INFORMING, ENGAGING AND EMPOWERING STAKEHOLDERS IN IRAQ | JUNE/JULY 2019
INSIDE
Q&A: Ihsan Ismaael, director 2 general of Basra Oil Company Deals in limbo as Oil Ministry 7 fights political headwinds Q&A: Bahaa Nima Abid, acting 9 director of the Siba gas field Q&A: Fatih Birol, head of the 10 International Energy Agency Q&A: Hossam Hussein Wali, 11 head of South Refineries Company Q&A: Zuhair al-Araji, mayor 12 of Mosul Q&A: Zardasht Shangali, 14 Cmdr. of the Sinjar Resistance Units
Iraqi Drilling Company personnel drill a well at the West Qurna 1 field in Basra in May 2019. Federal Supreme Court oil lawsuit 15 awaits PM signature Rumaila's quest for water key to production increase Future growth at Iraq's largest oil field hinges on unresolved plans for Optimism swells over meeting the project's massive demand for new water supplies. giant Eridu discovery Iraq’s largest oil field, accounting for A mature field that has been producing nearly one-third of the country’s total pro- for more than six decades, Rumaila’s pro- Lukoil has upgraded an assessment duction, is poised to surpass 1.5 million duction naturally declines by 15 to 20 per- of its Block 10 exploration results barrels per day (bpd) - but its growth hing- cent each year, according to several people – the latest success stemming from es on a key resource: water. familiar with the project. As a result, just a 2012 contract auction that was “This is a water-management field,” to keep production from falling, ROO con- initially seen as lackluster. said Nick White, acting deputy general stantly needs to get the most out of exist- manager for the Rumaila Operating Or- ing wells while also drilling new formations. Russia’s Lukoil has presided over a ganization (ROO), an umbrella entity that “In 2019, we are still targeting an excess major discovery at Iraq’s exploration includes field operator BP, along with Pet- of 1.5 million [bpd],” White said - but such Block 10, raising new expectations of ul- roChina and the state-owned Basra Oil production levels are only possible with a timately producing over 300,000 barrels Company (BOC). sound water-management plan. per day (bpd) from the Eridu field.
see WATER, page 5 see ERIDU, page 4
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Q&A: Ihsan Ismaael, director general of Basra Oil Company Iraq's largest state oil company is expanding production capacity and building new infrastructure as it waits out OPEC quota.
Have all of the ExxonMobil staff -re turned, including the Americans? Is there a new agreement between BOC or the Oil Ministry and Exxon? ExxonMobil has started to gradually re- turn its employees to West Qurna 1 field. Employees are returning to work, from different types of nationalities including Americans. There are no new terms for their return to the field except the security coordination with Basra Operations Com- mand and the Ministry of Defense. What is the current production of the field? And what’s the plan for a produc- tion increase? The production of West Qurna 1 is cur- rently about 450,000 to 490,000 bpd. A new production unit was added with 100,000 bpd capacity. BOC has lots of capabilities through other fields to increase production, Ihsan Ismaael, director general of the Basra Oil Company, inspects a bridge keeping rising floodwa- but we are committed to OPEC’s agreement. ters out of the Majnoon oil field on April 9, 2019. There has been about 200,000 bpd ca- company [Toyo Engineering Corp.]. A con- southern crude to the northern network? pacity increase at the Zubair field. What sulting contract was previously signed and BOC is working to rehabilitate Bas- are the changes and developments that the final results will come out in three months ra’s strategic line, to export Basra crude helped to reach that increase? so we can make a real plan to build the Fao through the northern region to the Turkish Zubair field is one of the best oil fields in depot. Currently it is under SCOP [State Com- port of Ceyhan. There is a plan of action to terms of implementation of surface facili- pany for Oil Projects] supervision, which was rehabilitate PS2 and PS3, which has techni- ties, and it has the capacity to treat 500,000 assigned to jointly work with the Oil Ministry cal problems in Najaf province, and there is bpd via the new facilities and 200,000 bpd on the implementation. We hope there will guidance from the Oil Minister to SCOP that by the old ones. The plan is to reach pro- be a new development and implementation handles the project, to speed up the imple- duction capacity of 700,000 bpd by 2027. plan after the report of Toyo company. mentation, while BOC will be providing the Iraq’s OPEC-related cuts have come What is the nature of the compro- support and the funds. mainly from state-operated fields. Is there mise deal between BOC and Leighton What’s the status of the common sea- any concern that the fields will be damaged company – the result you reached or will water supply project (CSSP), which has as a result of such severe curtailments? reach – and the timetable? been in negotiations or awarded recently? BOC is the most active company focused Leighton has abandoned all its rights Initially, the project was assigned to on protecting and maintaining the reservoirs. and previous demands made to BOC to Hyundai as a non-binding initial referral, Engineers are tasked to manage and head obtain all its confiscated proprieties that and the Oil Ministry is in the process of pre- the joint operating committees, and they do have been held in Dubai for more than five paring a financing plan to ensure the imple- what is continuously required to maintain years. Leighton exited the tender without mentation of the project. the reservoirs, as their maintenance and paying anything to BOC. BOC took its rights Will it be funded by the budget or is it protection is a nonnegotiable goal. and was five years late in carrying out the going to be an investment project? What are the plans to expand the ex- project, while the equipment was stuck in It will be discussed to clarify the financing port outlets? What about the delayed UAE ports, as they are needed to carry out whether by the government or investment. ♦ Fao depot? the contracted project. The Fao depot is currently under the su- What is the status of rebuilding the READ THE FULL INTERVIEW @ pervision and technical evaluation of Toyo strategic pipeline, which will connect www.iraqoilreport.com
