143.1 billion barrels" Daily Mail Online 5 October 2011. 10 ... company's energy assets, and so the amount of proven res
Iraq Oil Almanac An OpenOil Reference Guide
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Table of Contents Preface......................................................................................................6 Energy Industry Background......................................................................8 Iraqi Hydrocarbon Reserves.....................................................................8 Definition of Reserves............................................................................12 Dependency on Oil Revenues.................................................................13 Energy Governance Weak Points............................................................14 Oil theft...................................................................................................17 Regulatory Framework..............................................................................21 Ministry of Oil (Iraq)..............................................................................21 Ministry of Finance (Iraq)......................................................................23 Central Bank of Iraq...............................................................................24 Draft Laws Concerning Hydrocarbons in Iraq.......................................27 Treatment of Oil in Iraq's 2005 Constitution..........................................30 KRG Contract Disputes..........................................................................32 Federal Oil and Gas Council...................................................................34 Iraq National Oil Company Law............................................................37 Revenue Sharing Procedures..................................................................38 Middle East Comparisons.......................................................................40 Iraq's First Licensing Round (2009).......................................................46 Iraq's Second Licensing Round (2009)...................................................49 Iraq's Third Licensing Round (2010)......................................................53 Iraq's Fourth Licensing Round (2012)....................................................56 Historical Overview....................................................................................60 Iraq National Oil Company....................................................................60 Iraq Petroleum Company........................................................................62 Iraqi Oil Nationalisation.........................................................................65 Oil Industry post-Saddam.......................................................................67 Iraqi Membership of OPEC....................................................................71 Impact of Wars and Sanctions................................................................74 Federalism, Factionalism and Regional Differences..............................79 Regional Dynamics.....................................................................................85 Iran-Iraq..................................................................................................85 Saudi Arabia-Iraq....................................................................................88 Kuwait-Iraq.............................................................................................94 Turkey-Iraq.............................................................................................97 International Entities...............................................................................101 2
Firms with Contracts with Kurdistan Regional Government (KRG)...101 BP.........................................................................................................102 BP Operations in Iraq...........................................................................105 CNOOC................................................................................................106 CNOOC Operations in Iraq..................................................................109 China National Petroleum Corporation................................................110 CNPC Operations in Iraq......................................................................113 DNO......................................................................................................114 DNO Operations in Iraq........................................................................117 Eni.........................................................................................................118 Eni Operations in Iraq...........................................................................120 ExxonMobil..........................................................................................122 ExxonMobil Operations in Iraq............................................................125 Genel Energy........................................................................................128 Genel Operations in Iraq.......................................................................130 Heritage.................................................................................................131 Heritage Operations in Iraq..................................................................133 Hunt......................................................................................................134 Hunt Operations in Iraq........................................................................136 Japex (Japan Petroleum Exploration Company Limited).....................137 Japex Operations in Iraq.......................................................................140 KazMunayGas......................................................................................141 KazMunayGas Operations in Iraq........................................................144 Kogas (Korea Gas Corporation)...........................................................145 Kogas Operations in Iraq......................................................................147 Kuwait Energy Company.....................................................................150 Kuwait Energy Company Operations in Iraq.......................................152 Gazprom...............................................................................................153 Gazprom Operations in Iraq.................................................................156 Lukoil....................................................................................................157 Lukoil Operations in Iraq......................................................................160 Marathon...............................................................................................161 Marathon Operations in Iraq.................................................................164 Occidental.............................................................................................165 Occidental Operations in Iraq...............................................................167 Petronas.................................................................................................168 Petronas Operations in Iraq..................................................................170 Shell......................................................................................................171 Shell Operations in Iraq........................................................................174 3
Sonangol...............................................................................................176 Sonangol Operations in Iraq.................................................................178 Statoil....................................................................................................179 Statoil Operations in Iraq......................................................................182 Talisman Energy...................................................................................183 Talisman Energy Operations in Iraq.....................................................185 Total S.A...............................................................................................186 Total Operations in Iraq........................................................................189 TPAO (Türkiye Petrolleri Anonim Ortaklığı).......................................190 TPAO Operations in Iraq......................................................................193 Iraqi Entities.............................................................................................196 State Oil Marketing Organization.........................................................196 Petroleum Contracts and Licensing Directorate...................................197 Prime Minister's Office.........................................................................199 Maysan Oil Company...........................................................................201 North Oil Company (Iraq)....................................................................203 South Oil Company (Iraq)....................................................................204 Iraq Drilling Company..........................................................................206 Other Iraqi Entities...............................................................................207 Secondary Iraqi Entities........................................................................210 KRG Institutions...................................................................................213 Iraqi Federation of Oil Unions..............................................................215 Key Infrastructure...................................................................................219 Baiji Refinery........................................................................................219 Basra Refinery......................................................................................220 Daura Refinery......................................................................................221 Samawa Refinery..................................................................................222 Khor al-Amaya Terminal......................................................................223 Basra Oil Terminal................................................................................224 Kirkuk-Banias Pipeline.........................................................................225 Iraq Pipeline Through Saudi Arabia (IPSA).........................................227 Kirkuk-Ceyhan Oil Pipeline.................................................................228 South Gas Utilisation Project................................................................230 Environmental Impacts.........................................................................232 Oil and Gas Fields....................................................................................238 Ahdab (Field)........................................................................................238 Badra (Field).........................................................................................240 Kirkuk (Field).......................................................................................242 Majnoon (Field)....................................................................................245 4
Rumaila (Field).....................................................................................247 East Baghdad (Field)............................................................................250 Nahr Umr (Field)..................................................................................252 Najmah (Field)......................................................................................254 West Qurna Phase 1 (Field)..................................................................255 West Qurna Phase 2 (Field)..................................................................258 Qayara (Field).......................................................................................261 Zubair (Field)........................................................................................262 Nasiriya (Field).....................................................................................265 Bai Hassan (Field)................................................................................266 Eastern Fields (Field)............................................................................267 Siba (Field)...........................................................................................269 Akkas (Field)........................................................................................270 Mansuriya (Field).................................................................................272 Middle Furat (Field).............................................................................274 Maysan (Field)......................................................................................275 Garraf (Field)........................................................................................277 Halfaya (Field)......................................................................................278 Resource Transparency Opportunities...................................................281 Resource Curse.....................................................................................281 Natural Resource Charter.....................................................................285 Resource Transparency Movement.......................................................288 Resource Transparency Movement in Iraq...........................................289 EITI.......................................................................................................291 EITI in Iraq...........................................................................................295 Global Witness......................................................................................299 Revenue Watch Institute.......................................................................301 Transparency International...................................................................303 Transparency of Global Oil Companies (TI Report)............................304 TI Report: Grades of Companies in Iraq..............................................306 Publish What You Pay..........................................................................307 Directory of Contacts............................................................................310 Directory of Oil Companies in Iraq......................................................315 Alphabetical Index...................................................................................325
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Preface The Iraq Oil Almanac has been created to significantly increase the stock of information available in local languages and contexts among independent journalists, civil society activists and others. The guide will provide a living database of publicly available information around the Iraqi oil industry, not only for journalists but for anybody wanting to know more about the Iraqi oil industry, and as such, be the basis for a locally based knowledge community around the industry. This first edition of the guide has been prepared by MICT International and OpenOil UG. Internews Network will use it as the basis to work with a group of Iraqi journalists to develop future versions of the guide online and in book form. The Almanac will provide the basis for a series of capacity building workshops for Iraqi journalists. The principal behind the workshops is twofold; to focus on creating a group of journalists with a high level of understanding of the topic who will then go on to be the sole administrators of the Ar abic version of the wiki, as well as to create a lasting resource of informa tion around the Iraqi oil industry. The English language version of the Wiki can be seen online at www.iraq.wiki.openoil.net and the Arabic language version of the Wiki can be seen online at www.ar.wiki.openoil.net. The information there currently will only increase in quantity and quality as the number of contributors to it increases. All of the information included here is publicly available, and is clearly referenced (please see the footnotes at the end of each page) which enables the reader to easily find the source of the information for further research. Crucially, it was created using a MediaWiki, which means that there is now an online database of all of the articles included here which can be updated as more information becomes available. This also means that this printed guide is just a snapshot of what the database is at the moment; we hope that it will grow in the future as the online articles are updated. At the end of the workshop programme, we hope there will be an ever increasing group of energy specialist Iraqi journalists who would feel comfortable and be capable of covering the oil industry, which is essential especially in Iraq, both for increasing public knowledge and for holding the 6
state-owned oil industry accountable for their actions. OpenOil has created similar guides for a range of other countries. If you are interested in finding out more, please see our website: http://openoil.net, get in touch at
[email protected] or telephone +49 30 246 303 622.
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Energy Industry Background Iraqi Hydrocarbon Reserves Many reports and sources estimate oil and natural gas reserves in Iraq - and the Iraqi Kurdistan - in ways that conflict, agree, or simply differ. Reliable and relevant estimates are indicated and explained in the sections that follow in some detail.
Oil BP Statistical Review Proven Reserves Iraq's official reserve estimate for crude oil proven reserves has risen to 115 billion barrels (bbl) today from 34 billion barrels in 1980.1 The major part of this increase in the estimates came during the 1980s, as can be seen from the graph on the right. There have been three significant leaps in the estimate during this time. • In 1982, early in the war with Iran, reserves estimates nearly doubled from 32 billion to 59 billion barrels. • In 1987, as the Iraqi economy was suffering from the long war with Iran, and as it appeared that OPEC was about to base production quotas on stated reserves, the figure jumped from 72 billion barrels to exactly 100 billion barrels. • In 1996, as the United Nations was finalising terms of the Oil For Food program which would allow Iraq to export oil again after a total ban for several years, the estimate jumped from 100 billion to 112 billion barrels.
1
"British Petroleum Statistical Review" 2009 8
• In 2000, barely some months before the United Kingdom and the United States carried out bombing raids in order to attempt to disable Iraq's air de fense network,2 the reserves estimate was calculated at 112.5 billion barrels.3 • In 2009, the same year in which Iraq assumed control of security in Baghdad's 'Green Zone', most United States military personnel withdrew, and Iranian troops briefly occupied the Fakka oilfield, 4 reserves estimates reached 115 billion barrels of oil, a figure that has remained stable until December 2011. However, as with other OPEC producers, it is not clear if the current estimate of 115 billion barrels also includes oil that has already been produced. The United States Geological Survey's World Petroleum Outlook of 2000 estimated that of the 100 billion barrel figure that was then being used, 22 billion barrels had already been produced, leaving only 78 billion barrels yet to be recovered from the proven reserves.5 Nevertheless, it should be noted that BP defines "proved reserves of oil" in its annual statistical review of world energy as "those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions [emphasis is this article's]." BP also states that the estimates in their tables are compiled using: "a combination of primary official sources, third-party data from the OPEC Secretariat, Oil & Gas Journal and an independent estimate of Russian reserves based on information in the public domain." Daily and Yearly Production Estimates BP's June 2011 statistical review of world energy shows the profound variations in oil production (both in terms of daily and yearly production) throughout the decade 2000-2009 and until 2010. Whereas yearly production had reached 104 million tonnes of oil (mtoe) in 2002, it dropped to 66.1 in 2003, rose back to 100 in 2004, and kept rising to 119.5 in 2008, 119.8 in 2009, and 120.4 mtoe in 2010. For the same years, averaged daily production was 2.116 million barrels per day (mb/d) in 2002, dropped to 1.344 in 2 3 4 5
" Iraq Profile" BBC 20 December 2011. " BP Statistical Review of World Energy June 2011: Oil BP website June 2011. " Iran-Iraq Standoff Over Oil Field Ends" New York Times 20 December 2009. " How much oil does iraq have?", Brookings Institute paper, May 12, 2003 9
2003, rose back to 2.03 in 2004, and kept rising to 2.428 in 2008, 2.442 in 2009, and 2.46 mb/d in 2010.
Estimates for Ultimately Recoverable Crude Oil Since Iraq is the least explored of the oil-rich countries, there have been numerous claims of huge undiscovered reserves there as well - oil thought to exist, and expected to become economically recoverable - to the tune of hundreds of billions of barrels. The respected Petroleum Economist Magazine estimates that there may be as many as 200 bbl of oil in Iraq; the Federation of American Scientists estimates 215 bbl; a study by the Council on Foreign Relations and the James A. Baker III Institute at Rice University claimed that Iraq has 220 bbl of undiscovered oil. Overall, only about 2,000 wells reportedly have been drilled in Iraq (of which about 1,500-1,700 were actually producing oil in 2005), compared to around 150,000 producing wells in Texas for comparison purposes.6 Tareq Shafiq In 2003, Tareq Shafiq, a founding executive of the Iraq National Oil Company in the 1960s, endorsed a figure of 140 billion barrels as being Iraq's eventual proven reserves, and a potential reserve of 215 billion barrels.7 Hussain al-Shahristani In early October 2011, the Iraqi Minister of Oil at the time, Hussain alShahristani, stated that the country's oil reserves were higher than previously estimated and should be considered to be almost 143.1 billion barrels of oil.8
6 7 8
" OPEC Revenues", the US Energy Information Administration, retrieved July 25, 2010 " Iraq Oil Development Policy Options: In Search Of Balance", Middle East Economic Survey, December 15, 2003 " Iraq now the second biggest oil producer: oil reserves increase by 25% to 143.1 billion barrels" Daily Mail Online 5 October 2011. 10
Gas BP Statistical Review Proven Reserves Iraq's official reserve estimate for natural gas reserves has barely changed from the end of 1990 to the end of 2010: a slight increase only, from 3.1 trillion cubic meters in 1990 to 3.2 trillion cubic meters in 2010.9 Yearly Production Estimates BP's June 2011 statistical review of world energy shows a serious decline in natural gas production (both in terms of daily and yearly production) throughout the decade 2000-2009 and until 2010. In 2000, excluding gas flared or recycled, yearly production slowly dropped from 3.2 billion cubic meters (bcm) to 1.6 in 2003, 1 in 2004, to rise to 1.5 in 2006 and 1.9 in 2008, and 1.3 bcm in 2010.
