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Iraq Business Update: June 2008 Iraq Business UpdateKeeping abreast of developments
June 2008
Dear Reader,
Welcome to the MEC’s latest Iraq Business Update on the major economic developments in Iraq. In this issue, please find news about Damac Properties’ $15 billion project in Arbil, the fifth round of negotiations for a Trade and Cooperation Agreement (TCA) between EU-Iraq and the $380 million order won by South Korea’s Hyundai Heavy to make 144 diesel power plant equipments for Iraq.
If you would like to learn more about this newsletter or forthcoming events, or would like to suggest an event or article for inclusion in the next edition, please do not hesitate to contact me at info@meconsult.co.uk .
Kind regards,
Luxi Wang, Editor MEC International Ltd. Fax: 020 7591 4801 Email : info@meconsult.co.uk
BP, Exxon submit Iraq deal plans (27/05/2008) After several months of negotiations and pressure from the Iraqi government, BP PLC and Exxon Mobil Corp. have finally submitted proposals to the Iraqi oil ministry on technical services contracts to boost production at Iraq’s prized oil fields, sources close to the Iraqi ministry said Tuesday. BP and Exxon Mobil’s proposals include suggestions on how Iraq would pay them back for their services and the costs of equipment. The Iraqi oil ministry needs to approve these proposals before signing the contracts. Iraqi oil officials have said that each TSC would cost around $500 million.
Industry Ministry signs MoU with Swedish motor company (01/06/2008) The Iraqi Minister of Industry and Minerals has signed a memorandum of understanding (MoU) with the Swedish motor manufacturer Scania to develop the General Company for Motor Manufacturing in Babel province, a ministerial statement said on Saturday.
Iraq oil output, exports hit post-war high (02/06/2008) Iraq has raised oil exports to a post-war high, earning billions of dollars to fund reconstruction after Baghdad cracked down on sabotage of its strategic pipelines, the oil minister said on Sunday. Iraq, whose primary source of revenue comes from oil, needs huge amounts of investment to rebuild after years of sanctions and war battered the OPEC member’s economy. Sky-high oil prices have raised the prospects of a quicker recovery. Oil is still within sight of a record $135 a barrel hit last month, supported by concern supplies will struggle to match demand in the longer term and a weak U.S. dollar.
Damac plans $15bn Iraq project (03/06/2008) UAE developer Damac Properties plans a $15 billion development in Iraq’s Kurdistan province to start by the year-end, Damac said on Tuesday. The project includes residential, commercial and hospitality buildings over 170 million square feet in Arbil. Damac Chairman Hussain Sajwani said the first phase of the project would cost $4.5 billion and the total cost of the project would be 55 billion dirhams ($14.98 billion).
Work on Iran-Iraq railway link continues (03/06/08) The managing director of the Islamic Republic of Iran Railways Organization announced last week that the Iranian section of the Khorramshahr-Basra railway project, which is currently under construction, will be completed by the end of the Iranian calendar year (March 20, 2009). Hassan Ziari has said that although the Iranian side of the railway linking Khorramshahr to Shalamcheh will be finished by March 2009, the work on the Iraqi side is proceeding at a slower pace.
Lafarge, Asiacell plan $550mn Iraq cement plant (03/06/2008) France’s Lafarge and Iraqi partner Asiacell plan to invest around $550 million to raise cement capacity in Northern Iraq to help meet a shortage in the region, an executive said on Tuesday.
Iraq pays Russian company $110 million to resume work (04/06/08) Iraq’s ministerial council has agreed to pay $110 million to the Russian company that was working on the Yousfiyya Electrical Station to cover losses the company incurred after the abandoned site was looted when its workers left in 2003. The council has also reached an agreement with local tribesmen to provide security for the company’s workers as they return to finish work on the facility.
Iraq offers 22 firms for investments (06/06/2008) Iraq’s government has opened 22 state-run companies for domestic and international investment, hoping investors will see opportunities here now that violence is on the decline. Iraq is hoping to find investors willing to help rehabilitate, modernise and manage industrial plants under production-sharing agreements which can be negotiated.
Iraq signs $480 mln contract with GE for power plants (06/06/2008) Iraq has signed a contract with General Electric Co worth $480 million to build three power plants and is negotiating with Hyundai to buy diesel generators, the country’s electricity minister said on Friday. Iraq faces chronic electricity shortages, with its fragile grid, battered by years of war, sanctions and neglect, struggling to keep up with increasing demand. The capital Baghdad receives only a few hours of electricity every day.