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ERIDU, cont’d from page 1 to the Mishrif layer, at a depth of 1,900 IOCs as the Oil Ministry might have hoped. meters.” Out of 12 exploration blocks offered in Preliminary estimates suggest Eridu The consortium’s preliminary analysis 2012, only four were awarded, as compa- could hold between 7 and 10 billion bar- suggests the field holds relatively high- nies complained that the contract terms rels of reserves, which would make it one quality crude, with an API gravity of be- -- which largely resembled the techni- of the top seven largest fields in the coun- tween 25 and 29 and low sulfur content, cal service contracts (TSCs) that govern try, according to two senior officials at the according to the DQOC official. the development of already-discovered Dhi Qar Oil Company (DQOC), which is “Our labs on site are not very accurate, fields -- did not present adequate finan- Iraq’s state partner in the development of though,” the official added. cial incentives to offset the risks inherent Block 10. A third DQOC official compared the in exploration. “Expected production is 300,000 bpd, crude quality at Eridu to that of the Nas- Now, however, those projects that though these are just estimates, and well siriya field. were awarded are bearing fruit. drilling is ongoing,” said one of the DQOC The data gathered during the explora- The Fayha field, which was discovered officials. “The reservoir’s pressure is good, tion phase will inform the development in Block 9, in Basra province, is now pro- and we are optimistic.” plan, which will in turn dictate the construc- ducing just over 20,000 bpd from five Both DQOC officials and two other tion of other infrastructure. wells, according to an official at the field. industry officials confirmed that produc- “Surface facilities will be built, includ- By the end of this year, it’s expected to tion is expected to reach 300,000 bpd. ing separation stations, storage tanks, and reach 50,000 bpd. That figure is unlikely to be finalized -un pipelines,” the second senior DQOC official Block 9 was initially awarded to a con- til at least 2020, when the consortium is said. “All of this will be attached to the de- sortium led by Kuwait Energy, which was scheduled to set a development plan for velopment plan.” recently acquired by China’s United En- the field. As with many fields in southern Iraq, ergy Group (UEG). The two DQOC officials estimated that one challenge associated with develop- The consortium is currently connect- commercial production would begin by ing Eridu will be accessing enough wa- ing pipelines to a central processing facil- 2022, with an initial target of 50,000 bpd. ter to inject into the ground, to maintain ity, and just made plans to build a gas-oil The Oil Ministry awarded Block 10 to Lu- reservoir pressure as crude is produced. separation station, according to the field koil and minority partner Inpex, of Japan, in Unlike some fields, which only need large official. a 2012 bidding round focused on explora- amounts of water in later phases of their In Block 12, the Russian company tion. The contract includes a remuneration development, DQOC believes Eridu will Bashneft, a subsidiary of Rosneft, said in fee of $5.99 per barrel. need water right away. May 2018 that it had discovered a new The block stretches across the north- “Injection must begin directly after oil field that has been named Salman, eastern portion of Muthanna province and initial production,” the first DQOC official after drilling a 4,277-meter exploration into the western edge of Dhi Qar province. said. “Right now there is no clear injec- well. That block straddles western Muth- After the Oil Ministry spun off DQOC from tion plan. We have water at a depth of anna province and the southern part of the Basra Oil Company (BOC), in March 280 meters, but we’re not allowed to take Najaf. 2017, it assigned DQOC to oversee Block it from there because it’s a groundwater Bashneft won the block in a consortium 10. (Muthanna province does not yet reserve.” with the UK’s Premier Oil, which exited the produce enough oil to meet a minimum Another unanswered question con- project last year. A second well is expected threshold required to have its own state- cerns the boundaries of the field. to be completed by the end of 2019, ac- run oil company.) “Lukoil has requested to expand Eridu cording to Bashneft disclosures. The exploratory drilling plan for Eridu field, because they found other reservoirs At Block 8, in Diyala province, Pakistan involves a total of 13 wells, according to beyond the field’s current borders,” the Petroleum is teaming up with the state-run one senior DQOC official. Three explora- third DQOC official said. “We will give them Midland Oil Company (MdOC). The consor- tion wells have already been drilled, and permits to do so, pending the approval of tium has collected 318 square kilometers three more evaluation wells are in process, several departments.” of 3-D seismic, according to corporate dis- all under a contract with China’s Bohai. An- closures, and spudded its first exploration A bidding round bears fruit other seven evaluation wells are set to be well in April 2019. ♦ drilled by the Chinese company ZPEC. Eridu is just the latest success story “Drilling operations are going easily,” from the fourth bidding round, which ini- READ THE FULL STORY @ the DQOC official said. “We are drilling tially did not attract as much interest from www.iraqoilreport.com
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Rumaila's quest for water key to record production
WATER, cont’d from page 1
In recent years, ROO has gotten increas- ing volumes from the Qarmat Ali water treat- ment plant, pumping the water up to Rumai- la and injecting it into the ground, which has helped maintain reservoir pressure. Rumaila has and will continue to rely heavily on electric submersible pumps (ESP) to create artificial upward pressure to increase productivity in wells. “The well program and the future for Iraq is very much around ESPs,” White said. “So we will see the population grow well in excess of 1,000 ESPs, which is a big portfo- lio for any field.” The Shamiya degassing station at the Rumaila oil field on April 29, 2019. To support the next phase of produc- self had very little water content and there- ment facility that ROO installed two years tion growth, however, even more water is fore needed relatively little processing. ago is now producing 1 million bpd of water, also needed. And one potential solution is “When you start a field, you don’t have but this water is also shared with other IOCs. for ROO to capture and use the water that the water breakthrough,” White said. “As a Development at a crossroads comes out of the ground as a byproduct of field matures, you get water with oil. Then crude production. you need to separate it.” The major parameters of any develop- “That’s the intent,” said White. “It’s very To tackle the new water-management chal- ment plan for the field require approval much around separating the water out, lenges, ROO has installed three-phase separa- from the Oil Ministry, which has tradition- and then we want to use that water - pro- tors, known as free water knockouts (FWKO) ally maintained relatively stringent specifi- duced