Kurdistan Regional Government's Oil and Natural Gas Reserves and Production In December 2011, United Press International (UPI) stated that Iraqi Kurdistan had an estimate 45 billion barrels of oil (roughly the amount that the United Kingdom has produced from its North Sea fields) and an estimate 60 trillion cubic feet of natural gas (regional reserves that surpass Libya's entire reserves as a country). UPI also stated that Iraqi Kurdistan was producing an estimate of 100000 barrels of oil per day (bpd) and would be able to increase production to an estimated 175000 bpd in 2012. The Kurdish Minister of Natural Resources, Ashti Hawrami, stated that depending on the success of IOCs exploration and development projects in the region, production could reach 1 million bpd by 2015.10 Also in December 2011, the European Centre for Energy and Resource Security (EUCERS) stated that natural gas reserves are estimated at 100-200 trillion cubic feet - alternatively, 2.8-5.6 billion cubic meters - which is more than countries like Norway or Kazakhstan. EUCERS indicated that, at 9
" BP Statistical Review of World Energy June 2011: Natural Gas" BP website June 2011. 10 " As Iraq smolders, Kurds sit on oil riches" UPI 22 December 2011. 11
present, a consortium led by Crescent Petroleum, a privately owned oil and gas company from the United Arab Emirates, produces 300 million cubic feet per day of gas. Due to the fact that Turkey's natural gas consumption is projected to double by 2020, piped gas to Europe via Turkey is an export option that Iraq Kurdistan is considering at the moment, so as to secure Turkey's potential demand for Iraqi gas.11
Definition of Reserves Different systems have been used to classify reserves of oil and gas since the industry first developed in the nineteenth century. But the most widely used definitions today are provided by the Petroleum Resources Management System of the American Society of Petroleum Engineers.12
Reserves Proven Reserves Proven reserves are those that a company is more than 90% certain of extracting under existing market conditions. They are often reserves that fall within the extraction of existing infrastructure such as wells and associated transport infrastructure. The category of proven reserves is often prescribed in the regulations of various financial markets as the key definition of a company's energy assets, and so the amount of proven reserves a company has access to will influence its share price, and the amount of capital available to it for investment. Proven reserves are also known by the phrase P1. Proven reserves are usually quoted by the holding company and are not subject to external audit. Iraq's proven reserves are stated by the government to be 114 billion barrels of crude oil", a figure which has stayed constant since 2001. British Petroleum publishes a Statistical Review every year which includes proven reserves for over 50 producing countries. 11 " New stability and prospects for Kurdish oil and gas – European Energy Review" European Centre for Energy and Resource Security website 9 December 2011. 12 " SPE: Petroleum Reserves Definition", approved by SPE Board 2007 12
Probable Reserves Probable reserves are reserves which are known to exist and are recoverable under current market and technological conditions, but which the company is less certain of extracting than proven reserves. The threshold for probable reserves is 50% certainty of recovery, as opposed to 90% for proven reserves. Reasons for the difference could be that the reserves lie outside the extractive capacity of existing wells, so need new investment, or that various licenses for production and transportation are required from the host country. Probable and proven reserves are often lumped together in a definition known as P2.
Possible Reserves Possible reserves, like probable reserves, are recoverable under existing macro conditions of oil price and technology. But they reach only a 10% degree of certainty on the part of the holding company. Proven, probable and possible reserves are lumped together in a definition known as P3.
Contingent Resources Contingent resources are those which are known to exist but which may be too expensive or technologically challenging to extract under current conditions. For example, an oil field may exist so far out to sea that it will be too expensive to drill and produce unless the price of oil rises higher than it is today. Which resources are classified as contingent is therefore a moving picture, depending on the development of technology. Iraq has almost no contingent reserves as its known oil fields are all recoverable under current market and technology conditions.
Dependency on Oil Revenues There are two different measures of oil revenue dependence, as can be seen in the figure below. The first is the ratio of oil revenues to fiscal revenues,or the total income of the government. The second is the ratio of oil revenues to total exports. The IMF estimated that of the Gulf producers the United 13
Arab Emirates shows the least oil dependence, with oil accounting for just over half of government income, and just under half of exports.13 Qatar, by contrast, showed a ratio of 70% of government revenues, and 80% of total exports. The International Monetary Fund identified at least 30 countries where revenues from oil and gas accounted for at least 25% of government income during the period 2005-8 and where sufficient information was available for meaningful analysis: Algeria, Angola, Azerbaijan, Bahrain, Bolivia, Brunei, Cameroon, Chad, Congo, Ecuador, Equatorial Guinea, Gabon, Indonesia, Iran, Kazakhstan, Kuwait, Libya, Mexico, Nigeria, Norway, Oman, Qatar, Russia, Saudi Arabia, Sudan, Timor-Leste, Trinidad and Tobago, UAE, Venezuela, Vietnam, and Yemen.14 It is important to note that oil revenue dependence is not related to the quantity of oil produced or exported. Yemen, which exported around 448,000 barrels of oil a day (bpd) in 2003, displays a higher degrees of dependence on oil revenues than Saudi Arabia, which exported around 10.2 million bpd over the same period, or over twenty times more.15
Energy Governance Weak Points Pre-Production Stage Exploration Licenses Oil and gas production often works in two stages, with licenses awarded to explore given regions at the initial stage, and then separate arrangements being made once oil or gas is discovered. Given that prediction is so difficult, and the potential rewards are so great, even the license to explore certain areas can present an opportunity for corruption. For example, in 1999 Nigeria granted a series of exploration licenses for offshore exploration to 13 “ GCC Countries: From Oil Dependence to Diversification”. International Monetary Fund, 2003. 14 “ Fiscal Policy in Oil Producing Countries During the Recent Oil Price Cycle”. International Monetary Fund, February 2010. 15 “ BP Statistical Review of World Energy June 2011”. BP, June 2011. 14
companies which did not have any experience in oil production. 16 In Libya meanwhile, it was lucrative exploration contracts which were at stake when BP faced an outcry in 2010 over links made by the press between the company and the release of Lockerbie bomber Ali al-Megrahi, 17 who was released on 'compassionate grounds' by the Scottish government. BP denies any lobbying that linked Libyan prisoners to commercial contracts. 18
Production Awards Once discoveries have been made, the right to produce presents a further opportunity for corruption. In some cases, the company which made the discovery has already agreed terms to go ahead and produce the oil. But especially in post-conflict countries, licenses may be obtained without due process. A 2004 review of companies extracting minerals in Liberia found that only 45 out of 70 operating companies were in possession of proper licenses.19 In other cases, officials in host governments can use the threat of renegotiation or revocation of production rights to exort illegal payments from companies. Many economists regard auctions as the best way to manage both corruption and asymmetry of information between governments and companies at the production award stage.20 Nevertheless, corruption is possible even in the context of an auction process, since a company and a government official can collude over subsequent modifications and renegotiations to the contract.
Production Stage Import licenses, dues, levies Once a company is producing in the country, the host government has a range of tools by which it can effectively change conditions for operating companies, which have now sunk large investments and so have incentives to keep producing even in the face of extra burdens. This is known to the 16 “ Africa: Nigerian generals deny corruption”. BBC News, 10 May 1999. 17 “ Libyan controversy adds to BP's woes”. Washington Post, 16 July 2010. 18 “ A black cloud on the horizon for Anglo-American relations?”. The Economist, 21 July 2010. 19 “ Corruption and the renegotiation of mining contracts”. U4, 30 November 2007. 20 “ Managing the 'curse' of natural resources: charter offers guide for politicians”. The Guardian, 5 February 2009. 15
economists as a "time-inconsistency" problem.21This ability to hold the company to ransom over its sunk investment can either be exploited for public interest - as when the government of Abdul Karim Qassem raised port fees in Basra Oil Terminal by 1200% overnight as part of its struggle with the Iraq Petroleum Company in the 1960s,22 or it can be used for private gain by influential officials in the host government. Among such blocking tools are licenses to import equipment needed to produce, such as has happened in Angola,23 transit fees in ports and along pipelines, such as happened in the Iraqi industry when it fell into disagreement with neighbouring Syria, and more recently between Ukraine and Russia,24 and changes in various forms of corporate and other taxes.
Support Service Contracts The oil industry, in line with trends in the rest of the global economy over recent decades, has taken to outsourcing aggressively. This means that even when a top level operating license has been granted under public scrutiny through an auction process, the primary operator then issues contracts, which could be worth hundreds of millions of dollars, to other companies who in turn implement various activities to fulfil the contract with the host government. Since these contracts are between two private sector companies, they usually fall outside the scope of any governmental audit or integrity agency.25
Cost Recovery Accounting Many oil contracts make provisions for an oil company to recovery the heavy investment it has made to discover and then produce oil and gas. This is typically on a sliding scale over time, whereby a large portion of oil revenues are awarded to the company to cover their costs at the outset, but the proportion gradually diminishes over time. 26 Big oil companies often have 21 “ Dynamic Inconsistency”. Wikipedia, retrieved 25 October 2011. 22 “ Iraq: Post-World War II Through the 1970s”. US Library of Congress, retrieved 25 October 2011. 23 “ Angola Trade Report”. US Trade Department, retrieved 25 October 2011. 24 “ Q&A: Russia-Ukraine gas row”. BBC News, retrieved 25 October 2011. 25 “ The oil service industry: Rigging the market”. The Economist, 23 June 2011. 26 “ Glossary of Terms Used in Petroleum Reserves/Resources Definitions ”. Society of Petroleum Engineers, retrieved 25 October 2011. 16
sophisticated accounting methods at their disposal and can, for example, find ways to increase costs and decrease profits in one country with relatively high taxation, transferring the profits to another country where corporate taxes are lower. In some cases, multinational companies engage in complex transactions between several subsidiary companies across different legal jurisdictions. This is known as "transfer pricing", which can result in above market "costs", which they can then reclaim out of the oil revenues created by their production.27 All of these issues can be disputes between a host government and an oil company, as was seen in Indonesia in 2009-10 with cost recovery accounting.28
Oil theft Outright physical theft has been one of the major weak points in Iraq's industry since the 1990s, particularly with oil from Kirkuk.
Metering Iraq has suffered a lack of correct metering from its wellheads and pipelines since at least 2003. The International Advisory and Monitoring Board (IAMB), created in 2003 to oversee management of Iraq's natural resources during a transitional period, said in 2006 that years of requesting an accurate metering system had brought no results 29. The Coalition Provisional Authority had commissioned Kellog, Brown and Root (KBR) to restore Iraq's production capacity after the war, and KBR later stated they surpassed prewar production of 2 million barrels a day to reach 2.4 million barrels a day by December 2003. But no metering system was installed, despite the fact that KBR is a subsidiary of Halliburtons, an oil services company and one of the leading suppliers of state of the art oil meters30.
27 “ Cost Recovery And High Oil Price: How Can Host Governments Capture Adequate Revenue? A Case Study Of Nigeria”. CEPLMP, 04 June 2009. 28 “ Indonesia to drop cost recovery cap”. Upstream Online, 05 January 2010. 29 " Iraq's Oil Metering System Mysteriously Delayed", Reuters, February 9, 2006 30 " Halliburton's FastQ Multiphase Flow Meter System First To Be Certified For Deployment In Kazakhstan", New Technology, January 5, 2004 17
IAMB first expressed concern at the lack of metering in July 2004 31. As of mid-2010, the UN was still asking for accurate oil metering32. The lack of metering leads to the potential for large quantities to be stolen, since even a 1% discrepancy in the manifest of a ULCC tanker with 350,000 tonnes dead weight capacity would be equivalent to 500 entire truckloads of about 1,000 gallons each. Ghaith Abul-Ahad reported in the Guardian that one tribe in Basra was paying $250,000 a week to armed gunmen to secure the Basra Oil Terminal while they loaded tankers with unmetered cargoes of oil33
Bunkering Bunkering involves tapping oil pipelines and other major facilities to gather oil, storing it illegally, and then shipping it out in consignments which, unlike false metering, are entirely illegal. There has been much bunkering in the south of Iraq since the industry became deregulated as a result of sanctions in the 1990s.
Trucking Iraq's oil industry has relied heavily, on road transport at various times during its history, notably during the Iran-Iraq war in the 1980s when up to 250,000 barrels of oil a day were transported to Jordan and Turkey34, and again in the 1990s, when the government of Saddam Hussein was attempting to export the maximum amount of oil outside the parameters of sanctions and the Oil for Food Program. After 2003, illegal trucking has continued, sometimes on a large scale. In one operation in 2006, police seized 400,000 barrels of oil destined for Syria and worth an estimated $28 million on the black market35. 31 " IAMB Reviews KPMG Audit of the Iraq Development Fund", ReliefWeb, July 15, 2004 32 " Revenue Mechanism for Iraq Still Lacking, Comptroller says", UN website, July 12, 2010 33 " Oiling the wheels of war: smuggling becomes the real economy of Iraq", Ghaith Abul-Ahad, Guardian, June 9, 2007 34 " Iraq - Oil in the 1980s", US Library of Congress 35 " How Iraqi Oil Smuggling Greases Violence", Bilal Wahab, Middle East Forum, Fall 2006 18
Connection to Insurgency Since 2003 there have been hundreds of attacks on Iraq's oil industry, but analysts think that many such attacks, which are billed as political acts of insurgency, may in fact be the work of organized crime syndicates in order to maximise the potential for theft. Pipelines are damaged in order to force transport of oil by truck, so it can be stolen 36. Then Finance Minister Ali Allawi estimated insurgents were getting between 40% and 50% of Iraq's oil revenues.
Fuel Products and Gasoline In Iraq, demand for fuel products rose sharply after the 2003 war because more cars were on the road and the electricity grid virtually collapsed leading to use of private generators 37. This sharply increased the motivation to steal gasoline in large quantities, a trade that had begun under the Oil for Food Program in the 1990s, particularly as Iraq could not produce enough gasoline and fuel products for its own needs and had to import them, while also subsidising them on the local market. The Ministry of Oil's Inspector General reported that theft was occurring both in shipments of oil products entering Iraq from Turkey and Kuwait38. This kind of activity reached a peak in 2004-5, when gasoline was officially only 3 US cents per gallon while fetching over a dollar a gallon the black market. The inspector general's report stated that between September 2005 and February 2005 an average of nine trucks of imported oil products a day left Basra for the interior of Iraq but never arrived. The subsidies also made refined products that were being produced inside Iraq a target for theft, especially those coming from the Baiji Refinery, where in 2007 the US Department of Defence estimated 70% of the output was being stolen39. The number of retail petrol outlets near Baiji from just 36 " Oil corruption fuels insurgency in Iraq", Robert Worth and James Glanz, New York Times, February 5, 2006 37 " Criminals, Militias, and Insurgents: Organized Crime in Iraq", Phil Williams, Strategic Studies Institute 38 " Smuggling Crude Oil and Oil Products Second Transparency Report", Revenue Watch Institute 39 Measuring Stability and Security in Iraq", US Department of Defense, June 7, 2007 19
eight in 2003 to over 50 by 2008 as the station owners could gain access to oil products at the subsidised price and then resell them on the black market40. Policies led by Oil Minister Hussein Shahristani to reduce and then remove subsidies on fuel had greatly reduced this category of smuggling and theft in Iraq by mid-2010 compared to levels in 2004-541.