Company News Alert - Kalimat Launches 3.5G Wireless Network In Iraq Business Monitor International (06/06/2008) Kalimat, one of Iraq’s new fixed wireless telecommunications operators, has announced the launch of its national 3.5G wireless network, based on CDMA Revision A and WiMAX technologies. The wireless local loop (WLL) service was inaugurated in Baghdad and is being rolled out to other major population centres, before being extended into underserved rural areas of the country. The operator aims to be the first to serve not only residential customers but also the booming small- and medium-sized enterprise (SME) market. It plans to enter every home, business, governmental and non-governmental institution in Iraq and deliver 5mn active CDMA lines by 2011, a daunting task given that almost 50% of the 29mn-strong Iraqi population currently has a mobile phone that can be used almost anywhere in the country, whereas Kalimat’s WLL network can offer only limited mobility. However, BMI places great significance on Kalimat’s launch of voice and high-speed internet access/data transmission services in Iraq. High-quality, low-cost basic telephony and broadband services are sorely lacking in many towns and cities, including the most densely populated areas of the country, as the government continues to focus on rebuilding and replacing its ageing fixed backbone five years after coalition armed forces first entered the country.
Iraq talks with Kuwait, Iran on shared oil: report (08/06/2008) Iraq, home to the world’s third largest proven oil reserves, is in talks with neighbouring Iran and Kuwait to reach a deal to pool shared oilfields, the London-based Asharq al-Awsat reported on Sunday. Iraq is hoping for a further output boost after oil production and exports reached a post-war high in May.The country, whose main source of revenue is oil, needs huge investment after decades of sanctions and war, but sabotage and oil smuggling have robbed it of billions of dollars and hampered reconstruction.
Iraq to sign deals with foreign oil firms this month: MEES (09/06/2008)
Iraq wheat imports to rise as production drops (10/06/2008) Iraq’s drought-hit 2008 wheat crop looks set to fall to 1.0-1.5 million tones, down sharply from 2.3 million last year, Trade Minister Abdulfalah Hassan Al-Sudani said on Tuesday. "Because of the drought and bad weather we will probably need 500,000 tones more wheat (imports)," he told reporters on the sidelines of the International Grains Council annual conference in London.
Dana Gas charters world’s largest aircraft to Iraq (10/06/2008) Dana Gas, the Middle East’s first and largest regional private-sector natural gas company, along with its project partner Crescent Petroleum, has chartered the world’s largest aircraft, the Antonov 124 (An-124), to transport a large load of equipment and components from Houston, Texas (USA) to Erbil, Iraq for use in Dana Gas and Crescent Petroleum’s projects under implementation in the Kurdistan region of Iraq, at a cost of $1.25m.
Chinese firm starts drilling for oil in Harir (12/06/2008) Noozz Editorial As negotiations between the Kurdistan Regional Government (KRG) and Baghdad’s central government continue to solve the disputes about foreign oil contracts, a Chinese company specialized in drilling for oil continues work in the Harir area of Kurdistan which is located in the Harir valley in Irbil governorate. Speaking to the press, the director of the Harir District, Rizkar Nasir, has stressed oil has been found in Kati Jurkan, Amokan, Je-Me-Sur and Makran villages in addition to a number of other district villages as well, adding that district residents provided a great deal of assistance to the Chinese firm drilling for oil there. Razkar Nasser, the official in charge of the Kurdish district of Harir, said the Chinese were working in the area and initial reports “are very encouraging.” He said he was instructed by the Kurdish regional government in Arbil to provide the Chinese with “the means that will make their stay in the area peaceful and comfortable. Harir plateau is said to be the Kurds’ breadbasket. The narrow plain almost bisects the Iraqi Kurdistan as it extends for hundreds of kilometers. Nasser said several villages will be affected by the excavation and that a committee has been formed to assess damage and determine financial compensation. Digging and excavating for oil by foreign firms is proceeding in Kurdish areas, which are relatively quiet in comparison to other parts of the country. At least 15 foreign oil firms are working in the region and the Kurds say they now have the potential to export up to 150,000 barrels of oil a day. However, differences with the central government in Baghdad have made shipping of Kurdish oil difficult. The Oil Ministry says it will not allow the Kurds use the country’s export pipelines. Nasser declined to say which Chinese firm was involved in the excavation. Baghdad has vowed to punish any foreign firm working in the Kurdish region without central government approval by denying it Iraqi contracts.