water - in the re-injection program, to take out water and then gas, in four degas- cations for the water that can be used for because that water has got value for us in sing stations in south Rumaila and one in the injection into oil fields. reservoir support.” northern sector of the field, known as DS3. ROO’s development plans appear to The major question is whether the Oil This process is different from the classic hinge largely on the consortium’s ability to Ministry will support such a plan. desalter-dehydrator facilities that have been convince the ministry to embrace an unfa- used in other parts of Rumaila, where the rel- miliar approach. The evolving water challenge atively low water content in the crude means “There are many elements around BP and PetroChina signed the technical water-separation can be left as a last step. specification, water, governance process,” service contract (TSC) for Rumaila in 2009, The use of FWKOs creates a major op- White said. “Things take time. Always.” when the field was producing just under portunity, according to White. Each one has The water re-injection plans are also likely 1 million bpd. Since then, ROO has made the capacity to process 60,000 bpd of crude to dictate whether — and to what extent — steady gains. and 40,000 bpd of water - creating an ad- Rumaila’s development will depend on the The consortium was initially targeting a ditional supply of water for injection back Common Seawater Supply Project (CSSP), an production plateau of 2.85 million bpd, but into the reservoir. ambitious multi-billion dollar initiative that the Oil Ministry renegotiated the contract in For the time being, however, the water would take water from the Basra Gulf and 2014, as Iraq faced low oil prices, a financial from Shamiya is essentially being treated send it north to several oil fields. crisis, and limited ability to fund capital spend- as a useless byproduct - sent to the Dam- The project has been delayed for years. ing. Now, the plateau target is 2.1 million bpd. am reservoir rather than being reinjected. “CSSP is still very much there as far as we As the field ages, the water-manage- “That is a lost stream,” White said. “That are concerned,” said White. “The challenge ment challenge is growing and evolving. is why we are keen to get the ministry and would be the financial arrangement associ- Historically, Rumaila’s production has BOC to approve our produced water re- ated with it. But any bit of water we can get to come predominantly from the northern injection program as quickly as possible, so support Rumaila would be most welcome.” ♦ Main Pay reservoir. At first, there was we can actually get value for everybody.” enough natural pressure to produce with- In the meantime, Qarmat Ali is the only READ THE FULL STORY @ out much water injection, and the crude it- major source water for Rumaila. The treat- www.iraqoilreport.com
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Deals in limbo as Oil Ministry fights political headwinds Decision makers are moving cautiously on major oil sector initiatives while they beat back political opportunists making unsubstantiated corruption allegations.
Eight months into Iraqi Oil Minister “The political environment is very frag- at the ministry and before Parliament com- Thamir Ghadhban’s tenure, his ministry is mented. There are clear alliances, blocs, mittees, saying those pointing fingers at fighting against major political headwinds trends, but very little command and con- the ministry are welcome to present the as it pursues strategically important deals. trol,” said a senior Iraqi political figure. evidence they have. The ministry’s press of- Surrounded by grandstanding politi- “This isn’t a coordinated political effort to fice has also released detailed statements cians who have already raised a variety of undermine the ministry; it’s a couple of in response to various allegations, correct- unsubstantiated corruption allegations, guys looking to get on television. And there ing the factual errors and misrepresenta- the Oil Ministry has taken a deliberate ap- is absolutely no indication that there’s any tions that tend to underpin the most sen- proach to two major sets of initiatives that substance to their allegations.” sational claims. had gained momentum under the previous administration: upstream deals awarded in the ministry’s fifth bidding round, in April 2018; and a massive suite of infrastructure projects that are critical to increasing Iraq’s production and exports. “Thamir is basically starting from zero,” said a U.S. official. “He’s giving close scru- tiny to all contracts. No one wants dirt.” The Oil Ministry has also declined to re- new two profitable joint ventures with the marketing arms of Russia’s Lukoil and China’s Zhenhua, which had helped enable Iraq to maximize the price at which it sells crude -- but which also prompted some MPs to accuse the government’s State Oil Marketing Organi- zation (SOMO) of financial impropriety. Most of the political pressure is coming from a handful of populist personalities who appear more interested in establish- Oil Minister Thamir Ghadhban (third from left), flanked by deputies and senior directors general, ing their images as anti-corruption crusad- hosts MPs and other critics at the State Oil Marketing Organization’s headquarters to explain how the ers than in understanding the underlying oil sale process works on April 9, 2019. (Iraqi Oil Ministry’s media office) facts of the oil sector. In regular appear- ances on satellite television channels, and The official acknowledged that cor- Ghadhban himself has not blamed his using their platform in Parliament, they ruption has been pervasive throughout critics directly for slowing his ministry’s have made a variety of allegations related Iraq, including in the oil sector, but said work, instead attributing the ministry’s pace to both upstream deals and oil sales. that political figures were highly unlikely to its adherence to a system of internal Previous oil ministers have faced ac- to talk about actual crimes -- or provide checks designed to protect against the kinds cusations from similar figures, but the po- evidence of them -- because so many of problems that MPs are concerned about. litical climate in Baghdad makes the recent parties are entangled in the schemes. In- “For contracts, there is a system,” Ghad- scrutiny especially potent. Because Prime stead, politicians who want to raise their hban told reporters on the sidelines of a Minister Adil Abd al-Mahdi ascended to the appeal with anti-corruption voters typi- recent ministry event. “There are operat- premiership as a compromise candidate, cally fabricate or exaggerate allegations ing companies that are empowered by law he lacks a solid base that might function either against their rivals or against of- to negotiate contracts according to certain as a political bulwark for key ministers -- ficials with comparatively little political authorities… and there is a centralized and rival parties have shown relatively little protection. committee, headed by me, with all con- inclination or ability to reign in their most Ghadhban has publicly addressed his cerned directors general and deputy min- provocative members. critics frequently, in meetings he has held isters -- they look at those contracts. And