40 " Iraq’s Insurgency Runs on Stolen Oil Profits", Richard Oppel, New York Times, March 16, 2008 41 " IMF Executive Board Approves US$744 Million Stand-By Arrangement for Iraq", IMF website, December 20, 2007 20
Regulatory Framework Ministry of Oil (Iraq) The Ministry of Oil is responsible for the day-to-day management of the oil industry, including the overall implementation of oil policy, encouraging investments, coordination between the state-owned oil companies and training centers, and operation of infrastructure. 42 It is also responsible for publishing information on revenue generation, which includes monthly data on production and exports.43 The Ministry of Oil negotiates oil contracts through the Petroleum Contracts and Licensing Directorate, which is responsible for organising competitive licensing rounds,44 and markets Iraq's oil through the State Oil Marketing Organization (SOMO), which the federal government deems the sole body invested with the authority to organise the sale and export of Iraqi oil.45 As of December 2011, Abdul Karim al-Luaibi was Oil Minister, having assumed this position in December 2010 after his predecessor Hussein alShahristani - whom he had served as Deputy Minister - became Deputy Prime Minister for Energy.46
Role of Ministry of Oil With oil exports constituting, by January 2011, close to 95 percent of Iraq's federal revenues,47 the importance of the Iraqi oil ministry is not to be understated: it directly controls the state-owned North Oil Company (NOC), South Oil Company (SOC),48 and Maysan Oil Company,49 among 13 others, 42 The Role of Government in Oil and Gas" National Investment Commission website Retrieved 23 November 2011 43 Domestic Consumption Ministry of Oil website Retrieved 23 November 2011 44 Baghdad blacklists Sinopec Global Energy Talent 2 October 2009. 45 SOMO is sole marketer of Iraq oil - ministry Zawya 10 May 2009 46 ' Iraqi parliament approves new government BBC News 21 December 2010 47 " FACTBOX-Oil companies active in Iraqi Kurdistan" Reuters 5 January 2011. 48 " MoO Companies Iraq Energy Expo website Retrieved 22 November 2011. 49 " Missan Oil Company Three Producing Oil Fields" Iraq Energy Expo website 18 February 2009. 21
and also administers three operating offices and five training centers. The ministry also receives and considers applications for the establishment of crude oil refineries after a governorate or province has given preliminary approval for their construction.50 And, inasmuch as it is the federal government's ministry in charge of oil and gas, it establishes guidelines for the measurement of hydrocarbon products.51 By means of the Oil Products Distribution Company (OPDC), the ministry provides and delivers the petroleum products needed for civilian, commercial and military activities, besides supplementing electricity needs in order to establish permanent power supplies. 52 Additionally, it commands its own police force, which is tasked with the security of the country's oil infrastructure, stopping the smuggling of crude and fuel, and locating and defusing land mines.53
Dispute between the Ministry of Oil and Regional Governments The Iraqi Constitution of 2005 states that the country's natural resources, such as oil and gas, are owned by "all the people of Iraq in all regions and governorates."54 The Constitution also states that the federal government, with the "producing" governates and regional governments, will manage the oil and gas "extracted from the present fields" subject to a revenue distribution formula and provide for the equitable distribution of revenues, "regulated by a law", in proportion to the population. However, neither is the term "present fields" nor the proper roles and authorities of the federal and regional governments for equitably sharing oil and gas and/or making decisions that concern the management of natural resources properly defined. The federal government maintains that contracts signed unilaterally by a regional government (i.e. the Kurdistan Regional 50 " Instructions No. (1) of 2009" Ministry of Oil website Retrieved 18 November 2011. 51 " Iraqi national code for measurements of hydrocarbon fluids" International Advisory and Monitoring Board for Iraq website Retrieved 23 November 2011. 52 " Ministry Services" Ministry of Oil website Retrieved 23 November 2011. 53 " Twelve Reasons Why Iraq Will Not Be a Major Oil Exporter, Part One" Peter van Buren 6 May 2011. 54 " Oil and gas contracts in Iraq Who's Who Legal website July 2010. 22
Government), after the draft federal Hydrocarbons Law was agreed in February 2007, are "illegal" until the Ministry of Oil has reviewed and approved them. Nonetheless, the Constitution does not authorise, in clear terms, the Ministry of Oil to award contracts to international oil companies either.
External links Official Website: www.oil.gov.iq Official Licensing Rounds Website: Oil www.pcld-iraq.com
Ministry of Finance (Iraq) The Iraqi Ministry of Finance is responsible for drafting the country's fiscal budget and overseeing its implementation, imposing and collecting taxes, and coordinating the payment of pensions and of the salaries of government employees.55 It is also responsible for reporting the country's official expenditure data.56 The federal budget, which is passed as a law by the Iraqi parliament, is drafted by the Ministry of Finance in consultation with other ministries, governorates and the regional government. The investment - that is to say, capital - budget is drafted with the assistance of the Ministry of Planning. 57 Rafi al-Isawi was the active Finance Minister as of December 2011.58
55 " Ministry of Finance Iraq" Maps of World website Retrieved 25 November 2011. 56 " Report to Congressional Committees: Securing, Stabilizing, And Rebuilding Iraq: Iraqi Government Has Not Met Most Legislative, Security, And Economic Benchmarks (p. 46)" United States Government Accountability Office website Retrieved 25 November 2011. 57 "{http://www.revenuewatch.org/countries/middle-east-and-northafrica/iraq/extractive-industries Iraq: Extractive Industries]" Revenue Watch Institute website" Retrieved 25 November 2011. 58 ' Iraqi parliament approves new government BBC News 21 December 2010 23
Role of Ministry of Finance The Ministry of Finance owns the Trade Bank of Iraq (TBI), established in July 2003 in order to facilitate Iraq's international trade and the reconstruction of the country after the UN Oil-For-Food Programme expired. According to its official website, the TBI is the most experienced bank in the issuance of Letters of Credit (LC) and Letters of Guarantee (LG).59 LCs are vital to the Iraqi economy and its relations with international oil companies because they are the legal and financial instruments that ensure full payment to the Iraqi Ministry of Oil's State Oil Marketing Organisation (SOMO) for export sales of petroleum products.60 The Ministry of Finance is also authorized to issue obligations guaranteed by the federal government of Iraq. The Ministry of Finance authorizes the Central Bank of Iraq (CBI) to act as its fiscal agent and conduct auctions for government debt securities on behalf of the Ministry of Finance. This is done in order to finance the federal government of Iraq, subject to the limits of the annual budget.61 From the 2003 occupation of Iraq onward, Iraqi revenues from export sales of petroleum, products are deposited into the Development Fund for Iraq (DFI), an account held by the CBI at the New York Federal Reserve Bank. The DFI is managed by the Iraqi Ministry of Finance and administered by the CBI, while its activities are monitored and audited by the Committee of Financial Experts (COFE). Expenditures from the DFI are carried out via checks issued by the CBI upon instruction from the Iraqi Ministry of Finance on the basis of the budget.
Central Bank of Iraq The Central Bank of Iraq (CBI) was established on 6 March 2004 by the Central Bank of Iraq Law, which – as the name indicates – was written specifically for that purpose. The bank's principal functions are to: maintain 59 " About TBI" Trade Bank of Iraq website Retrieved 25 November 2011. 60 " Ernst & Young: Development Fund for Iraq: Report of Factual Findings In Connection With Oil Export Sales International Advisory and Monitoring Board website 10 July 2006. 61 " MOF Auctions" Central Bank of Iraq website Retrieved 25 November 2011. 24
prices stability; implement monetary policy and exchange rate policies; manage foreign reserves; issue and manage the Iraqi currency; and, regulate the banking sector.62 As December 2011, Dr. Sinan Al-Shabibi had been the CBI's governor since its establishment.63 The head office of the CBI is in Baghad and has four branches, located in Basrah, Mosul, Sulaimaniyah and Erbil.
Oversight of Oil Revenues From the 2003 occupation of Iraq to July 2011, the CBI had arrangements with the Federal Reserve Bank of New York (FRBNY) whereby the FRBNY maintained an oil proceeds account that received Iraqi oil sales revenues. Of these proceeds, 95% were credited to the Development Fund for Iraq (DFI),64 created by a United Nations' Security Council resolution in May 200365 and housed within the CBI; the other 5% were credited to the United Nations Compensation Commission's fund account – established in 1991 for Iraq to pay compensation for losses resulting from its invasion and occupation of Kuwait in 1990.66 During this period, an organisation called the International Advisory and Monitoring Board (IAMB), whose members represented the Arab Fund, the International Monetary Fund (IMF), World Bank and United Nations, had oversight of the operations of the DFI. This included audit oversight, both over the control and reporting of oil export revenues, and over the use of revenues by the Iraqi spending ministries. On 1 July 2011, oversight of the DFI was handed over to the Iraqi Committee of Financial Experts (COFE). 67 62 " History of the CBI" Central Bank of Iraq website Retrieved 25 November 2011. 63 " The CBI" Central Bank of Iraq website Retrieved 25 November 2011. 64 " FSVC and Central Bank of Iraq Meet to Discuss New Central Bank HQ and Future Arrangements for Development Fund for Iraq" Financial Services Volunteer Corps website 14 June 2010. 65 " Iraq: Transparency Snapshot" Revenue Watch Institute website Retrieved 25 November 2011. 66 " Introduction" United Nations Compensation Commission website Retrieved 25 November 2011. 67 " International Advisory and Monitoring Board of the Development Fund for Iraq: Press Release" Iraq Business News 5 July 2011. 25
The United Nations Security Council welcomed the Iraqi federal government's assumption of oversight and full authority over its development fund at the same time that it underscored the importance of the Iraqi government ensuring that oil revenues are used in the interest of the country’s people. 68
Support from International Financial Institutions The World Bank has invested in projects to help build transparent and robust institutions, including the central bank, in Iraq. Among these, World Bank funds were used to support the country's inter-banking network, connecting the CBI and commercial banks with high capacity telecommunications capabilities, a project which as of September 2011 was operational in 29 sites.69 The International Monetary Fund (IMF) has provided support to enhance CBI operations in order to develop a banking sector that can provide basic financial services, which in turn help to create a dynamic private sector. To reinforce Iraq's central banking operations, the IMF has promoted rebuilding the capacity of the ICB to conduct monetary and exchange rate policies, supervise banks, and manage the country’s foreign exchange reserves. The IMF has also advocated the financial restructuring of Iraq's two main stateowned banks as an important step to help establish the conditions for the banking system to extend credit to the private sector.70 The World Bank71 and IMF have also supported Iraq's efforts to become a full member of the Extractive Industries Transparency Initiative (EITI) by 2012, considering membership a reflection of the country's efforts to ensure transparency and accountability in its oil sector.
68 " Security Council welcomes Iraq’s assumption of oversight over development fund" United Nations News Service 30 June 2011. 69 " Iraq: Overview: Country Brief" World Bank website Retrieved 25 November 2011. 70 " Program notes: Iraq" International Monetary Fund website Retrieved 25 November 2011. 71 " Iraq: Overview: Country Brief" World Bank website Retrieved 25 November 2011. 26
Draft Laws Concerning Hydrocarbons in Iraq The draft Iraqi oil and gas law (also referred to as the draft hydrocarbon law) first received approval by the Iraqi Council of Ministers in February 2007. The draft law contains a package of interconnected measures and several other companion laws and legal texts (for example, on revenue sharing and taxation) designed to restructure and rehabilitate Iraq's oil and gas sector. After cabinet approval, the draft law was submitted to the Council of Representatives for further ratification. But due to ongoing political disputes, as of late 2011 no framework law had been passed into law. Throughout most of the year parliament and the Cabinet had traded different and conflicting versions of a draft law.
Hydrocarbon Framework Law The draft hydrocarbon framework law outlines a regulatory and policy development framework for future oil and gas exploration and production in Iraq. It also defines responsibilities for management of petroleum resources, including setting out licensing and contracting procedures. 72 The law was drafted by a Parliamentary Oil and Energy Committee, working under the Council of Ministers, and was subsequently amended to clarify the responsibilities of federal and regional authorities as well as contracting procedures for oil fields. Of its 43 articles, only one deals with revenue sharing. In July 2007, Iraqi Prime Minister Nouri Al-Maliki announced that a final draft version of the bill was forwarded to the Council of Representatives for consideration, but objections by Kurdish representatives to the proposed amendments led to the law being stalled in parliament.73 The hydrocarbon law was considered an essential part of the Bush administration's strategy to attract much-needed investment into Iraq's oil sector.
72 " Iraq's Oil Politics: Where Agreements Might Be Found" United States Institute of Peace January 2010. 73 " Under sustained US pressure, Iraqi cabinet sends oil law to parliament" World Socialist Web Site 5 July 2007. 27
Revenue Sharing Law The draft law would establish terms and mechanisms for revenue sharing was proposed to parliament in July 2007. With it, the Iraqi federal government would be empowered to collect all oil and gas revenue with the condition that all funds are deposited into external and internal accounts based on their source.74 The federal government would have priority to allocate funds to national projects such as defence and foreign affairs, with the remainder of funds being distributed to regions and governorates on a monthly basis. The draft law states that funds are distributed based on agreed population-density figures until a census is completed. The Kurdistan Regional Government (KRG) would receive a 17% share. Despite the fact a law has not been passed, this has in fact been the de facto means of revenue distribution to the KRG in Iraq, through the annual budget, for the last few years. The draft law also calls for the establishment of a Commission of Monitoring the Federal Financial Resources. The Commission would include experts, officials and representatives from the central and provincial governments who would monitor allocation of oil revenues, ensure that accounts are independently audited, and produce regular reports to maintain transparency of the entire process.75
Iraq National Oil Company Law The draft Iraq National Oil Company Law that would re-establish the Iraq National Oil Company (INOC) was passed by the Council of Ministers but has yet to be passed by the Council of Representatives. The draft law would establish mechanisms for accountability, oversight and the clear separation of powers between the new INOC and the Iraqi Ministry of Oil.76
74 " Draft Law of Financial Resources" Kurdistan Regional Goverment website 20 June 2007. 75 " Iraq: Oil and Gas Legislation, Revenue Sharing, and U.S. Policy" Federation of American Scientists website Retrieved 16 December 2011. 76 Iraq Hopes For National Oil Co Law By End-2011 - Aide" Iraq Energy Expo website 15 July 2011. 28
Ministry of Oil Law The draft law would significantly reorganize Iraq's Ministry of Oil to accommodate for the establishment of the Iraqi National Oil Company.
Continued Disputes over Draft Oil and Gas Laws The draft laws call for a nationalized oil system which also paves the way for privatization of the Iraqi oil and gas industry. Various commentators and interests groups, such as the Iraqi Federation of Oil Unions, criticized that the draft laws failed to sufficiently preserve Iraqi national interest and Iraqi sovereignty over its natural resources. The Kurdistan Regional Government also criticized the draft laws extensively, since the provisions it contained were mostly favorable to the Iraqi federal government and undermined the KRG's regional authority. The constitutionality of the Iraqi federal government's claims that it has final authority to organize competitive licensing rounds and tender contracts with international oil companies (IOC) is a source of much contention with the Kurdish regional government. As a result, in August 2007, the KRG drafted and passed its own Kurdistan Regional Oil and Gas and structured its own model Production-Sharing Contract (PSC). The Iraqi federal government declared that the subsequent contracts that the KRG entered with IOCs to be unconstitutional and illegal. In August 2011, both the Parliamentary Committee on Oil and Energy and the Iraqi cabinet presented different draft oil and gas laws to the Iraqi Parliament for its consideration.77 Kurdish politicians were considered to be, generally, more supportive of the parliamentary committee's drafts, rather than those presented by the Iraqi cabinet, due to two facts: 1) the parliamentary committee's draft laws would make the Federal Oil and Gas Council (FOGC) the most powerful governmental body to determine oil and gas policy, which in turn would limit the Iraqi federal government's power over these matters; and, 2) the parliamentary committee's draft laws contain broader inclusion of regional authorities in the management of the oil and gas industry amongst their provisions.78 77 " Iraq approves new draft oil law IFP Iraq 1 September 2011. 78 " Time to move on: iraq's oil and gas impasse explained" Niqash: briefings from inside and across Iraq 1 December 2011. 29
Both the Iraqi cabinet and the parliamentary committee claimed that the draft laws that they have presented invalidate the other and, as a consequence, considered that the rival draft should be withdrawn.79
Treatment of Oil in Iraq's 2005 Constitution The Iraqi Constitution of 200580 functions as the regulatory framework of Iraq's oil and gas sector. The Constitution contains several provisions that address, in quite vague terms, the control and distribution of natural resources.
Articles concerning natural resources Only two articles of the Constitution contain provisions that deal with Iraq's natural resources, and by extension, its oil and gas reserves: articles 111 and 112.81 Article 111 of the Constitution states: Oil and gas are owned by all the people of Iraq in all the regions and governorates.
