bags stuffed with bricks of $100 bills.

That episode brought down the previous defense minister, Hazam Shalan, now a fugitive, and tarnished the reputation of the interim Prime Minister, Ayad Allawi. American and Iraqi officials said the loss of so much money and time caused critical delays in the development of the Iraqi army.

Those with knowledge of the Serbian arms deal said they knew of no specific crimes, but warned that with so little transparency and such poor oversight, problems were likely to emerge, as they did with the 2004 deal.

The Serbian deal called for the purchase of a large number of helicopters, planes, armored personnel carriers, mortar systems, machine guns, body armor, military uniforms and other equipment. It largely was negotiated by Qadir and the planning minister, Ali Glahil Baban. The deal was signed in March, American military officials said.
Pentagon program

American military officials and the Iraqi authorities alike point to the Pentagon's little-known Foreign Military Sales program as the reason the Serbian arms deal was pursued in the first place. After that, however, their versions of events diverge sharply.

Under the sales program, used by more than 100 allied nations, Pentagon officials serve as intermediaries for government-to-government defense procurements, handling administrative issues, logistics, delivery, maintenance and training.

Defense contractors also benefit to some extent, because the program often channels clients to American companies that produce arms and other equipment.

American officials hoped the program would help Iraq spend more of its money on defense. For the first time, Iraqi military expenditures of $7.5 billion last year surpassed the $5.5 billion in American financing for Iraq's military.

But with protocols spanning hundreds of pages, the program is built more for transparency and standardization than for speed.

Beginning in late 2006, the Iraqi government deposited $2.6 billion in an account for Foreign Military Sales procurements. But by September 2007, less than $200 million worth of badly needed equipment had been delivered, and many of those items were stockpiled because of poor distribution and accountability systems. And that, the officials noted, was during one of the most violent periods on record.

A bureaucracy used to functioning under a command economy during the reign of Saddam Hussein had little use for formal procurement protocols and was unaccustomed to such basic practices as writing detailed specifications.

Some critics, all of them high-ranking Iraqi and American military officials, contend that senior Iraqi officials intentionally obstructed American-sponsored procurements because they feared the sales program would prevent them from siphoning off a share of the money. But they offered no independent corroboration.

American procurement experts were so mystified by some of the delays that they set up a new office to track procurements and found that many of the delays led straight back to Qadir's desk. Qadir denied delaying contracts or making money from them.

After months of delays and an overhaul of the Pentagon procurement bureaucracy, the program increased the value of its delivered equipment to $1 billion by this February. But in the absence of a comprehensive distribution and inventory system in Iraq, much of that equipment remains locked in Iraqi storehouses, American officials said.

Qadir blamed the slowness of the Foreign Military Sales program for his decision to deal directly with Serbia.

In an interview in February in his office, Qadir, a Sunni native of Ramadi, confirmed that the original Serbian deal "exceeded $800 million."

"The thing is, we did not limit ourselves to any fixed number or fixed price," he said.

But critics say the deal circumvented fragile anti-corruption safeguards. Indeed, at Qadir's urging, al-Maliki abolished the National Contracts Committee, a mandatory review agency for all government purchases of more than $50 million.

Al-Maliki also overrode the nation's Supreme Economic Committee after it expressed concerns that the Serbian deal lacked guarantees of service from the Serbian government.

The deal also was supported by Iraq's Office of the Commander in Chief, a shadowy group of Shiite advisers to al-Maliki that American officials accused last year of leading a purge of Sunni Iraqi army commanders who had cracked down on Shiite militia leaders.

"I heard about it out of the blue, that the minister of defense took a delegation to Serbia and came back and said he had signed deals with the Serbian prime minister," said one high-ranking Iraqi government official. "Why Serbia? Why not Ukraine? Why not Russia? We just don't know."

http://pukmedia.com/english/index.ph...=4266&Itemid=1

Iraqi Delegation Arrives in Cairo

As a response to the Egyptian Government invitation, an Iraqi Delegation headed by Riyadh Gareeb the Minister of Municipality arrived in Cairo. The Delegation will meet a number of Egyptian officials to discuss many security and economic issues.

Gareeb said in a press statement that the visit comes in the framework of consolidating the relation with Egypt and to encourage the Egyptian investors to invest in Iraq. He clarified that the Iraqi Delegation will ask Egypt and all other Arab and Foreign States to invest in Iraq.

It’s worth mentioning that the delegation is consisted: the Minister of Housing and Construction Bayan Dizaie, the Governor of Baghdad Husain al-Tahan, Head of Baghdad Province Council Moen al-Kazemi and the Governors of Najaf, Diwaniya, Nassyria and Kut.

PUKmedia :: English - Iraqi Delegation Arrives in Cairo

Kurdistan Region Vice President: We Need Constructive Criticism

Today a special seminar was held for the Kurdistan Region Vice President, Kosrat Rasul, in Erbil. The seminar came amidst the International Book Fair’s activities recently held in Erbil.

The Vice President shed light on the economic and political achievements in Iraq in general and in Kurdistan region in particular since the Iraqi freedom operation. He then focused on the strategic service projects which have been implemented by Kurdistan Regional Government (KRG) since then. The Vice President expressed his concern about those who are pessimistic and try to underestimate the achievements without having evidence in hand as they claim nothing has been achieved for five years. “We need constructive criticism, not destructive one to distort and underrate the achievements, he said.

As he said, gaining the sovereign posts in new Iraq is the outcome of the Kurdish political parties’ unified stance.

“After the Iraqi freedom operation, the role and status of Kurds have been better and strengthened on the local and international levels."

PUKmedia :: English - Kurdistan Region Vice President: We Need Constructive Criticism

Demand for dollar sets Record in daily Auction

Demand for the dollar set a record in the Iraqi Central Bank's auction on Monday, registering at $260.410 million for the first time in the auction’s history compared to $39.815 million on Sunday.

"The demand hit $25.750 million in cash and $234.660 million in money transfers outside the country, all covered by the bank at an exchange rate of 1,206 Iraqi dinars per dollar, unchanged for the sixth session in a row," according to the central bank's daily bulletin which was received by Aswat al-Iraq - Voices of Iraq - (VOI).

The 18 banks that participated in the auction offered to sell 1.010 million dollars, which the bank bought all at a rate of 1202 dinars per dollar.

Speaking to VOI, Ali al-Yasseri, a trader, said that the increase in today’s session was expected because the bank used to decrease the exchange rate which led the remitters to concentrate their remittances today, raising the overall demand for the dollar.

Aswat Aliraq