7 www.iraqoilreport.com not only that, we have a specialized team… news channels, Awad gathered signatures Critical infrastructure on hold they look at every contract in detail, scruti- from 13 members of the Parliament Oil Political pressure also appears to be nize the cost of all the items and they come and Energy Committee, summoning SOMO one of the many factors complicating late- back with recommendations.” Director General Alaa al-Yassiri and two of stage negotiations over the Southern Iraq his senior deputies for questioning. They Joint ventures scuttled Integrated Project (SIIP) between the Oil appeared in Parliament on Jan. 22, and re- Ministry and a consortium consisting of Leading the charge of accusers against porters were not allowed in. ExxonMobil and the China National Petro- the ministry is Uday Awad, an MP with the From outside the doors of the meeting, leum Corp. (CNPC). militia-turned-political party Asaib Ahl al- Iraq Oil Report could hear bouts of yell- The most recent version of the deal in- Haq, who now sits on the Parliament Oil ing as Awad led the questioning of Yassiri. volves three projects critical to the future and Energy Committee. By most accounts provided by committee of Iraq’s oil sector: infrastructure to raise Shortly after Ghadhban took office last members, the SOMO leaders answered the export capacity through the Basra Gulf; fa- year, Awad took aim at SOMO and its joint questions with clarity and pointed out er- cilities to treat associated gas, enabling Iraq ventures with Litasco and Zhenhua. rors in the documents presented by Awad. to reduce flaring and increase domestic en- “SOMO’s corruption has become one of “It was a very productive meeting, dur- ergy production; and a project to provide the most dangerous matters that threatens ing which the director of SOMO unveiled water to several oil fields around Basra. the state,” Awad said at the time. “There are the details of SOMO operations,” said Ghal- To pay for the infrastructure the con- indications that a huge amount of money ib Mohammed, a member of the commit- sortium would get development rights for has been wasted by the company, estimat- tee from the Gorran party. “I believe Yassiri two oil fields, Ratawi and Nahr Bin Omar, ed in the millions of dollars.” provided convincing answers to many of currently operated by Basra Oil Company In fact, the joint ventures were struc- the questions in a transparent way.” (BOC). tured to help Iraq earn a premium on its According to a statement issued by In the waning days of former Oil Minis- own oil sales: SOMO sold oil to the JVs at SOMO on Feb. 21, the main evidence of ter Jabbar al-Luiebi, talks began to gain mo- the standard price, and then the JVs tried wrongdoing provided by the MPs was a mentum. And when Ghadhban took office, to resell the same crude for a higher price. false “establishment document” of the JV he consistently listed the project as one of Any of the resulting profits were split- be with Zhenhua that incorrectly stated the his top priorities. tween the government and the private contract term as 50 years. But after half a year, negotiations are partner, effectively giving Iraq the oppor- “SOMO has proved that the document still ongoing. tunity to earn extra crude revenue while and the contract are false, by showing the One of the most foreboding develop- minimizing downside risk. true draft, which was submitted to the ments is that, according to both a senior As a side benefit, the JVs also helped Council of Ministers and confirms that the Iraqi official and a senior American official provide a better understanding of the mar- contract term is only five years,” the SOMO who are familiar with the negotiations, the ket that Iraq sells into, improving SOMO’s statement said. Iraqi government intends to submit the ability to set prices that strike the optimal Nonetheless, Awad continued his cam- deal for approval by the Parliament. That balance between maximizing revenues paign against SOMO in regular television would break a precedent set with other oil while still attracting buyers. appearances. In one interview, he said he deals, which have gone forward with only Awad, however, may have misunder- was ready to submit evidence to the Par- the approval of the executive branch. stood the nature of the profit split, and liament “clearly proving the minister’s in- “The Oil Ministry wants MPs to under- claimed that he possessed documents de- volvement in hiding files related to SOMO stand that, if we do this deal, it’s going to tailing financial mishandling. Awad has not and continuing his protection of this cor- mean a portion of our oil exports won’t responded to several requests to provide rupt company.” feed state revenues for a few years, un- or discuss his evidence. On May 6 he told a At some point in early 2019, the ministry til a certain threshold of repayment is press conference that he planned to sue the decided to scuttle the JVs. A senior ministry reached,” the Iraqi official said. “The Parlia- state-run Basra Oil Company, and oil firms official and an industry official said the- con ment is going to own this, or it’s not going BP, Eni, Anton Oil, Kuwait Energy, and Lukoil tracts required an annual renewal, and the to happen.” for allegedly violating employment laws. ministry had simply let them expire. The deal seemingly took a significant “The corruption mafia within SOMO will “There was a sort of assessment to stay step forward on May 8, when the Cabinet be hit for dealing with the Russians and as we used to be, before, in terms of sell- endorsed further negotiations with Exxon, Chinese companies in exchange for com- ing,” Ghadhban said recently on the side- though no final deal has been reached as missions that go into the pockets of the lines of a ministry event. “It’s more practi- of publication. ♦ corrupt,” Awad said in a statement. cal, and perhaps it’s too early now to go Following a publicity campaign, which ahead with joint ventures. Perhaps in the READ THE FULL STORY @ also included appearances on satellite future, but not now.” www.iraqoilreport.com
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Q&A: Bahaa Nima Abid, acting director of the Siba gas field The first of federal Iraq's three gas fields awarded in a 2010 bidding round is now nearly ready for commercial production, helping the country become a sustainable producer of electricity.