Hence, the ownership of any particular resource is not attributed to any particular group or geographical or political region. Article 112 of the Constitution states: First: The federal government, with the producing governorates and regional governments, shall undertake the management of oil and gas extracted from present fields, provided that it distributes its revenues in a fair manner in proportion to the population distribution in all parts of the country, specifying an allotment for a specified period for the damaged regions which were unjustly deprived of them by the former regime, and the regions that were damaged afterwards in a way that ensures balanced development in different 79 " Two Are Not Always Better Than One: Iraq’s Competing Oil And Gas Laws Baker Botts LLP October 2011. 80 " Arabic text of Iraq's 2005 constitution Niqash website. 81 " Iraqi Constitution" United Nations Assistance Mission for Iraq website Retrieved 14 December 2011. 30
areas of the country, and this shall be regulated by a law. Second: The federal government, with the producing regional and governorate governments, shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of the market principles and encouraging investment.
Hence, because the term "present fields" is not defined, it remains unclear whether it includes fields that are only currently producing or if it extends to other fields. Similarly, whether the currently producing fields include partially developed fields also remains unclear. The proper roles and authorities of federal and regional authorities for equitably sharing oil and gas and making strategic decisions on the utilization and management of resources is a point of contention. 82 The Iraqi federal government and the Kurdistan Regional Government (KRG) continue to clash over this and hence new legislation on oil and gas remains in deadlock and stalled.83 This is because the Iraqi federal government maintains that the Constitution does not allow the KRG to adopt unilateral and permanent measures over the management of oil and gas fields. Under this interpretation, any contracted signed after the draft oil and gas law was agreed in February 2007 is "illegal" until reviewed and approved by the Iraqi Ministry of Oil.84 Nonetheless, the Constitution does not expressly authorize either the Ministry of Oil or the ministry's Petroleum Contracts and Licensing Directorate to award contracts to international oil companies (IOC) either. The Ministry of Oil interprets the legality of contracts awarded to IOCs on the grounds that: 1) the constitutional requirement for the approval of the Council of Representatives - the 325 seat main elected body of representatives in Iraq 85 - only applies to international treaties and agreements between the State of Iraq and other States, so commercial contracts between Iraqi regional oil companies (ROC) and IOCs do not need such approval, and (2) the technical service contracts (TSC) were awarded under the proposed Hydrocarbon 82 " Iraq's Next Government: What do the Kurds Want?" Time 6 October 2010. 83 " UPDATE 2 - Iraq's Shahristani retains hard line on Kurdish oil" Reuters 10 October 2011. 84 " Oil power struggle as U.S. leaves Iraq" CNN 12 December 2011 85 Fact Sheet: Iraq's Council of Representative Election" United Nations Assistance Mission for Iraq website 11 February 2010. 31
Law, despite the fact that this is not yet approved by the Council of Representatives.
KRG Contract Disputes The Iraqi Constitution of 2005 is unequivocal about the fact that the country's natural resources, such as oil and gas, are owned by "all the people of Iraq in all regions and governorates." However, and despite the fact that the Constitution also states that the federal government will manage oil and gas extracted from Iraqi fields with regional governments and governates, the Constitution is ambiguous about the specific dynamics, revenue distribution and competencies of the various Iraqi governmental authorities involved. This ambiguity in the Constitution has led to various conflicts, since the federal government maintains that contracts signed unilaterally by a regional government (i.e., the Kurdistan Regional Government), after the draft federal oil and gas laws were approved by Iraqi Council of Ministers in February 2007, are "illegal" until review and approval by the Iraqi Ministry of Oil. However, to be clear, the Constitution itself does not state that the Ministry of Oil is the final authority in awarding contracts to international oil companies (IOC). The Kurdistan Regional Government (KRG) maintains that the ambiguity in the Constitution allows for regional government's to sign oil contracts with IOCs on their own. The KRG also maintains that objections to their interpretation of the Constitution are actually attempts to limit Kurdish autonomy.86
Oil Contract Disputes with Federal Government After the removal of Saddam Hussein's government in 2003, the three provinces under the KRG's administration were the only ones in Iraq to be ranked "secure" by the United States' military. 87 In 2006, Norwegian energy company DNO drilled the first new oil well since the invasion of Iraq in Ir86 ” Wrapup 1: Kurd, Baghdad oil officials meet on Exxon spat” Reuters 17 November 2011 87 ” Iraq: The way to go” The New York Review of Books Retrieved 21 November 2011. 32
aqi Kurdistan.88 Since then, other companies have entered the region, such as: Genel Enerji from Turkey, Gulf Keystone Petroleum from the United Kingdom, Hess Corporation and Marathon Oil Company from the United States, Repsol YPF from Spain, OMV from Austria, 89 Western Oil Sands from Canada via its subsidiary WesternZagros Resources, 90 Sterling Energy from the United Kingdom,91 and since October 2011, ExxonMobil, from the United States92. Despite the fact the KRG's oil and gas development contracts could increase production and revenues in the Iraqi oil industry at a national level, the matter of governmental authority over natural resources continues to be controversial because of its implications for the issue of Iraqi federalism, since the constitutionality of the KRG's contracts continues to be disputed. The disputes over the KRG's contracts with IOCs reached a critical point when the regional government announced, on 13 November 2011, that it had awarded six exploration and production licenses to ExxonMobil Corporation, the world's largest oil company. 93 Additionally, these agreements also constituted the first attempt from an oil supermajor to contravene the Iraqi federal goverment's blacklist policy on any contracts which give IOCs a proprietary interest in Iraqi oil94 The Iraqi federal government tried to assure its final authority on matters related to contracts with IOCs when Abdul Madhi al-Ameedi, Director General of the Petroleum Contracts and Licensing Directorate (PCLD) stated, towards the end of November 2011, that unless ExxonMobil reneged the deals it had signed with the KRG - which the Iraqi federal government considered a clear violation of Iraqi law - not only would it excluded from bidding on 88 ” DNO ASA – PSA agreement in Iraqi Kurdistan” DNO website Retrieved 21 November 2011. 89 " Trip report: The future of oil in Kurdistan” Financial Times Retrieved 21 November 2011. 90 ” Operations” WesternZagros Resources website Retrieved 21 November 2011. 91 ” Operations: Kurdistan: Sangaw North” Sterling Energy website Retrieved 21 November 2011. 92 ” Conflicting rising in Iraq over oil contracts and revenues” Oil Price 15 November 2011 93 " Giant Exxon Mobil enters Kurdistan oil market" Kurdish Globe 19 November 2011. 94 " Report: Exxon to be banned from Iraq 4th round" Arabian Oil and Gas 27 November 2011. 33
the upcoming fourth round of auctions for oil development programs in Iraq but, also, its contracts in the south of Iraq could easily be replaced by Royal Dutch Shell. 95 The Director General of the PCLD later stated, in December 2011, that the Iraqi federal government would uphold agreements with ExxonMobil, but he also indicated that the Iraqi federal government was "considering measures" in response to the oil company's latest actions. He declined to specifiy what measures would be taken or to rule out that punitive steps against ExxonMobil could be decided upon at a later date.96
Federal Oil and Gas Council The Federal Oil and Gas Council (FOGC) is a body proposed in the 2007 draft of the Iraqi hydrocarbon law. Under the draft law, the FOGC would be granted the power to review all contracts and set Iraq's oil and gas policy, 97 giving it a critical role in the future development of Iraq's petroleum sector, the prospects of its economy, and effective control over its natural resources.98 In 2011 two new, competing draft laws - one by a parliamentary committee, one by the Iraqi cabinet - were presented to the Iraqi parliament, which each modify the role of the FOGC specified in the original 2007 draft law. The role of the FOGC and the scope of its powers were as of December 2011 still being debated within the Iraqi government.99
Treatment in 2007 draft hydrocarbon law 95 " ExxonMobil Contracts in Southern Iraq Could Be Replaced in Light of Kurdistan Deal, Warns Baghdad" International Business Times 21 November 2011. 96 " Iraq to Uphold Accord With Exxon Mobil ‘For Now,’ Al-Ameedi Says" Bloomberg Businessweek 14 December 2011. 97 " Oil & Gas Contracts in Iraq Who's Who Legal July 2010. 98 " Iraqi Federal Oil and Gas Law Revisited Middle East Economic Survey Retrieved 8 December 2011. 99 " Time to move on: iraq's oil and gas impasse explained. Niqash: briefings from inside and across Iraq 1 December 2011. 34
Responsibilities and powers The 2007 draft law entrusts the FOGC with a wide range of responsibilities and powers. It would determine all national oil and gas sector policies and plans, including those governing exploration, development, and transportation. With the power to review all contracts, the FOGC would become the most powerful body in Iraq’s oil sector, according to a report by the US Congressional Research Service.100 Under the 2007 law, the FOGC would have the ultimate authority to approve and re-write any contract using whichever model it prefers as long as a "2/3 majority of the members in attendance" agree.101
Organisation The FOGC would be a non-elected organ with seats reserved for specific cabinet members, representatives of constitutionally recognised regional governments, hydrocarbon experts, and producing governorates. Working with the FOGC in a nonbinding, advisory capacity would be a "Panel of Independent Experts", in the language of the draft law, open to Iraqi and foreign membership. The possibility that foreign energy experts or industry representatives could be chosen to participate on this panel has raised concern among some Iraqi and foreign observers. Ahmed Mousa Jiyad writes in the energy journal Middle East Economic Survey (MEES) that the "possibility of total dependency on these advisers is real and high and this represents a detrimental and severe regulatory capture." Likewise, Raed Jarrar and Antonia Juhasz of Foreign Policy in Focus point to a potential scenario in which foreign oil company executives could sit on Iraq's key oil and gas decision-making body. The draft law states that the FOGC would "take into consideration a fair representation of the basic components of the Iraqi society," but the US Congressional report points out that the formation of the FOGC could lead to regional or sectarian tensions.
100" Iraq: Oil and Gas Legislation, Revenue Sharing, and U.S. Policy CRS Report for Congress 2 April 2008. 101" Oil Grab in Iraq Foreign Policy in Focus 22 February 2007. 35
Treatment in subsequent draft laws As of December 2011, there were two main players debating the issue of the FOGC in Iraqi politics: the Parliamentary Committee on the Oil and Gas Law (PCOGL) and a committee within the Iraqi cabinet, known as the committee on oil and gas law (COGL). The two committees released competing draft hydrocarbon laws in 2011, which offer different interpretations of the extent of the proposed FOGC's power.102 Each faction claims their proposed law is paramount and the other is invalid and should be withdrawn.103
Treatment in parliament's 2011 draft law In its draft law, presented to parliament on 17 August 2011,104 the parliamentary committee seeks to make the FOGC the most powerful body in oil and gas policy, limiting the power of the federal government, namely the Ministry of Oil, the Council of Ministers (the Cabinet) and the Parliament itself. Regional authorities would have expanded roles in managing Iraq's upstream oil and gas industry. The parliamentary committee's draft law would give the FOGC the power to review and approve all new petroleum contracts in the Federal Region and the Kurdistan Region, as well as the power to make key decisions on the issuance of oil and gas contracts under bid rounds and otherwise, including preparing model contracts. This would give it effective control over which oil companies qualify for work in Iraq. The parliamentary committee is chaired by Adnan al-Janabi, a member of the Iraqiya political bloc, the main opposition to Prime Minister Nouri alMaliki’s ruling State of Law bloc. Given the parliamentary committee draft's broader inclusion of regional authorities in managing Iraq's hydrocarbon sector, this committee is generally supported by Kurdish politicians.
102" Iraqi cabinet seeks to cancel previous federal oil law drafts Platts 29 August 2011. 103" Two Are Not Always Better Than One: Iraq’s Competing Oil And Gas Laws Baker Botts LLP October 2011. 104" Iraq approves new draft oil law IFP Iraq 1 September 2011. 36
Treatment in cabinet's 2011 draft law The Iraqi cabinet proposed a different draft law, prepared by the Ministry of Oil, to the parliament on 28 August 2011. The cabinet-based committee's draft law gives the FOGC powers somewhat more limited in scope, proposing an FOGC chaired by the Prime Minister, with a membership largely representing central government interests. Still, the FOGC outlined in the cabinet draft would have the ability to set energy policy, approve oil and gas contract models, award contracts and develop plans to supervise and coordinate various federal, regional and provincial energy authorities. Regional authorities such as the KRG could hold oil and gas licensing rounds and award contracts, but only in accordance with procedures established by the FOGC. The cabinet draft also grants the FOGC binding authority to rule on whether existing federal and KRG contracts are consistent with the oil law.
Iraq National Oil Company Law The Iraq National Oil Company (INOC) Law is a draft law that, were it to be passed by the Iraqi parliament, would reestablish the Iraq National Oil Company. The INOC was merged into the Iraqi Ministry of Oil in 1987, after it was invalidated by Saddam Hussein's government. A draft of the INOC Law was submitted to parliament in July 2009, but was later on stalled. In July 2011, Thamer al-Ghadhban, a top energy advisor to Iraqi Prime Minister Nouri al-Maliki, stated that the Iraqi parliament expected to pass the law by the end of that year. 105
INOC Law Drafts and political debate The 2009 draft INOC Law proposes a new INOC that would be involved in supervising Iraq's producing oil and gas fields, under-development fields and explorations blocks, explained Thamer al-Ghadhban in July 2011. The INOC would lead national and local oil industry strategy, carry out operations that range from exploration to developing fields, and partner with or even compete against foreign companies to develop Iraqi oil fields. 105"Iraq Hopes For National Oil Co Law By End-2011 - Aide" Iraq Energy Expo website 15 July 2011. 37
Oil and gas marketing, however, could continue to be a responsibility of the Iraqi Ministry of Oil's State Oil Marketing Organization (SOMO). The draft law also enables the INOC to act as a parent company to North Oil Company, Missan Oil Company, Midland Oil Company, and South Oil Company - which is the country's largest petroleum company. Organizationally, the new INOC would be structured as a cabinet-level organization led by a president with ministerial rank; the company board would include officials from the Iraqi Ministry of Oil, Ministry of Finance, Ministry of Planning, and from the Central Bank of Iraq (CBI). Early in July 2011, Minister of Oil Abdul Kareem Luaibi expressed his opinion to the Parliamentary Oil and Energy Committee that the establishment of a new INOC was not essential and could confuse the work of the Iraqi Ministry of Oil.106 Later on in the same month, a parliamentary hearing to start debating the INOC Law was attended by Luaibi, former Ministers of Oil Ibrahim Bahr al-Uloom and al-Ghadhban, the head and members of the Parliament's Oil and Energy Committee and several Iraq oil experts. In August 2011, the Iraqi Parliament's Oil and Energy Committee released its draft versions of the Iraq Oil and Gas Law and the INOC Law. This draft would turn the Iraqi Ministry of Oil into more of a policy-making body, no longer operationally responsible for the oil sector. Parliament would resume in September 2011 and continue to legislate the draft laws.107 Reuters reported in late September 2011 that, compared to the 2007 draft laws on oil and gas and the INOC (approved by the political blocs, including the Iraqi Kurds), the most recent amendments at the time to the laws gave more power to Baghdad over all of Iraq's natural resources, even those in Iraqi Kurdistan. However, in these most recent drafts, oil and gas marketing and sales would be a responsibility of SOMO after the reestablisment of the INOC.108
106" Iraq oil minister says no need for national oil co Fox Business 3 July 2011. 107" Parliament releases official draft oil and INOC laws" Iraq Oil Report website 24 August 2011. 108" Comparison of Iraq oil law drafts, new and old" Reuters. 23 September 2011. 38
Revenue Sharing Procedures The 2007 draft hydrocarbon law states that Iraq’s hydrocarbon wealth belongs to all of its citizens, 109 but does not contain specific guidelines for how oil and gas revenues should be distributed.110 Concerns over the equitable distribution of Iraq's oil revenues are one of the central issues in the ongoing dispute between the Kurdistan Regional Government (KRG) and the federal government in Baghdad. Other regions, such as Anbar in Iraq's northwest and the oil-rich Basra region in the south, have also demanded more control over their natural resources.111 A primary focus of the revenue sharing debate in Iraq is the issue of whether or not governorates should retain the right to make decisions over revenues from oil and gas produced in their territory; also at play is whether the revenue distribution formula should be automatic and fixed or whether the federal government in Baghdad should retain discretion over the allocation of funding to governorates. The mechanisms through which Iraq's oil revenues are collected and distributed remain contested. An equitable, mutually agreed revenue distribution formula is of intrinsic political and economic importance to Iraq's future prosperity, according to a report by the US Institute of Peace. 112
Revenue sharing arrangements in 2007 draft law The KRG and the federal government in Baghdad agreed on a draft revenue sharing law for Iraq in June 2007. 113 According to the draft law, the federal government is empowered to collect all of Iraq's oil and gas revenue, with a priority to allocate the funds to support national priorities such as defense 109" Parliament studying draft law on petro dollars; Integral to oil and gas law” The Currency Newshound 30 June 2011. 110 " Iraq: Oil and Gas Sector, Revenue Sharing, and U.S. Policy” US Congressional Research Service 3 March 2010. 111 " Anbar Province, Once a Hotbed of Iraqi Insurgency, Demands a Say on Resources” New York Times 27 October 2010. 112 " IRAQ’S OIL POLITICS: Where Agreement Might Be Found” US Institute of Peace 2010. 113 " Oil & gas legislation and major developments” KRG website 21 June 2009. 39
and foreign affairs. The remainder would then be distributed to governorates automatically, on a monthly basis, based on agreed population-density-based percentages until a census can be completed. Of this remainder, the KRG would receive a 17% share.