Germany’s Siemens to supply Iraq with equipments for electricity (13/06/2008) Iraq’s deputy electricity minister said on Wednesday that leading German company Siemens will provide Iraq with equipment to strengthen its power grid. Iraq has agreed with Siemens that the company will share in the building of a total of 16 power plants with a capacity ranging from 160 to 270 megawatts, Salam Kazaz told the Iraqi al-Sabah newspaper. He said that the power plants were aimed at strengthening the country’s power network with 3,250 megawatts of power within two years. "The deals will be sealed with Siemens after the consent of the prime minister’s office," Kazaz said. The negotiations with the German company are taking place in the Turkish city of Istanbul. Siemens wanted to know where the power plans should be set up, in addition to the kind of fuel that the Iraqi ministry would prefer while implementing the projects, the Iraqi official said. In the time where international companies are shying away from investing in Iraq, Kazaz stressed that a Korean company agreed to provide Iraq with 144 new power plants when Iraqi Prime Minister Nuri al-Maliki visited China earlier this year. Iraq’s power output, currently at about 5,500 megawatts, falls far below its estimated needs of 9,000 megawatts. Power outages and acute shortages, which are a huge source of public anger in the oil-rich country, are caused by frequent acts of sabotage on power plants. The population in all provinces does not have electricity more than 10 hours a day. Power supplies in the capital Baghdad are sporadic in the summer, with negative impact on water pumping, filtration and supply.
DNO says no new signals on Iraq oil export timing (13/06/2008) Norwegian oil and gas producer DNO International’s boss told Reuters on Friday he has no new signals about the timing of its expected Iraq oil export licence. DNO shares surged on Friday on a rumour about a looming deal between the Kurdish authorities in northern Iraq, where DNO has oilfields, and the central Iraqi government in Baghdad.
Iraq extends oil supply deal with Jordan (13/06/2008) Iraq extended for another three years an unimplemented accord with Jordan to supply it with 10,000 barrels per day of crude oil under preferential terms, officials said on Friday. They said the two sides however failed during a state visit by Iraqi Prime Minister Nuri al-Maliki to Amman to reach agreement on a new deal that would have enhanced the terms of the original accord that was due to expire in August.
South Korea’s Hyundai Heavy wins $380 mln Iraq order (15/06/2008) Hyundai Heavy Industries Co Ltd, the world’s largest shipbuilder, said on Monday it had secured a $380 million order to make 144 diesel power plant equipments for Iraq. Hyundai said in a statement that it would deliver the facilities from December 2008 to April 2009.
DNO says its Iraq May oil output up to 11,685 bpd (18/06/2008) Norwegian oil company DNO said on Wednesday its output in Iraq, on a working interest basis, jumped to 11,685 barrel per day in May from 5,961 barrels in April. DNO produces oil at the Tawke field in northern Iraq under a production sharing agreement with the Kurdistan regional authorities.
Four oil majors return to Iraq (19/06/2008) Four Western oil companies, Exxon Mobil, BP Plc, Royal Dutch Shell and Total, are close to signing oil contracts with the Iraqi government that will return them to the country for the first time in 36 years, the New York Times reported in its online edition. The deals are expected to be announced on June 30 and will be awarded on a no-bid basis. They will be an extension of current agreements in which the companies are providing free advice and training to the Iraqis.
EU-Iraq: negotiations for a Trade and Cooperation Agreement continue (19/06/2008) The European Commission and the Government of Iraq will hold the fifth round of negotiations for a Trade and Cooperation Agreement (TCA) since negotiations started in November 2006. The fifth round is expected to cover trade in services, sanitary and phyto-sanitary issues, public procurement, intellectual property rights, statistical cooperation, combating drugs, organised crime and corruption, money laundering and terrorism financing, migration, regional cooperation, macroeconomic dialogue, investment, financial services cooperation and telecommunications.
China, Iraq Drive Price of Oil Downward (20/06/2008) Oil prices dropped sharply Thursday after China said it will raise fuel prices, a move that could dampen the booming Asian nation’s oil consumption. Prices also were pushed downward by the Iraqi Oil Ministry’s announcement that it is close to signing oil service deals with several major Western oil companies in an effort to boost its crude output.
Iraq awards oil contracts (23/06/2008) Iraq will award contracts to 41 foreign oil firms in a bid to boost production that could give multinationals a potentially lucrative foothold in huge but underdeveloped oil fields, an official said on Sunday. The agreements, to be signed on June 30, are expected to be short-term arrangements although the ministry has yet to provide a timeframe.
Iraq’s Kurds sign oil deals with South Korea firms (25/06/2008) Iraq’s Kurdish region has signed two production sharing deals with a South Korean consortium, the second such announcement in as many days despite complaints from the central government that deems the contracts illegal. Oil deals have caused tensions between the largely autonomous Kurdish region of northern Iraq and central government. The Kurdish regional government (KRG) has shrugged off Baghdad’s objections and says the constitution permits it to sign deals with international oil companies.
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