What is current production of gas Have you hit any problems on the and condensates? way to commercial production? The [first commercial] production target Yes, we have done preventative mainte- is 25 million standard cubic feet per day nance and experienced technical malfunc- [scf/d], until gradually reaching a daily pro- tions. This is generally part of the work. Af- duction rate of 100 million scf/d. ter the opening of the station, work in the The station was opened in April 2018, field has gone smoothly. and production started in at the beginning Where does gas from Siba go now, of August 2018. and how is it used? Current production is 20 million scf/d. The gas production is sent directly to The commercial production threshold of 25 the national network. Condensates are million scf/d has not been officially reached sent for export, by SOMO, which mixes by the operator, because of operational them with the exported crude. There are and reservoir considerations. future thoughts to invest in the conden- The foundation of the contract focuses sates, without mixing them with crude. on gas production rather than conden- Are there any plans to export gas sates. LPG is considered a secondary prod- from Siba to Kuwait? uct, and production is currently 4,000 to The gas is currently pumped into the 5,000 bpd. national network, for now, because Iraq What is the timetable to increase pro- needs the gas and has not reached the abil- duction of both gas and condensates? ity to meet local demand. There is no plan Bahaa Nima Abid, acting director of the Siba gas According to the contract, the operator to export gas at the current time. field, at his office in April 2019. is not obligated to produce condensates. It If Akkas and Mansuriya fields are - de is only dry gas - 25 million scf/d to reach million scf/d, then the condensates will be veloped, and if they start production, then commercial production, 100 million scf/d 20,000 bpd. maybe the local demand will be covered for the plateau. The rest is secondary pro- The contract is for 20 years. It starts with and gas can be exported. ♦ duction. commercial production, then increases to Note that the condensates production 100 million scf/d over nine years, and then READ THE FULL INTERVIEW @ is good. If [dry gas production] reaches 100 a normal decline. www.iraqoilreport.com
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Q&A: Fatih Birol, head of the International Energy Agency After spearheading a major new survey of Iraq’s energy sector, the IEA’s executive director previews his key insights and policy recommendations.
Your recent report on Iraq’s energy keeps up both with the upstream, and the sector notes that the Oil Ministry and evolving product demand in the country. Electricity Ministry’s capital spending At present, the problem with refineries has fallen in the last five years. Does the in Iraq is both quality and quantity. Iraq pro- government need to put more money duced too little refined product, and most into electricity investment? What are of this is HFO because of poor upgrading fa- your main policy recommendations? cilities in the refineries. We are encouraging Capex increases are a key issue, but it’s the government of Iraq to look closely at this not the most important one for me. The issue, and to try to incentivize the invest- main problem is how to manage the cur- ments needed in the downstream sector. rent infrastructure better. There is huge The gas that Iraq is currently flaring room for improvement without adding one could fuel 4.5 GW of electricity genera- new gigawatt of new capacity. tion. It makes overwhelming economic Today we have about 32 gigawatts of ca- sense to invest in developing associated pacity [in Iraq], but effective generation is only gas. So why hasn’t it happened? What are about 16 gigawatts because of lack of main- the key structural barriers? And are you tenance and inefficient use of power plants. making any policy recommendations for More importantly, out of those 16 giga- the Iraqi government that would help watts, when we send it to the customers, encourage investment in associated gas? about 40 percent is lost during distribution. This is a fundamental issue in Iraq. The This is a world record. In Africa, for exam- 16 bcm [billion cubic meters] flared each Fatih Birol, Executive Director of the Interna- ple, which has some of the least developed year is more than enough to displace all im- tional Energy Agency. (IEA) power systems in the world, the losses in ports of gas Iraq currently relies on. In other distribution are about 14 percent. I am hopeful, and I’ll tell you why. One, I words, it would save Iraq billions of dollars This is something which can be easily believe it’s a very urgent issue. Second, the each year if it can capture and utilize the as- identified - what are the weakest parts of new government here, it’s a technocrat gov- sociated gas in the south of the country. this system. And with limited additional ernment. When I look at the prime minister, In the very recent past, there have been capital, but good management, we can cut the minister of electricity, the minister of oil, encouraging signs, with Basra Gas Company the losses in half. This would help a lot to they give me a lot of confidence. They have increasing capacity to 10 bcm and taking fi- address problems this summer. a strong intention to improve the situation, nal investment decisions to grow this further You also reached some interesting and also the skills to address these issues. in the next two or three years. We are also conclusions about the private generator The IEA expects major changes in encouraged by some of the developments business. global HFO demand. Can you summarize in other fields, and the contracting of service We have calculated that the average cost how these changes are likely to affect companies that can make a difference. of neighborhood generation to customers Iraq, and what policy actions you are One element of Iraqi gas that is particu- is four times higher than customers pay in recommending the Iraqi government to larly interesting is its high ethane content. Germany. This is a huge amount of money. take in response? At 17 percent, Iraq’s associated gas is very It’s scandalous. There’s a need for regulat- With the introduction of the new IMO liquid-rich, and Iraq can use this in the fu- ing the neighborhood generation tariffs. [International Maritime Organization] rules ture to underpin a petrochemicals industry. We’ve calculated that neighborhood gener- next year, we expect that a large dent will For me, the issue of gas is not only about ation revenues were last year about $4 billion, be made in heavy fuel oil demand globally, power generation, although that clearly is which is one and a half times higher than the particularly for HFO that has high sulfur. a major concern, but also of broader eco- entire capex budget of the Electricity Ministry. In the immediate term, the effects can nomic diversification that can be enabled Your report says Iraq could potential- be mitigated because Iraq will continue to by an efficient gas market.♦ ly take short-term actions that improve need to burn liquids for power generation power supply by 4 to 5 gigawatts, which to meet peak demand. But going forward, READ THE FULL INTERVIEW @ seems unusually optimistic. it is essential that Iraq’s downstream sector www.iraqoilreport.com
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Q&A: Hossam Hussein Wali, director general of the South Refineries Company Iraq's largest refinery is set to expand by over 30 percent this year.