Treatment in the 2012 draft budget The Iraqi government presented its draft for the annual 2012 budget law in December 2011; the total budget is 117 trillion Iraqi dinars (ID), or approximately US $100 billion.114 The 2012 draft budget is based on an oil price of $85 a barrel and oil exports of 2.625 million barrels per day (bpd). It represents a 21% increase over Iraq's 2011 budget of $82.6 billion, which was based on an average oil price of $76.50 per barrel.115 Revenue sharing with KRG The 2012 draft budget is favorable to the interests of the KRG, Iraq's only federal region, according to Reidar Visser of the Iraq and Gulf Analysis blog. The budget projects Kurdistan's oil exports to amount to 175,000 barrels per day (bpd) in 2012, about 6.7% of the anticipated total Iraqi daily exports of 2.6 million barrels. By way of contrast, the budget allocates 17% of the expenditure budget - about 16 trillion ID - for the KRG. Revenue sharing with other governorates Under the 2012 draft budget, oil-producing governorates receive one US dollar per exported barrel. This is expected to make up about 1.7 trillion ID in total, or less than a tenth of what the KRG alone receives.
Middle East Comparisons Valerie Marcel, principal researcher on energy at Chatham House, explains that national oil companies (NOC) have proven in past years that they can compete with international oil companies (IOC). Nowadays, five NOCs produce one quarter of the world's oil and hold one half of the world's oil and gas reserves: the Saudi NOC, Saudi Aramco; the Kuwait Petroleum Company (KPC); the National Iranian Oil Company (NIOC); the Algerian 114 " The Economics of Federalism in the Iraqi 2012 Draft Budget” Iraq and Gulf Analysis 9 December 2011. 115 " Iraq cabinet okays 2012 budget at $100 billion” Reuters 5 December 2011. 40
NOC, Société Nationale pour la Recherche, la Production, le Transport, la Transformation, et la Commercialisation des Hydrocarbures s.p.a.(Sonatrach); and the Emirati NOC, Abu Dhabi National Oil Company (ADNOC).116 Chatham House and the Centre for Energy, Petroleum and Mineral Law Policy (CEPMLP) believe that because the petroleum sector is vital to "generating wealth and creating a sustainable economy and positive long-term human development" in developing countries with substantial oil and gas resources, in countries where NOCs exist, government should attempt to adhered to principles of good governance. Since no international standard or measure of good governance for this sector exists, Chatham House and the CEPMLP wrote a report in order to offer guidelines.117
General Considerations on National Oil Companies Valerie Marcel indicates in an article for FIRST Magazine about NOCs, that Saudi Aramco has boosted the country's oil output without the help of foreign partners. Similarly, she indicates that Iranian National Petrochemical was a strong bidder in the competition to acquire a Shell-BASF petrochemical venture. A number of NOCs cooperate with IOCs on their national soil. Examples are the United Arab Emirates' Abu Dhabi National Oil (ADNOC), the National Oil Corporation of Libya, and Qatar National Gas Company. The size of these countries' reserves means they do not have to - necessarily - develop internationally, as most IOCs have to do. Financially, also, NOCs differ from IOCs: their finances are not independent of the government. Additionally, they promote social welfare. Last, but not least, they have a monopoly or near-monopoly over the countries' natural resources. However, many state companies experiment with degrees of private ownership and offer shares to the public while government control is maintained. Such is the case of Norway's Statoil, the Russian Federation's Gazprom, and Brazil's Petrobras, where new models create entities that have the characteristics of both a NOC and an IOC. 116 " The increasing role of NOCs" Valerie Marcel in FIRST Magazine Retrieved 25 December 2011. 117 " Report on Good Governance of the National Petroleum Sector" Chatham House website April 2007. 41
However, NOC are always instruments of the state, and as such, do not always operate on the basis of commercial rationale. The relationship between NOCs, their society and their government can be complex. Although NOC managers tend to be political, there are exceptions, as is the case of Iran. Events in the industry can carry political significance for the societies of the states in question and that can lead to institutional struggles between operational and governmental goals. Views on whether NOCs should be privatize differ strongly whether they come from outside or inside the country. However, competence and efficiency do not depend on privatization. Management can even improve consultative and consensus-building processes that strengthen the companies, such as the case of ADNOC, or carefully return the burden of national mission expenditures to the state in order to better their own strategic objectives, such as the cases of NIOC and Saudi Aramco. The most crucial matter is to remind state and society that the NOC cannot solve the country's economic problems on its own. Diversification of the economy and reduction of dependency on the oil and gas industry are vital. But, in order to become an oil titan, the liberty to operate commercially, al beit within the boundaries indicated by state oil policy, must be ensured.
2007 Report on Good Governance of the National Petroleum Sector In March 2007, Chatham House and the Centre for Energy, Petroleum and Mineral Law Policy (CEPMLP) reported on the conclusions of efforts at dialogue between government, national and international oil companies (NOC and IOC), NGOs and financial institutions from 23 developing and developed oil and gas producing countries, supplemented by additional research on international governance practices, in their Good Governance of the National Petroleum Sector: The Chatham House Document. As an introductory statement, the report states that the petroleum sector is vital to "generating wealth and creating a sustainable economy and positive long-term human development" in developing countries with substantial oil and gas resources. The report proposes to help to policy advisers, officials, industry executives and civil society advocates to identify possible improvements in their petroleum sector governance, but not as a management textbook. Concerned with the relationship between NOCs and their govern42
ments in those countries where a NOC exists, the report could be useful to governments that must wholly design a governance system for the petroleum sector. Because there is no international standard or measure of good governance for this sector, the project provided an informal forum where knowledge could be shared and guidelines could be established by means of discussion between experts and representatives from national and international civil society and institutions. Part one of the report focuses on what are the requirements of good governance of the national petroleum sector, while part two of the report focuses on practices of petroleum sector policy-making and implementation of policy in particular national contexts.
Principles of Good Governance Part one explains that principles of good governance are high-level and are used to develop criteria, measures and expectations to form good guidelines by which to achieve satisfactory governance. • Clarity of goals, roles and responsibilities between agencies is crucial and helps avoid confusion between the responsibilities of NOC and the ministry of petroleum. What IOCs choose to do in a country beyond their contractual and legal obligations should fall in the arena of corporate social responsibility, not governance. • Sustainable development for the benefit of future generations helps neutralize the effects of unexpectedly high oil prices so as to ensure long-term prosperity. Education, training, experience and business opportunities can increase human capital, promote local private sector and help diversify the countries economy. • Enablement to carry out the assigned role is strengthened by delegating decision-making authority and reinforcing capacities. Higher levels of transparency and inter-agency communications are also required to achieve this. Optimally, NOCs could become corporatized NOCs' with their own balance sheet and right to reatin revenue for reinvestment, so as to avoid policy volatility. Accountability of decision-making and performance prevent corruption and malpractice, since society entrusts the national government with the natural resources that NOCs develop. Mechanisms for ensuring accountability are regulations, performance contracts, disciplinary processes, industry audits and channels of communication with society and the law. 43
• Transparency and accuracy of information are vital to enable good decisions, rapidly intervene to correct problems, and build trust. Both internal (among institutions directly involved in petroleum governance) and external (among the sector and the public) transparency are needed. The disclosure of information leads to a sense of public ownership, which increases social stability and security, and to earn international credit and credibility.
National Oil Company Practices in the Middle East and Beyond Part two states that relations between governments and NOCs relations can be established with either high (e.g., Saudi Arabia) or low (e.g., Kuwait) degrees of delegation and government approval. Similarly, that the NOC can dominate their ministries in terms of knowledge and capacity (e.g., Venezuela in the 1990s, Suriname) or that NOCs can be partially privatized (e.g., Brazil, Norway). Parliaments and/or congresses can also have an active role in shaping the objectives and regulations of their NOCs. This is the case in countries such as Iran, Kuwait, the United States, the United Kingdom, the Russian Federation and Venezuela. In some countries, oil workers' unions also play a role in the petroleum sector's policy-making (e.g., Mexico, Venezuela, Colombia). The interests of citizens of oil-producing regions of the country can also have political impact on the setting of objectives (e.g., Canada, Norway, the United Kingdom, Iraq). Parliamentary involvement sometimes leads to lengthy approval processes for settings objectives and targets of the petroleum sector, such as the examples of Kuwait and the Russian Federation show. In centralized political systems, fewer institutions are involved in decisionmaking, but there can also be corporate organizations with advisory boards which include non-government industry experts, and even foreign nationals, such as the case of Saudi Arabia. In may cases, government agencies (ministries of petroleum or independent regulatory agencies) monitor the activities of foreign investors and their relations with the NOC. In some countries, independent state agencies are set up to regulate both NOCs and IOCs, and to award licenses where state and foreign companies are in competition (e.g., Algeria, Mexico, Norway). Some countries do the same even where there is no NOC (e.g., the United States, Canada, the United Kingdom). In occasion, political expedience leads to direct governmental intervention in NOC management, organiza44
tion, and review of its contracts and plans (e.g., Venezuela, Bolivia). Social welfare is less of a goal for most NOCs today than it was in other years. However, indirect involvement may occur by means of funding of state programmes. Saudi Arabia built hospital when they were need in the late 1990s through Saudi Aramco; in Venezuela, PDVSA must now spend at least 105 of its annual investment budget on social programmes. In some countries, fuel subsidies are carried in government budgets, the NOC compensated for the difference between domestic and international prices. In other countries, the NOC must bear the costs of the subsidies within their own budgets, which can limit their investments in upgrading refineries and developing upstream assets, besides establishing counterproductive patterns of domestic energy consumption and negative effects for the environment. Such is the case of Iran, where highly subsidized prices reduces the countries ability to export oil. Even if poorer households are helped by such measures, the share will always be bigger for wealthier, larger consumers. National legal frameworks, tax systems and contractual obligations may give objectives to IOCs similar to those given to NOCs. In Iran, buyback agreements with foreign partners require 51% of expenditure to be placed with Iranian contractors, manufacturers and consulting firms. In the United Arab Emirates, joint venture partners are required to obtain 51% of their goods and services from local companies. In Venezuela, joint ventures will soon required that IOCs spend 3.3% of their local investment budget on social programmes. Countries that rely on national oil and gas companies for all or most of their petroleum development employ various forms of organization, for example: government agencies (e.g., Iran, Mexico), government corporations, (e.g., Algeria, Kuwait, Saudi Arabia, Venezuela), companies in private sector with 100% government shareholding (e.g., United Arab Emirates) or with controlling government interest (e.g., Brazil, Norway). Tax and finance structures can also be very different. Countries like Algeria, United Arab Emirates, Saudi Arabia, the Russian Federation and Noway have a royalty, tax and dividend structure (where NOCs pay these to the state, like a IOC). Iran and Mexico used to have a complex system in which operating and capital expenditure were presented in detail for government approval, for example, to the congress or parliament. In some countries, the 45
NOC pays a specified percentage of gross petroleum revenues direct to a state investment or development authority so that these revenues are not available for normal budgetary purposes (e.g., Kuwait, United Arab Emirates, Malaysia). Various types of arrangements that mix private and public sector companies also exist. There is the case of 100% state-owned NOCs that work with private companies (mostly IOCs), and which can partner in mixed enterprises (e.g., Venezuela, Malaysia) or in joint ventures (United Arab Emirates, Algeria, Nigeria). Private companies can work as contractors (e.g, Iran, Venezuela in its old system) or in production sharing contracts (PSC) (e.g., Azerbaijan, Angola). There is also the case of countries with a partially privatized NOC, which work with local and foreign private companies (e.g., Norway, the Russian Federation, Brazil). Transparency processes in licensing and contracting can increase competition, raises standards of work programmes and generate more investment. Countries like Brazil, Venezuela, Libya, Algeria and Nigeria have introduced more transparency as of late. Local content policies, which introduce legislations or regulations to secure more employment and build national capacity in the oil and gas sector, are policies adopted by countries like Nigeria, Angola, Iran, Venezuela, the Russian Federation and others.
Iraq's First Licensing Round (2009) Oil Minister Hussein Shahristani launched Iraq's first licensing round in 2008. Bids on more barrels of oil in a single bid round than at any other time or place in history were made open to international oil companies, 118 who had not had any significant activity in oil operations in Iraq since nationalisation in 1974. Some 22 companies took part in the licensing round.119 In the end, only one field, Rumaila, was awarded in the auction process itself, though two other fields, Maysan and West Qurna Phase 1, were subsequently awarded in bilateral negotiations.120 118 " First Oil Bid Round: The Greatest Show On Earth", Wikileaks, 22 June 2009. 119 " The Results", Iraq Oil Forum, 5 February 2009. 120" Oil Companies Making Moves In Iraq", Investopedia, 18 January 2010. 46
Background After the war of April 2003, oil production was quickly restored to about two million barrels per day (bpd). But then the security situation deteriorated and there was no significant expansion of production. There was much discussion around the role to be played by international companies in the Iraqi oil sector after 2003, the presence of which would call for a significant restructuring of policies.121
Process By early 2008, companies were invited to pre-qualify for an auction process. Many experts in resource transparency regard auctions as the best way to manage both the danger of corruption and asymmetry of information between governments and companies at the production award stage.