Can you give a snapshot of SRC’s cur- crease. Naphtha exports will be reduced rent refining activity? because of increasing local benzene pro- The South Refineries Company has duction, and benzene imports will go down. three refining units of 70,000 bpd each, How has the capacity of the Basra re- and is making progress in terms of expan- finery changed in the past year or so? sions and production increases. The capacity is affected by several ele- In January and February 2019, there ments, such as crude quality, weather con- were maintenance and rehabilitation ditions, and high temperatures. works done on the first and second - pro We have urged BOC to improve the duction lines, which were completed. Oper- quality of the crude they deliver, and they ations resumed, and production in March are responsive. increased up to the planned rate - 200,000 Some precautionary steps have been bpd. taken by SRC to increase the crude stor- Since March 15 until now, the refining age capacity, to improve the consistency of units have been 95 percent active. The crude supply to the refining units so they improvement units are 85 percent active can work at higher capacities than last year. - that’s the available capacity to produce What is the quality of the delivered gasoline of more than 90 octane. crude in terms of API and sulfur content? What are the rehabilitation and ex- It is below SRC’s standards. The units pansion projects currently taking place are designed for 34 API, and the crude sup- at Basra refinery? ply is currently 31 API. Hossam Hussein Wali, the director general of The expansion operations continue. If the quality were better - if the API the South Refineries Company. Currently there is work on the fourth re- could increase up to 33, say - we could po- fining unit, with a processing capacity of Basra refinery with water, a semi-rental tentially increase production of benzene. 70,000 bpd. The work is progressing, and RO [reverse osmosis] water unit, which will What refined products are exported, we hope it will be completed by Septem- be to provide water - 600 cubic meters per and through which ports? ber, to start testing and then operation. hour - to the Basra refinery. The products that are exported are the Work has been partially hindered by We have also started to drill water wells gas oil and the extra non-hydrogenated some of the secondary contractors and on the SRC’s site. That was has been tested, naphtha from the external refineries. Also, workers of TechnoExport. [Editor’s note: and conforms with the requirements for there is a plan to export jet fuel, once ex- TechnoExport is a Czech company owned industrial water. An announcement has tra supply is available; currently we supply by a Swiss conglomerate that has worked also been made about installing another Basra International Airport. as a subcontractor on a variety of refining 600 cubic meter-capacity RO unit, to be The exports are done through Khor al- projects in Iraq over the past decade.] ready next year - a sea station. In addition Zubair port, because it’s close to SRC. There A meeting was held with the company’s to other precautionary actions for the next are pipelines to deliver gas oil and a pipe- director, to amend and improve the work. summer season, including providing filters line for the naphtha. There are some indications that secondary for the sea-based RO units. What details can you give about the contractors will be replaced, and we ob- When do you expect refining capacity Fao investment refinery? tained a new specific timetable to speed up to increase? Fao refinery will be established in an the installation of the fourth refining unit. An increase will be reached during the area near the crude export ports. There Once it’s active, the production capacity last few months of this year, and at the be- are currently preparations ongoing to an- of Basra refinery will be 280,000 bpd. ginning of next year, 2020. This will result nounce the project. Eight international What about the water problem - is it in an increase of gas oil and naphtha pro- companies will be enlisted to build it, ac- solved? Do you expect the same prob- duction. cording to the ministerial contracting. ♦ lems to reoccur, like last year? Once the Azmarah unit is completed As for the industrial water, we’ve taken and operated, which is expected at the end READ THE FULL INTERVIEW @ a few actions, such as contracts to supply of this year, benzene - 88 octane - will in- www.iraqoilreport.com www.iraqoilreport.com
Q&A: Zuhair al-Araji, mayor of Mosul To recover from a devastating war, Iraq's second-largest city needs a massive mobilization of resources and coherent planning and organization – but it's getting neither.
What are the various authorities in The nature of the process itself raises cal facility. We allocated a sum of money charge of reconstruction in Mosul, and eyebrows about corruption, even if he was to install temporary medical facilities, be- how are they coordinated? not involved in corruption. Why did he shut cause health care is essential and we could A month ago, the governor of Ninewa out the local institutions during the imple- not wait a year or two until the hospitals [Naufel Hamadi] was removed. A new mentation of these projects? The way the are reconstructed. governor has been appointed. A crisis cell governor handled the projects raised ma- Health falls into the “urgent” category. was formed to act as a temporary admin- jor concerns about corruption. The former So do education and services. The majority istrative body in Ninewa. The crisis cell was governor’s ways of handling things derailed of schools are flattened to the ground. We composed of the chairman of the Universi- [reconstruction] efforts. need 1,000 schools. But with the budget we ty of Ninewa, Muzahem Khayyat; the com- We are pursuing a different mechanism have at our disposal, we are building 100 mander of Ninewa Operations Command, now, where four bodies are jointly involved schools. Maj. Gen. Najim al-Jibouri; and the head of in planning, financing, and implementing How are security forces organized in the Ninewa Police Directorate, Maj. Gen. the projects. and around Mosul? Hamad Namis. The Iraqi Army has established a mili- What are the responsibilities and tary line right outside the city. The local po- powers of the Ninewa Crisis Cell? lice is in charge security inside the city. In The crisis cell was formed to contain the addition to the Iraqi Army, in the Ninewa public grievances and avert further escala- plains, we have Christian Hashid, Shabak tion. The initial task of the crisis cell was to Hashid. facilitate the release of Ninewa’s budget When it comes to the southern parts and all the other funding that had been put of Mosul, like Qayarah, Shora and Hazir, on hold. The crisis cell gathered 135 billion Ba’aj and Hamam Alil, there is a presence Iraqi dinars [about $114 million] from the of Hashid Ashayari. These Hashid groups stabilization and reconstruction budget, to are playing a secondary role, after the Iraqi fund the ongoing projects in Ninewa. Army. The crisis cell, in coordination with We’ve seen evidence that ISIS has de- the local administration and numerous volved back into a kind of insurgency. experts, mapped out a plan and divided What’s the extent of the threat they the projects into three categories: urgent now pose to Mosul? projects; projects we need to complete We have a large swath of open territory in six months or a year’s time; and long- west of Mosul that stretches towards the term projects. Once we underlined our Syrian border. The ISIS remnants who have priorities, the implementation phase of fled the battlefields in Iraq and Syria have the projects kicked off, based on the avail- retreated to these open areas. able budget. Zuhair Muhssein al-Araji at his office in Mosul in These remnants are sneaking into