Pre-qualification On February 18, 2008, the government announced some 35 international companies, including most of the so-called "majors" had passed the prequalification stage out of a total of 140 companies who applied. They were evaluated on five criteria: technical, financial, legal, training, and HSE (Health, Safety and Environment).122
Other preparatory measures Between February 2008 and April 2009, the ministry of oil undertook a number of other preparatory measures common for auctions, such as publishing packages of geological and other data for companies to review, running a roadshow to present the auction opportunities in London and a workshop to explain the auction process123. The government also published model contracts for oil 124 and gas125 and invited company comments, which were 121" IRAQ’S OIL SECTOR: ISSUES AND OPPORTUNITIES", THE JAMES A. BAKER III INSTITUTE FOR PUBLIC POLICY, December 2006. 122" Iraq's First Licensing Round - perqualification", Iraq Oil Forum, October 2008 123" Iraq's First Petroleum Licensing Round", Petroleum Contracts and Licensing Division, retrieved 2 August 2010 124" The Model Producing Oil Field Technical Service Contract (PFTSC): An Overview" Middle East Economic Digest, 6 July 2009 125" Key legal issues in the third licensing round in Iraq's gas fields", Lexology, 47
then absorbed into a revision process in May 2009126.
Evaluation Criteria The government announced there would be two main criteria on which all bids would be judged. First, the production plateau offered by a consortium for any given field, where the higher the production they were guaranteeing the better. The government itself set a minimum production level it was prepared to accept for each field based on its reserves and historic production, which varied between 2.75 million bpd for Rumaila and 450,000 bpd in Maysan. The second set of criteria was the remuneration fee the consortium would accept per barrel it produced once it reached the plateau - the lower the fee, the higher the companies would score. It was in this element that there were wide discrepancies between maximum remuneration fees set by the government, and offers made by the companies themselves. In the case of Rumaila, BP were the lowest bid with an offer of $3.99 a barrel, but that was still double the maximum the government specified of $2 per barrel.127 In other fields the gaps were even wider. In Maysan, for example, the consortium led by CNOOC accepted a fee of $2.30 in bilateral negotiations, having originally proposed a fee of $21.40.128
Cost Recovery & Local Content The contracts specify that the Iraqi state partners would cover the costs of development but the terms and means of evaluating this cost recovery have not been published. Provisions for local content in these contracts have not been made public, despite the fact that such clauses are usualyl considered important, and have been addressed in the draft of the Hydrocarbons Law which has been sitting retrieved August 2, 2010 126" Iraq Contract Revisions Clear Obstacles To Oil Expansion" MEES, 4 May 2009. 127" Iraq’s First Petroleum Licensing Round Rumaila Contract Area – Bidding Results" Petroleum Contracts and Licensing Directorate, 30 June 2009. 128" Iraq to Develop Maysan Oil Fields with Chinese Firms" Investors in Iraq, 3 October 2010. 48
in Iraq's parliament since 2007129.
Results The only award made out of the auction round was to BP for the Rumaila field, although bilateral negotiations continued until a deal was announced in November 2009, and actually signed in January 2010. The other oil fields offered were Kirkuk, Zubair, Maysan, West Qurna Phase 1 and Bai Hassan. The gas fields of Akkas and Mansuriya, which were part of the first licensing round, were due to be offered again in the third round, due in September 2010. The fact that only one award was announced in July 2009 out of so many bids and contract areas led some analysts to classify the process as failure 130. In a leaked US diplomatic cable it was reported that the June 30 results were not a complete victory and that Iraqi leaders said they would accelerate the second bid round and look at ways to make it "more effective" than the first round.131
Iraq's Second Licensing Round (2009) The second round of auctions offered by the Ministry of Oil took place 1112 December 2009.132 The terms and process of the second round were similar to the first, 133 which saw the re-entry into Iraq of for the first time since nationalisation of the industry in the 1970s.134
129" Draft Oil and Gas Law", Revenue Watch, February 2007. 130" Iraq Oil Bidding in Shambles, Wall Street Journal, 1 July 2009 131" Iraq,s First Oil Bid Round: Too Hard A Bargain?, Wikileaks, 1 July 1 2009 132" 2nd Round of Bidding On Iraq’s Oil Fields Ends As A Success", Musings on Iraq 14 December 2009. 133" Take Two: Iraq's All-Important Licensing Round", OffshoreTechnology.com 7 December 2009. 134" Shell wins Iraq oil ‘gold rush’ auction", Financial Times 11 December 2009. 49
Oil Fields Ten major oilfields were up for bid in the second round, which produced deals for seven of those fields. The fields receiving successful bids were Halfaya, Majnoon, Qayara, Badra, Garraf, Najmah and West Qurna 2. The three fields receiving no bids were East Baghdad, the Eastern Fields and Middle Furat.
Background The lead time to complete the auction process was faster for the second round than the first because the preliminary work had been done. It was less than four months from August 25, when oil minister Hussein Shahristani opened a roadshow in Istanbul to market the round the international oil industry, from when bids were submitted on December 12, 2009.135
Process In all, a total of 40 companies prequalified for the bidding round 136 after submitting data proving they met the Iraqi oil ministry's criteria for technical, financial, legal, training, and HSE (Health, Safety and Environment) competence.137 The second round followed the same procedures as the first round with few deviations.
Results There were 17 bidding consortia, and the seven winning consortia gained access to fields with proven reserves of 32 billion barrels of oil, or over a quarter of Iraq's proven reserves. The production projections from the companies winning bids in the second round have the potential to add about 4.765 million barrels of oil to its daily production total.
135" Iraq's Second Petroleum Licensing Round", Oil ministry website, retrieved 2 August 2010 136" Iraq’s Second Oil Bidding Round Bolstered by Exxon, Eni Deals", Bloomberg 10 December 2009. 137" Announcement", Petroleum Contracts and Licensing Directorate Retrieved 8 December 2011. 50
China’s CNPC (operator with 50% share), Malaysia’s Petronas (25%), and France’s Total (25%) submitted the winning bid for the Halfaya field under terms that pay $1.40 for each extra barrel produced on top of a baseline level of production defined in the contract. The consortium agreed to boost production to 535,000 barrels per day (bpd).138 Anglo-Dutch Shell (operator with 60% share) and Petronas (40%) submitted the winning bid for the Majnoon field under terms that pay $1.39 for each extra barrel produced. The consortium agreed to boost production to 1.8 million bpd.139 Angola's Sonangol (operator with 100% share) submitted the winning bid for the Qayara field under terms that pay $5 for each extra barrel produced. Sonangol agreed to boost production to 120,000 bpd. Sonangol (operator with 100% share) also won a contract for the Najmah field under terms that pay $6 for each extra barrel produced. Songangol agreed to boost production from Najma to 110,000 bpd.140 Russia’s Gazprom (operator with 40% share), South Korea’s Kogas (30%), Petronas (20%), and Turkey’s TPAO (10%) submitted the winning bid for the Badra field under terms that pay $5.50 for each extra barrel produced. The consortium agreed to boost production to 170,000 bpd.141 Petronas (operator with 60% share) and Japan’s Japex (40%) submitted the winning bid for the Garraf field under terms that pay $1.49 for each extra barrel produced. The consortium agreed to boost production to 230,000 bpd.142 Russia’s Lukoil (operator with 85% share) and Norway’s Statoil (15%) submitted the winning bid for the West Qurna 2 field under terms that pay $1.15 for each extra barrel produced. The consortium agreed to boost pro138" Halfaya Contract Area – Bidding Results", Petroleum and Contracts Licensing Directorate 11 December 2009. 139" Majnoon Contract Area – Bidding Results", Petroleum and Contracts Licensing Directorate 11 December 2009. 140" Future Global Need For The Increase In Iraq’s Oil Production", Musings on Iraq 13 December 2009. 141" Badra Contract Area – Bidding Results", Petroleum and Contracts Licensing Directorate 11 December 2009. 142" Gharraf Contract Area – Bidding Results", Petroleum and Contracts Licensing Directorate 11 December 2009. 51
duction to 1.8 million bpd.143 Field
Company Home country Company Share in Service fee type field /barrel ($)
Production rise (bpd)
Halfaya
CNPC
China
State
50%
1.40
535,000
Petronas
Malaysia
State
25%
1.40
535,000
Total
France
Public
25%
1.40
535,000
UK/ Neth.
Public
60%
1.39
1.8 million
Malaysia
State
40%
1.39
1.8 million
Majnoon Shell Petronas Qayara
Sonangol Angola
State
100%
5
120,000
Najmah
Sonangol Angola
State
100%
6
110,000
Badra
Gazprom Russia
State
40%
5.50
170,000
Kogas
South Korea
State
30%
5.50
170,000
Petronas
Malaysia
State
20%
5.50
170,000
TPAO
Turkey
State
20%
5.5
170,000
Petronas
Malaysia
State
60%
1.49
230,000
Japex
Japan
Public
40%
1.49
230,000
Russia
Public
85%
1.15
1.8 million
Norway
State
15%
1.15
1.8 million
Garraf
West Lukoil Qurna 2 Statoil
143" West Qurna Phase 2 Contract Area – Bidding Results", Petroleum and Contracts Licensing Directorate 12 December 2009. 52
Iraq's Third Licensing Round (2010) After launching its first and second licensing rounds in 2009, Iraq held its third bid round on 20 October 2010144 for three gas fields: Akkas, containing an estimated 158 billion cubic meters (bcm) of natural gas, Mansuriya, containing approximately 130 bcm, and Siba, containing about 31 bcm.145
Background The Akkas and Mansuriya fields had been included in the first round of licensing, but Mansuriya received no bids and Akkas received only one bid that failed. Siba had originally been included in the second bid round, but was removed from the list before bidding began. Subsequently, the government had indicated that all three fields would be developed by national efforts, but then decided to offer the fields for auction in the third round after all. Shell, Total and the Korean Gas Corporation (KOGAS) were favored among 15 companies invited to bid for the three fields because of their experience in the industry, but only KOGAS and Total were among the 13 companies that finally registered for the auction round.
Process Differences from previous rounds The contracts awarded in the third licensing round eliminated signature bonuses, a significant departure from the first two rounds that sweetened the deal for bidders but erased what usually serves as income for the country. Additionally, the annual commitment to the Training, Technology and Scholarship Fund - by which contractors facilitate on-the-job training in petroleum operations for Iraqi nationals and promote research in oil and gas technology146 - was reduced from $5 million to $1 million. 144" Gas Fields Bid Round In Iraq: Success With Risk", Middle East Economic Survey 27 December 2010. 145" Iraq inks final deal SKorea's KOGAS", Yahoo!News 13 October 2011. 146" Model Service Development and Production Contract", North Oil Company of the Republic of Iraq 23 April 2009. 53
The conversion factor for natural gas volume deliveries into barrels of oil equivalent (boe) was also reduced from about 225 cubic meters to about 170, allowing companies to register larger volumes of gas produced.
Results South Korea's Kogas won the rights to develop the Akkas field alongside Kazakhstan's KazMunaiGas, but KazMunaiGas pulled out of the deal in May 2011, forcing Kogas to double its share in the project. Kogas signed the deal with the Ministry of Oil, which will pay Kogas a remuneration of $5.50 per barrel of oil equivalent (boe) extracted, in October 2011. The production plateau target in Kogas' winning bid was 11.3 million cubic meters (mcm) per day over 13 years. Turkey's TPAO, Kuwait Energy Company (KEC) and Kogas finalised deals in June 2011 to jointly develop the Mansuriya field in eastern Iraq, which pays $7 per boe extracted147 and has a plateau production target of 9.06 mcm. Kuwait Energy (60% operating stake) and TPAO (40%) won the bid to jointly develop the Siba field in the south and signed a deal that will pay them $7.50 per boe extracted148 and has a plateau production target of 2.1 mcm. The gas produced will be used domestically mainly for power plants and the petrochemical industry, according to Iraqi officials, and the surplus will be exported. All three deals will run for 20 years. The development of the three fields will require significant foreign investment. TPAO and its partners expect to invest approximately $2.5 billion in the Mansuriya field and $1 billion in Siba, while Kogas' expected investment in the Akkas field has not yet been made public. The regional and geographical proximity of the above firms, specifically TPAO and Kuwait Energy, played a role in their winning of the contracts, according to the Cyprus-based energy newsletter Middle East Economic Survey (MEES). With its stake in the Siba and Mansuriya fields, TPAO 147" Mansuriyah Contract Area - Bidding Results", Petroleum Contracts and Licensing Directorate 20 October 2011. 148" Siba Contract Area - Bidding Results", Petroleum Contracts and Licensing Directorate 20 October 2011. 54
strengthened its foothold in the Iraqi upstream sector since it already has minority stakes in Badra (with Russia’s Gazprom as the operator) and in the Misan group of oilfields with China’s CNOOC. Kuwait Energy's involvement in Iraq, meanwhile, could help revive the export of Iraqi gas to Kuwait. According to MEES, there has been talk of reactivating a pipeline from Rumaila to Kuwait that was operational in the mid 1980s. Kogas also consolidated its position in Iraq's petroleum sector, as it already possesses minority stakes in the Zubair and Badra oil fields. Field
Company Home country
Company Share in Service fee type field /barrel ($)
Production rise (m cub ft /day)
Akkas
Kogas
South Korea
State
100%
5.50
400
Turkey
State
50%
7
320
KEC
Kuwait
Public
50%
7
320
Majnoon
Kogas
South Korea
State
20%
7
320
Siba
KEC
Kuwait
Public
60%
7.50
100
Siba
TPAO
Turkey
State
40%
7.50
100
Mansuriya TPAO
Absence of IOCs Unlike the first two rounds, the third round was dominated by regional companies, with major international oil companies (IOCs) absent. Of the IOCs favoured by the oil ministry, only Total submitted bids. They may have been repelled by tough payment terms and an uncertain security situation in Iraq, according to MEES. Another possible reason for the absence of some IOCs could be their relative lack of exposure in Iraq and their reluctance to overstretch their involvement under current circumstances.
55
Iraq's Fourth Licensing Round (2012) Iraq's fourth licensing round is to take place on 7-8 March 2012 149 and include areas that have not yet been explored 150 as well as newly discovered fields that have not been exploited.151 Oil discovered in the new round will help Iraq maintain and increase its reserves to offset expected depletion and could strengthen its case in convincing OPEC to set an export quota for Baghdad, according to Reuters news agency.152 On top of the previous three licensing rounds, the fourth licensing round is planned to help boost Iraq's production capacity from 2.5 million barrels per day (bpd) in 2011 to 12 million bpd by 2017.153
Oil and Gas Fields In April 2011, the oil ministry announced that 12 sites would be included in the round, in the provinces of Nineveh, Diyala, Wasit, Basra, Muthanna, Qadisiya and Babil,154 as well Najaf, Karbala, Samawa, Diwaniya and Anbar, which were not included in the previous rounds. 155 Eight of the 12 blocks are situated in the west of the country along the Iraq-Syria and Iraq-Saudi borders.156
149" Iraq delays 4th energy auction to March next year", Reuters Africa 10 October 2011. 150" Iraq 4th bidding round offers new opportunities for IOCs", Evaluate Energy 12 May 2011. 151" Iraq sets date for oil and gas licensing round", Al-Shorfa 3 December 2011. 152" Iraq reworks fees to bolster 4th energy auction", Reuters 13 September 2011. 153" Iraqi Oil Ministry Prepares 4th Licensing Round", Iraq-Business News 21 March 2011. 154" Iraq Offers 12 New Oil Blocks in 4th Round", Iraq-Business News 25 April 2011. 155" Iraqi Oil Ministry Prepares 4th Licensing Round", Iraq-Business News 21 March 2011. 156" Launch of the 4th Licensing Round in Iraq 2011", Deloitte Petroleum Services 21 March 2011. 56
Seven of the twelve blocks are gas prone, while the rest have oil potential, 157 containing a combined 29 billion cubic meters (bcm) of gas and 10 billion barrels of crude oil.
Background The fourth round of licensing is the first to offer exploration contracts compared to the technical contracts offered in the past three rounds. Iraq seeks to use the fourth licensing round to explore more oil fields and develop the country's infrastructure, according to the Ministry of Oil, and to intensify drilling operations and the formation of exploratory committees. The licensing auction had originally been scheduled for November 2011, was deferred to January 2012 and was then delayed again to 7-8 March 2012. An Iraqi parliamentary committee had previously requested that the oil ministry delay the bid round and not sign any more contracts until a new hydrocarbon law had been approved. Oil Minister Abdul Kareem al-Luaibi rejected this request during a meeting on 12 May 2011 158 and the eventual delays to the auction were technical, according to the oil ministry's Petroleum Contracts and Licensing Directorate (PCLD). According to Abdul-Mahdy al-Ameedi, head of the PCLD, Iraq will not necessarily begin development or production from any oil fields discovered, using them instead to maintain and boost reserves. Companies discovering gas, however, will be allowed to produce it. Iraq plans to use the produced gas as a fuel for power generation, petrochemicals and other industries, according to Ameedi.159 The government is seeking $1.5 billion in natural gas investments in the fourth licensing round, according to Natik al-Bayati, a senior petroleum expert on Prime Minister Nouri al-Maliki's advisory commission. Gas from the concessions to be offered for bids could be brought to market by 2015.160
157" The Forthcoming Exploration Blocks Bid Round In Iraq: Issues For Consideration", Middle East Economic Survey 6 June 2011. 158" Iraq MPs to Ask Parliament to Delay New Energy Round, Saad Says", Bloomberg 17 May 2011. 159" Iraq reworks fees to bolster 4th energy auction", Reuters 13 September 2011. 160" Iraq Seeks $1.5 Billion in Gas Investment, Adviser Says", Bloomberg 19 October 2011. 57
Process International oil companies (IOCs) that qualified for the previous three rounds of licensing automatically qualified for the fourth, whether or not a contract was signed in previous rounds. As of December 2011, 161 46 companies had pre-qualified for the fourth round of licensing. 162 Of these, the US oil firms Hess163 and ExxonMobil have been excluded from participating in the fourth licensing round because of their contracts with the Kurdistan Regional Government (KRG).164 The Iraqi government considers all oil contracts signed with the KRG illegal.165
Differences from previous rounds The contract models of the fourth auction round will feature several changes from the first three. The remuneration fee, or the amount the government pays to the companies for each barrel of oil produced,166 will be calculated differently in the new contracts. Under the new remuneration formula, companies (the contractors) will not be paid for oil they pay subcontractors to produce. The Iraqi government will deduct the cost of subcontracts from the total production and then pay remuneration on the remaining production. In other words, if total production is 1 million barrels and the contractor has spent the value of 300,000 barrels on a subcontractor, the contractor will receive payment only for the remaining production, or 700,000 barrels, according to Ameedi. This new formula is aimed at cutting the cost of subcontracts and effectively ties companies' compensation to their cost-efficiency.167
161" Iraq sets date for oil and gas licensing round", Al-Shorfa 3 December 2011. 162" Iraq OKs six more companies for 4th energy bid", Reuters 7 September 2011. 163" REFILE-Iraq bars Hess from auction over Kurdish deals", Reuters 5 September 2011. 164" Iraq to exclude Exxon Mobil from 4th oil licensing round", AKnews 26 November 2011. 165" Exxon Mobile Threatens Its Oil Interests In Southern Iraq With Kurdish Deal", AKnews 24 November 2011. 166" China initials Halfaya contract", T.D Asset and Trust 7 January 2010. 167" Ministry unveils tough terms for 4th bid round", Iraq Oil Report 14 September 2011. 58
Another change from previous rounds is the criteria on which bids are judged. Previous rounds took into account not only the remuneration fee each bidder would charge, but also the amount of oil they agreed to produce. In the fourth round, with many of the bidding areas yet to be explored and with actual production therefore less certain, the remuneration fee will be the only criterion. Under the new deals, contractors will also face restrictions on their ability to pump oil and gas in order to avoid over-supplying the market and overwhelming Iraq's underdeveloped infrastructure.
59
Historical Overview Iraq National Oil Company Iraq's state-owned oil company the Iraqi National Oil Company (INOC) which was founded in 1964 and took over all aspects of the industry after nationalisation of the Iraq Petroleum Company until it was dissolved by the government of Saddam Hussein in 1987 into its subsidiary operating companies.168 From 2007 onwards, various pieces of legislation were put before the Iraqi parliament to recreate INOC.169
Creation & Coexistence with IPC The company was created in 1964 to build Iraqi national expertise in the industry, which was still dominated by Western major companies, including the leading consortium in Iraq at the time, the Iraq Petroleum Company (IPC). INOC was granted exclusive rights under Iraqi law to develop oil concessions in the 99.5% of territory that had been expropriated from the IPC by Law 80 in 1961. The INOC chairman of the board was given cabinet rank, to allow the company the political authority to develop. In 1967 the Iraq-Soviet protocol brought Soviet expertise in to develop the Rumaila field. It was one of a number of agreements with experts from countries outside the companies in the IPC, as INOC sought to develop its own ability to produce oil.170
168" IRAQ’S OIL SECTOR:ISSUES AND OPPORTUNITIES", James Baker Institute for Public Policy, December 2006 169" Creation of Iraq national oil company not essential", Saudi Gazette, undated 170" Iraqi oil post-World War II Through the 1970s", US Library of Congress, undated 60
Sole control The nationalisation of the industry in stages between 1972 and 1975 left the INOC as sole operator in Iraq. The company managed to increase production from 1.4 million barrels per day (bpd) in 1974 to 3 million bpd 1980, although production was then hit by the outbreak of war with Iran171. But just as it gained sole control over the industry, the Iraqi government imposed more political control. A law in 1976 made the oil minister, a political appointee, chairman of the board of the company while another law in 1979 removed all financial independence from INOC, stipulating that all revenues from oil had to pass to the Treasury and that the company would be allocated an annual operating budget by the government172. Upon nationalisation of the IPC, INOC had also taken over the IPC subsidiaries the Mosul Petroleum Company and the Basrah Petroleum Company, which turned into South Oil Company. But a series of Baath Party decrees in the 1980s established a range of new regional operating companies which reported directly to the oil ministry, bypassing INOC.
Dissolution in 1987 Iraq's oil industry was hit immediately when war broke out between Iran and Iraq in 1980. Export facilities at Basra and Khor al-Amaya were damaged in the first weeks. In response, INOC's energies in the 1980s were concentrated on building new export capacity, such as expanding the KirkukCeyhan Oil Pipeline and building the IPSA pipeline across Saudi Arabia. In addition, the company trucked up to 250,000 bpd through Jordan and Turkey173. In April 1987, under newly appointed oil minister Issam Chalabi, Decree 267 merged the INOC with the oil ministry, which became the direct operator in the industry as well as its regulator. Its subsidiaries were now broken off into North Oil Company, South Oil Company and the Oil Exploration Company.
171" BP Statistical Review 2010 BP, retrieved 13 January 2012 172" Iraq National Oil Company, An Historical And Political Perspective", Middle East Economic Digest, 21 September 2009 173" Iraq - Oil in the 1980s", US Library of Congress, undated 61
Mooted recreation See also Draft laws concerning hydrocarbons in Iraq The vast majority of Iraqi oil experts would like to re-establish INOC, including former Oil Minister Ibrahim Bahr al-Uloum 174, former INOC founding chairman Tareq Shafiq among others.
Iraq Petroleum Company The Iraq Petroleum Corporation was a consortium of Western major oil companies which held a monopoly on all Iraqi production from the start of the industry until 1962, and continued to dominate production until nationalisation in the early 1970s.175
Foundation The company was founded in 1912 as the Turkish Petroleum Company, so called because although it was formed to prospect for oil inside Iraq, Iraq was then a province of the Ottoman Turkish empire.176 The largest shareholder in the company was the Anglo-Persian Oil Company, an antecedent of the today's BP, at the time controlled directly by the British government.177 Other major shareholders on its creation were Shell and Armenian oil magnate Calouste Gulbenkian, who owned 5% of the shares. The company received a concession from the Ottoman authorities but then the First World War broke out, ceasing all exploration activity. It would be 15 years before any oil at all was discovered in Iraq 178 but that did not prevent IPC from being the subject of fierce political battles. The Allies realised the importance of oil during the world war. The status and ownership of the company was a prominent issue at the San Remo Conference of 1920 174" Interview with Ibrahim Bahr al-Uloum", Niqash, retrieved 25 July 2010 175" Iraq's Oil Sector: Past, Present and Future", James Baker Institute for Public Policy, March 2007 176" The Turkish Petroleum Company", US Library of Congress, undated. 177" From Anglo-Persian Oil to BP Amoco", BBC, 11 August 1998 178" Iraq Petroleum Company Archive Archives Hub, retrieved 13 January 2012. 62
which discussed the fate of non-Turkish parts of the Ottoman Empire. The French company Elf siezed the assets of a German company which had held equity before the war, and the Americans succeeded in negotiating a share for Standard Oil179.
Oil is Discovered In 1925, the British government, now ruling Iraq as a direct mandate after the collapse of the Ottoman Empire, granted a fresh concession to the TPC and on October 15, 1927 oil was struck at Baba Garghour, now one of the three domes of the Kirkuk field. Turkey had only agreed to the northern region of Mosul remaining in the newly created country of Iraq in the previous year180. The discovery led to new negotiations over the ownership of TPC. Four equal shareholders now held 23.75% each: the Anglo-Persian Oil Company, Royal Dutch/Shell, the Compagnie française des pétroles, later to become Total), and the Near East Development Corporation (a consortium of five large US oil companies, among them Standard Oil). Calouste Gulbenkian the remaining 5%181. The company itself was a shell, producing oil for a fee for the parent companies to sell while it was itself forbidden from selling oil except within Iraq, where demand was then very small. It was nearly a decade before the Kirkuk discovery was produced in any sizeable quantities. First, the IPC shareholder companies disagreed about how much oil to produce. Some of them, such as BP and Shell, had substantial holdings elsewhere, and wanted to delay production from Iraq to maintain the world price. Others such as CFP had few other sources, and so wanted to speed up Iraqi production. There were also disagreements about how to export the oil, with the French CFP favouring a pipeline running through Syria, then French dependencies, and BP preferring a route through Transjordan and Palestine, both then under British mandate. In the end, pipelines to both the Banias in Lebanon and Haifa in what was then Palestine were eventually built. 179" The Turkish Petroleum Company", US Library of Congress, undated. 180" The Iraq Petroleum Company 1914-1982" Free Republic, 27 April 2006. 181" Iraq's Oil Sector: Past, Present and Future", James Baker Institute for Public Policy, March 2007. 63
Production rose from 6 million tonnes (120,000 barrels of oil a day) in 1950, to 18 million tonnes (360,000 barrels of oil a day) in 1954, to 30 million tonnes (600,000 barrels of oil a day) in 1956 to 40 million tonnes (800,000 barrels of oil a day) in 1960. Foreign control of Iraq's oil industry had become incresingly unpopular following the creation of the state of Israel in 1948 and the rising wave of Arab nationalism in the 1950s. The government of Iraq, under a monarchy which was broadly considered friendly to the Western powers, negotiated new agreements with the IPC in 1950, 1951 and 1955, each time strengthening the conditions in favour of the Iraqi government.
After the Revolution Nationalist feeling rose further after the 1958 revolution but the government of Abdel-Karim Qassem did not move immediately to nationalise the industry because it needed the revenues provided by existing arrangements. But in September 1960 Iraq convened a conference in Baghdad of oil producing countries which later evolved into the association of "Oil Producing and Exporting Countries", or OPEC for short.182 The following year, the government enacted Law 80, which removed from the IPC 99.5% of the concession areas it had gained, leaving only the fields that were already in production183.
The INOC era The Iraq National Oil Company was created in 1964, leaving the country in the unusual situation of having two production tracks which were in competition with each other. IPC and its subsidiaries the Mosul Petroleum Company and the Basrah Petroleum Company were still responsible for the vast majority of Iraqi production. But the government did continue to deal briefly with foreign oil companies, including service contracts signed with French Elf Aquitaine and Brazilian Braspetro in 1967. These agreements in the late 1960s resulted in fields which began to produce by the mid-1970s, including Rumaila, which was developed by the Soviet Union.
182" Brief History of OPEC", OPEC, retrieved 13 January 2012. 183" The Turkish Petroleum Company", US Library of Congress, undated. 64
Relations between the government and IPC continued to deteriorate. When Syria raised transit fees on the Banias pipeline in 1966, IPC refused to pay, the Syrians closed the pipeline and the Iraqi government lost a lot of revenue. When the Suez Canal was closed as a result of debris from the 1967 Middle East War, the government demanded a premium on oil arriving directly at the Mediterranean by pipeline that was comparable to rates paid to Libya. IPC refused, responding that Iraqi oil was a heavier grade and more expensive to process. IPC continued to control the core of Iraqi production so the government used its growing power at the edges, for example, at one stage increasing transit fees through Basrah port overnight by 1200%. 184
Nationalisation See separate article: 'Iraqi oil nationalisation'
Iraqi Oil Nationalisation Iraq gradually took control of its own oil industry from international oil companies in a process which began in 1961 and ended in 1975 with complete nationalisation of all assets and production in the country. 185
Prelude From 1961, when the revolutionary regime of Abdel Karim Qasssim passed Law 80 depriving the foreign consortium of the Iraq Petroleum Company (IPC) of the right to prospect in 99.5% of Iraqi territory, Iraq envisaged the creation of a nationally owned and run oil industry. The creation of the Iraq National Oil Company in 1964 confirmed this, even if INOC was originally set up with limited powers.186 But IPC still remained in control of existing production, which by the 1960s was reaching a million barrels a day. Therefore in the late 1960s, Iraq signed a series of deals with other foreign companies, notably Entreprise des 184" Iraqi oil post-World War II Through the 1970s", US Library of Congress, undated. 185" Iraq's Oil Sector: Past, Present and Future", James Baker Institute for Public Policy, March 2007. 186" Iraq National Oil Company, a historical perspective", Middle East Economic Digest, 21 September 2009. 65
Recherches et des Activites Petrolieres (ERAP) for offshore areas in southern Iraq, and the Soviet Union under the Iraq-Soviet pact of 1967 which eventually led to the development of the Rumaila field.187
1972 During the late 1960s and early 1970s Iraq continued to be dissatisfied with the way the IPC managed production levels in Iraq based on their commercial interests elsewhere, and there were various disputes about pricing. Iraq also demanded a 20% equity stake in IPC, something which the San Remo Conference of the great powers in 1920 had envisaged but which the international company partners in IPC had denied them.188 The IPC, submitting to the rising tide of economic nationalism in Iraq and more broadly across the Middle East, offered in May 1972 to increase the Iraqi state's profits, raise production, and agree to some advance payments on royalties.189 But the offers were not enough, and on June 1, 1972, the Iraqi government expropriated all of the IPC's assets in Iraq. Saddam Hussein, then formally vice-president to Ahmed Hassan al-Bakr, led the nationalisation process for the Baath Party190. Only the parent IPC was affected by this move and only the production out of the Kirkuk field. Its subsidiary, the Basrah Petroleum Company (BPC), continued to operate normally, producing the southern fields which were then growing in importance. OPEC fully supported Iraq's takeover of IPC, offering loans to help meet foreign exchange shortages caused by the loss of revenues from IPC191. In 1973, Iraq and IPC settled their claims and counterclaims. IPC agreed to pay nearly $350 million to Iraq as compensation for revenue lost to Iraq over the years when IPC was selling Iraqi oil. In return, the government 187" Iraq - Post World War II Through the 1970s", US Library of Congress, undated. 188" Iraq - the Turkish Petroleum Company", US Library of Congress, undated. 189" The Nationalization of the Iraqi Petroleum Company, International Journal of Middle East Studies, 29 January 2009. 190Aburish, Said " Saddam Hussein, the Politics of Revenge", Bloomsbury UK", 2001. 191" the Iraq National Petroleum Company 1914-1982", Free Republic, retrieved 25 July 2010 66
agreed to provide to IPC, free of charge, 15 million tons of Kirkuk crude, valued at the time at over $300 million, in final settlement of IPC claims.