vil- Where is corruption causing the most May 2018. lages at night to obtain supplies, whether problems? How do you characterize the medical or food. Some of the villages con- nature and the scale of the corruption? Who decided how to prioritize the tain no more than 10 houses. Once they With all due respect to the former gov- projects, and how? sneak into the villages, they ask the local ernor, the former governor was running all Let me put it this way: all of our main villagers for food and other supplies. the administrative-related affairs by him- hospitals had been demolished. Salam, Some of the local villagers comply and self, and through a handful of individuals which was a 400-bed hospital, was reduced provide them with supplies in exchange for in his office. The governor was unilaterally to rubble. Health care is a priority, and we some slight financial gain. For instance, if laying out plans, providing budgets, and have a massive population who are in need a pack of cigarettes costs 1,000 dinars, the implementing projects. He was awarding to medical services. locals would sell it to the ISIS fighters for tenders to companies that he himself pre- So we installed a 50-bed facility and 10,000 dinars. Same applies to food sup- sented. He would appoint contractors. asked the UN to add another 50-bed medi- plies: you can purchase 10 loaves of bread
12 www.iraqoilreport.com for 1,000 dinars in a normal bakery, then There is nothing fishy about dissolving Why did the commander of Ninewa sell the bread to ISIS for 10,000 dinars. the Crisis Cell. It was a temporary body to Operations Command Najim al-Jibouri It’s not possible to deploy a force to oversee the reconstruction process and resign from the Crisis Cell? every village composed of 10 houses. The service delivery, and to run administra- Najim submitted a request for retire- Iraqi Army is deployed to a strategic line. tive affairs, until the new governor came ment six months ago. In his request, Najim They cannot provide protection to every to office. had demanded to be promoted to a higher village. The press misinterpreted Muzahem rank before his retirement. He is now nei- These ISIS infiltrations are not that sig- Khayyat’s so-called resignation. Khayy- ther retired nor promoted; he’s been trans- nificant. ISIS no longer exists; what we deal at held a press conference and stated ferred to the Ministry of Interior, where he with is individuals who will eventually sur- that his role with the Crisis Cell has will continue to serve but without holding render or be killed in confrontations. come to an end with the appointment any key positions. ♦ The Crisis Cell was disbanded, and of a new governor. He didn’t use the Muzahem Khayyat resigned. What hap- term “resignation” because it wasn’t a READ THE FULL INTERVIEW @ pened? resignation. www.iraqoilreport.com
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Q&A: Zardasht Shangali, Cmdr. of the Sinjar Resistance Units After deadly clashes with the Iraqi Army in March, the YBS leader discussed improved security coordination, a strategically important Syrian border crossing, and the future of Sinjar.
We have been tracking the recent everyone else in the area. We have helped conflicts between YBS and Iraqi forces the people of Sinjar to return to their homes. in Sinjar. How is the current situation? We are the ones who kept the Iraqi flag in The situation is normal now. We managed Sinjar for a long time, before the Iraqi Army to defuse the tension and stop the misunder- and al-Hashid al-Shabi came to the area. We standing that caused some tensions in Sinjar. used to bring special forces of the Iraqi na- After the [recent] military clash at the tional security apparatus from Syria to Sin- checkpoint, we faced some complications jar when Daesh was in the area. We fought with the Iraqi Army units in the area. It was Daesh together, in the same trenches. mostly the result of misunderstandings. Does the Iraqi government support I believe that the conflict was staged to and supply YBS forces? Does it pay your shift Baghdad’s position against people of fighters, similar to the support it has Sinjar and YBS forces, specifically. We im- offered to al-Hashid al-Turkmani, the mediately started to clarify our position. Christian Hashid forces in Ninewa? We told Iraqi security leaders that we did Yes, it does, but the support is not suf- not want this conflict. Later, by peaceful ficient, and we still have half of our fighters and friendly talks, we showed them what unpaid. was going on. Then Baghdad leaders found YBS has about 4,000 members. Part out that the issue was artificially amplified. of this force is within the structure of al- What did you and the Iraqi leaders Hashid al-Shabi. It is supplied and paid by find wrong in the whole situation? Iraqi national security institution. We are a Zardasht Shangali, commander of the YBS (Sin- The Iraqis realized that the conflict was formal security force in Iraq. National army jar Resistance Units), a paramilitary group that not initiated by YBS members. It was not a and security leaders sit with us to discuss operates in the Sinjar district of Iraq’s Ninewa planned attack by us. It was actually a mili- province. (Zardasht Shangali) all security issues in Sinajar. tary accident that happened in the Bora Your political opponents say YBS is checkpoint. We did not initiate it. The conflict was between YBS and the an arm of the PKK, and you are just im- Actually, some Iraqi soldiers started Iraqi Army’s 72nd Brigade, which had ar- plementing PKK’s agenda. What is your shooting at YBS members. In the first con- rived in the area just four days prior to the relationship with the PKK? flict, two of YBS’s members and an Iraqi sol- checkpoint accident. First, YBS consists of the local people of dier were martyred. The Iraqi Army soldier We agreed to form two joint operations Sinjar. About 90 percent of them Yazidis, who was killed was shot from behind, at a rooms, in Snunne and Sinjar, in order to have and the rest are local Arabs. They are all point when all YBS members at the check- proper security and military cooperation. from Sinjar. point were seated in a car. This shows that The Iraqi Army’s 72nd Brigade, local police, PKK came to Sinjar to protect our peo- he could have been shot [accidentally] by and al-Hashid al-Shabi forces — who are not ple when there was not any other force to another Iraqi soldier. from the area [but come from southern and protect us. It was the time when Daesh was Anyway, it is still not clear what exactly middle provinces of Iraq] — as well as YBS conducting a genocide campaign against happened. will be parts of the joint operations rooms. our defenseless people. Both the Iraqi fed- What exactly have YBS and Iraqi lead- Do they recognize YBS as part of the eral government and the Kurdistan Region- ers agreed about Sinjar going forward? Iraqi security apparatus? al Government were aware of the PKK’s Right after the accident, Iraqi security Yes, they have recognized YBS and YJS intervention in Sinjar. PKK was welcomed leaders — including the Iraqi Army’s chief [the Sinjar Women’s Protection Units, a at the time because it was protecting the of staff, the head of the national security sister organization of YBS] as formal secu- dignity of Sinjari and all Iraqi people. We institution, and the commander of the rity forces. They see them as legitimate and will never forget this support. Ninewa Operations Command — came to reliable Iraqi forces. However, on April 1, 2018, PKK formally Sinajr. We started direct talks with them, They know how YBS and YJS fiercely and totally left Sinjar. There is not any PKK and we found out that the accident was fought Daesh and how much they sacrificed militant here. YBS consists of the young mostly caused by lack of cooperation. in battle. We started fighting Daesh before people of Sinjar.
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The people who are accusing us of being forces and officials who left Sinjar for Daesh? We are expecting the Iraqi federal gov- PKK are those who do not want Sinjar to have These parliament members are not ernment to implement the agreement its own security forces. They actually do not from Sinjar, and they did not get the votes regarding the joint operations rooms in want Sinjar to become a stable place, so that of the Sinjari people. They do not represent Sinjar and Snune. Leaders of Iraqi nation- displaced people can return to their homes. Sinjar. They should stop disrespecting Sin- al security institution promised to create They are against reconstructing Sinjar. jar and its people. badges for YBS fighters and their vehicles. Second, there are some members of Iraqi Has the recent agreement between The promise has not been met yet. We are Parliament who bring up the PKK issue from YBS and the Iraqi government changed still waiting for Baghdad to fulfill its end of time to time. I think they would be better off anything regarding the posture of your the agreement. ♦ discussing how and why, on Aug. 3, 2014, Sin- forces in Sinjar? jar was left defenseless against Daesh terror- No, we have not changed anything. All READ THE FULL INTERVIEW @ ists. Why are they not questioning the military YBS forces are still in their positions. www.iraqoilreport.com
Federal Supreme Court oil lawsuit awaits PM signature Baghdad's seven-year-old case against KRG oil sector inches closer to resolution, with next hearing set for Aug. 5.
Iraq’s highest court has postponed until the KRG’s decade-long control over the Khur- to the prime minister’s office. at least August a ruling in a landmark law- mala Dome formation of the Kirkuk oil field. “I submitted to you today a statement suit challenging the autonomous Kurdistan While those two lawsuits affect key - as attached with an official letter from the -of Regional Government’s (KRG) independent pects of the KRG oil sector, the Federal fice of the Secretary General of the Council oil operations. Supreme Court case is the one that most of Ministers, Hamed al-Ghazi, and the offi- The lawsuit, first filed by the federal directly addresses the core constitutional cial has signed with his real signature, and government in 2012, is one of three ongo- arguments at the heart of Iraq’s oil disputes. the prime minister signed an internal state- ing legal actions against the KRG’s policy of The case was first filed under then-Prime ment attached to this letter,” Sofi said. producing and exporting oil without over- Minister Nouri al-Maliki, but was stuck for Mahmoud said he had received the let- sight from Baghdad. years because the KRG, exploiting a proce- ter signed by Ghazi, but he indicated he did The Iraqi Constitution does not clearly dural loophole, did not show up in court. not have the prime minister’s signature. establish the balance of oil authorities Hearings picked up starting in April 2018, “We asked you to bring the real signa- between the federal government and the when KRG lawyers began attending hearings. ture of the prime minister -- the court was KRG, instead calling on Parliament to pass Since then, proceedings have been clear,” Mahmoud said. “We need a state- new laws fleshing out the structure of the slow, as Chief Justice Medhat al-Mahmoud ment signed by the federal prime minister, country’s oil sector. But those legislative ef- has hinted at the court’s reluctance to rule as we asked before.” forts have been stuck for more than a de- on an issue where a political settlement After the hearing, Iraq Oil Report asked cade, and Iraq has developed two separate might be possible. Sofi whether the prime minister would pro- oil sectors according to diverging interpre- Mahmoud has repeatedly requested vide his signature in time for the next ses- tations of the constitution. that lawyers obtain signatures from leaders sion, now scheduled for Aug. 5. With no foreseeable prospects of a in both Baghdad and Erbil, in an apparent “I will explain the situation and it will be long-term political resolution, the issue is effort to confirm that top decision-makers his decision,” Sofi said. now in several different courts. -- who have struck short-term deals to fa- Imad Allaq, representing the Oil Ministry, In addition to the Federal Supreme Court cilitate some limited oil sector cooperation said his team also submitted an updated bill case, Baghdad has made a multi-billion-dol- -- actually support the hard-line arguments of complaints that was four pages long. lar claim against the Turkish government in being made by their legal representatives. The KRG, represented by Rushdie Kha- a Paris court of arbitration for facilitating the At a June 17 hearing, Iraqi Prime Minis- lis, is legally obligated to submit a response. KRG’s independent oil exports, in an alleged ter Adil Abd al-Mahdi was the only person The updated Oil Ministry complaint violation of the Iraq-Turkey Pipeline treaty. whose signature the court had requested “doesn’t say anything new from the previ- Officials familiar with the proceedings say a but not received. ous one,” Khalis said, “but legally we need judgment is expected within a year. When Mahmoud asked why Abd al- to respond. So I requested more time.” ♦ Another legal action was filed in April, by Mahdi had not signed the statement, the the state-run North Oil Company (NOC), in federal government’s lawyer, Haider al-So- READ THE FULL STORY @ the Kirkuk Investigative Court, challenging fi, said he had given the court’s instructions www.iraqoilreport.com
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