1974-5 The October 1973 war caused Iraq to seek to continue this process and it nationalised the Dutch and American stakes in BPC as retribution for their countries' support of Israel during that war. At the time of nationalization, Britain depended on Iraq for 3.5%. Europe depended on Iraq for 9% of its supplies. France however imported 14% of her total crude oil supplies from Iraq, and Compagnie Francaises de Petrole, later to become Total, depended on Iraq for 19 million tons of oil each year (nearly 40,000 barrels of oil per day).
In recognition of France's sympathetic stand on the Arab-Israeli issue since 1967, the Iraqi government agreed to allow CFP to take its usual share of the nationalised oil. During the oil shortage, the Iraqis decided to play the French against the majors. By 1975, it had completed nationalisation of all remaining foreign interests in the oil industry.
Oil Industry post-Saddam State of oil industry during insurgency According to Daniel Yergin, renowned oil industry analyst, in 2003 the Iraqi oil industry was suffering from years of neglect and lack of investment, as well as chaotic management following the collapse of the Ba'athist regime. At this stage, of 80 discovered oil fields only 23 had been put into production due to the disruption of war and sanctions in place since the 1980s. Thamir Ghadhban, who became head of the Ministry of Oil, and Philip Carroll, the former CEO of Shell Oil USA, became the core of the team charged with reviving the industry. The two men set a target of reaching a production level of 3 million barrels per day (bpd) by the end of 2004. Carroll stated that the urgent priority for the restoration of the oil industry and the rest of the economy must be security. 192 192Yergin, Daniel (2011) "The Quest" p152-3 Penguin Press, London. 67
As the anti-American insurgency began to intensify and the security situation deteriorated, oil industry infrastructure also came under attack. Pipelines were regularly bombed from 2003 onwards193 and in 2004, insurgents mounted an attack against the Al-Amiya platform using suicide bombers in three small crafts, who reached within 30 yards of the installation before they were shot by Iraqi guards and disaster was averted. 194 From the fall of Saddam up until 2008, there were well over 300 incidents affecting the integrity of oil facilities, and oil production remained below target levels. Production fell short of the goals set and the new goal for oil production in 2007 was dropped in 2006 to 2.1 million bpd.195
Restructuring of economy in occupied Iraq On the 22 May 2003, the United Nations Security Council passed Resolution 1483, abolishing sanctions against Iraq and recognizing the US and the UK as the country's occupying powers.196 On the 20 September 2003, Order 39 was issued by Paul Bremer, head of the Coalition Provisional Authority (CPA), the transitional government established by the US and its allies following the invasion of Iraq. This order abolished Iraq's ban on foreign investment, allowing foreigners to own up to 100% of all sectors other than natural resources. Over 200 state enterprises, including electricity, telecommunications and pharmaceuticals were privatized.197 Under the reforms, income and corporate taxes were capped at 15% and tarrifs slashed to a universal 5% rate, however with none imposed on food, drugs, books and other 'humanitarian' imports.198 The reforms implemented were described by World Bank economist Joseph Stiglitz as 'an even more radical form of shock therapy than pursued in the former Soviet world.'199 and Iraq was branded by the Economist magazine as a 'capitalist dream'. 193" Iraq Pipeline Watch" IAGS retrieved 24 November 2011. 194" Iraq oil hopes hinge on shielding industry" Energy Daily 8 October 2010. 195Cordesman, Anthony and Davies, Emma " Iraq's insurgency and the road to civil conflict" Greenwood Publishing Group 2008, p460-1. 196" Resolution 1483" UN Security Council 22 May 2003. 197" COALITION PROVISIONAL AUTHORITY ORDER NUMBER 39" Iraq Coalition retrieved 25 November 2011. 198" Let's all go to the yard sale" Economist 25 September 2003. 199"[0]" Baghdad year zero September 2004. 68
BBC correspondent Nick Springate however warned that many Iraqis may see the moves to privatize as a 'sell-off', with US multinationals seen to get the majority of the 'rewards'. However, US Treasury Secretary John Snow rejected the suggestion that the US dominated the drafting of reforms, asserting that they were based on the ideas of the Iraqi Governing Council.200 The moves by the CPA to restructure the Iraqi economy to bring the system into line with a neoliberal economic model caused much controversy. In March 2003 a leaked memo by UK Attorney General Lord Goldsmith revealed that he had advised British Prime Minister Tony Blair that the invasion and subsequent occupation of Iraq was illegal, stating that: 'My view is that a further security council resolution is needed to authorise imposing reform and restructuring of Iraq and its government' and that 'the imposition of major structural reforms would not be authorised by international law.'201 Philip Carroll, who was put in charge of Iraqi oil production, claims that in 2003 he stated that "there was to be no privatisation of Iraqi oil resources or facilities while I was involved." Many were arguing for a privatization of Iraq's oil assets. However, the BBC reported that new plans called for the creation of a state-owned oil company favoured by the US oil industry. 202
Iraq Oil Law (For further detail please see Draft laws concerning hydrocarbons in Iraq) In February 2007, the US-backed Iraqi cabinet approved a new oil law which would give foreign companies the long-term contracts and safe legal framework they had been waiting for. Some analysts and labour groups criticized the process of the drafting of the law, warning that it is skewed in favour of foreign firms that it could heighten tensions and spread instability. The draft specified that up to two thirds of Iraq's known reserves would be developed by multinationals under contracts lasting for 15 to 20 years. This would represent a break from normal practice in the Middle East, and civil society groups and Union leaders complained that they had been left out of the drafting process. Critics claim that under the law, ownership of the oil reserves would remain with the state 200" Iraq adopts sweeping reforms" BBC 21 September 2003. 201" Pillage is forbidden" Guardian 7 November 2003. 202" Secret US plans for Iraq's oil" BBC News 17 March 2005. 69
in form, but not in substance.203
Opposition from Unions The prospect of the privatization of Iraq's oil industry has been opposed by Trade Unions in occupied Iraq, and described by the UK's Guardian as 'a red line' for the Unions and a 'red rag' to the workers on the front line. They have vowed to resist any privatisation of what they see as their national assets.204 Concerned that the new hydrocarbon legislation would lead Iraq's oil industry to full privatisation, in February 2007 the labour unions sent a letter to Iraqi President Jalal Talbani urging him to reconsider the Oil Law draft, commenting that: 'Production-sharing agreements are a relic of the 1960s," said the letter, seen by news agency IPS. "They will re-imprison the Iraqi economy and impinge on Iraq's sovereignty since they only preserve the interests of foreign companies." Many critics instead advocate for technical service contracts, meaning a company would come in and offer services such as building a refinery, laying a pipeline, or offering consultancy services, but the control of production and development of oil would stay with the Iraqi state. Officials from the Iraqi government defended the law, saying it represented a step forward for the war-torn country and that oil revenues would be distributed to all 18 provinces based on population size, and regional administrations would have the authority to negotiate contracts with international oil companies. A researcher at platform claimed that 'there is no other country in the Middle East with the kind of oil reserves that Iraq has that would consider signing a production-sharing agreement.... because it's not in their interests.' In 2007 the law being discussed by the Iraqi cabinet stated that untapped oil would remain state-owned but that contracts would be drawn up giving private sector firms the exclusive right to extract it. Britain and the US argued that Iraq urgently needed foreign investment to boost output, which had slipped below 2 million barrels per day (bpd),205 However, a survey car203" New Oil Law Seen as Cover for Privatisation" IPS, 27 February 2007. 204" Oil and troubled waters" Guardian, 9 July 2008. 205" Iraq poised to hand control of oil fields to foreign firms" Observer, 25 February 2007. 70
ried out in 2007 suggests that Iraq public opinion resisted international intervention in the industry, showing that more than 63% of respondents would prefer that Iraqi companies rather than foreign firms took the lead in developing Iraq's oil.206
Appointment of Shahristani 2006 Hussein Shahristani, a nuclear scientist by training who had been imprisoned during Hussein's regime, returned from exile in Canada and was appointed as Oil Minister in 2006. He was to oversee upcoming bidding rounds and was deemed by Iraq Energy News as the 'architect of Iraq's oil future'. According to energy analyst Samuel Ciszuk, Shahristani was seen as "a guarantor of continuity from the point of view of the companies investing in the south of Iraq", however critics have claimed that he is not receptive to advice.207
Iraqi Membership of OPEC Iraq is a Founder Member of the Organization of the Petroleum Exporting Countries (OPEC)208 but had its production quota suspended in 1990 because of the impact that the Gulf War and subsequent sanctions on Iraq had upon the oil industry.209
Foundation Iraq hosted the conference that led to the foundation of OPEC in Baghdad, Iraq, in September 1960, along with Iran, Kuwait, Saudi Arabia and Venezuela. Barely two years had passed before the reluctance of other OPEC member countries to adopt a single negotiating stance with international oil companies began to frustrate the Iraqi government. Instead of a unified front, each member country had decided to negotiate separately, with the result that the 206" Summary of Iraq Survey Results" Price of Oil, 30 July 2007. 207" Shahristani, Architect of Iraq's Oil Future" Iraq Energy News, 17 January 2011. 208" Member Countries" Organization of the Petroleum Exporting Countries website Retrieved 27 November 2011. 209" Opec leaves Iraq oil surge off agenda" Financial Times 17 December 2009. 71
oil supermajors were able to switch production away from Iraq in order to avoid harder conditions that were rising from Iraqi governmental demands.210 OPEC played a key part in the Iraqi oil nationalisation process in 1972, providing loans to compensate for a transitional period where Baghdad would lose revenues from the Iraq Petroleum Company.211
Rivalry with Iran Iraq was locked in rivalry with neighbouring producer Iran in the 1980s over OPEC production quotas, at the same time that they fought an eightyear war. Iraq demanded parity of quota with Iran at around 3.4 million barrels of oil per day (mb/d), but OPEC consistently denied this as Iran's stated proven reserves were higher, and OPEC quotas are based on reserves.212 In response, Iraq flouted the quotas. In 1986, then Minister of Oil Issam Chalabi said Iraq would ignore its OPEC quota of 1.54 mb/d export, producing instead whatever amount would best serve Iraqi interests.
Suspension After the 1991 Gulf War, the United Nations Security Council imposed a continuing ban on Iraqi oil exports that remained in place until the Oil for Food program was initiated in 1996. But between then and the outbreak of the second Gulf War in April 2003, Iraq's production did not rise above 1.5 mb/d, and its exports were lower, falling well below its export quota.213 As a result, in 1998, OPEC formally suspended Iraq's production quota, a state of affairs that remains until this day. Nonetheless, Iraq asked in October 2011 to rejoin the OPEC county system by 2014."214
210 “ Iraq: Post-World War II Through the 1970s”. US Library of Congress, retrieved 25 October 2011. 211 " The Iraq Petroleum Company 1914-1982" Zajel website 1 February 2005. 212 "Oil in the 1980s"US Library of Congress Retrieved 30 November 2011 213" Iraq and OPEC" Alexander's Gas & Oil Connections 1 October 2002. 214" Iraq Aims to Join OPEC Quota System in 2014, Official Says" Business Week 26 October 2011. 72
Recent Iraq Activity within OPEC Iraqi oil output reached its highest in two decades in February 2011 at an average of 2.08 mb/d, which also made it the biggest single contributor to world oil supply growth that month. The website Live Oil Prices indicated that this was deemed by OPEC to pose a threat to its control on the global supply of oil threatened, and Leo Drollas of the Centre for Global Energy Studies stated that an extended period of stability for Iraq "could have a major destabilising effect on OPEC and the oil price."215 By June 2011, Iraq produced 2.7 mb/d. Hussain al-Shahristani, Deputy Prime Minister for Energy, stated that the country would be likely to reach 3 mb/d by the end of the year. The Iraqi Ministry of Oil had already stated, in March 2011, that the country could reach 5.6 mb/d by 2014 and even 12 to 13 mb/d by 2017 - to be sure, if insurgent activity were kept in check, pipelines upgrades were successful and long-term production-expansion contracts with international oil companies (IOL) were signed. 216 In October 2011, the country asked to rejoin OPEC's quota system for crude input in 2014 as it reached an average of 2.9 mb/d. Falah al-Amri, director of the State Oil Marketing Organisation (SOMO), stated that the country aims to increase oil output to 3.4 mb/d for 2012 and to 4.5 mb/d in 2013. However, al-Amri has indicated that the country "will seek the biggest possible quota." As of December 2011, Iraq is striving to support an increase in OPEC output, although Abdul Karim al-Luaibi, Iraqi Minister of Oil, speculates that OPEC will likely decide to cut oil output in December 2011. Iran, supported by African OPEC members and Venezuela, has blocked Saudi Arabia's proposals to increase output throughout 2011.217 Iraq takes over the OPEC presidency in 2012, al-Luaibi said in December 2011. The OPEC presidency is a ceremonial post that rotates among the 12 members of the organisation, chosen on the consequence of members' alphabetical names, and it is a one-year term. 218 Nevertheless, the presidency 215" OPEC member Iraq oil output may affect future oil prices" Live Oil Prices Retrieved 27 November 2011. 216" Iraq's oil industry looks for OPEC growth role" The Australian 7 June 2011. 217" OPEC likely to Cut Output in December: Iraq Oil Minister" CNBC News 22 November 2011. 218" Iraq Expects To Be Given OPEC Presidency In 2012 - Oil Min" Rigzone 13 73
signals, according to the New York Times, that Iraq could again be a central player in OPEC for the first time since the toppling of Saddam Hussein in 2003.219
Continued Rivalry with Iran In June 2011, Iran successfully opposed a move led by Saudi Arabia to raise OPEC oil output quotas in order to meet shortfalls in supplies from Libya.220As a result, no formal agreement on OPEC production levels could be reached.221 In November 2011, Iran moved to reduce oil output back to the volumes before Libya's civil war. However, if oil output were to be boosted unilaterally again - as it occurred earlier in June of the same year - by Saudi Arabia and its supporters (which include Iraq), Iran's move could not matter in the long run.
Impact of Wars and Sanctions Iraq has endured three major wars since 1980222 and strict economic sanctions between 1990 and 2003.223 Iraq's oil infrastructure was damaged in the Iran-Iraq War of the 1980s, the Gulf War of the early 1990s and the Iraq war of the 2000s, while UN sanctions from 1990 to 2003 severely limited Iraq's ability to export oil224 and gain access to the latest technology to develop its fields.225 The combined effect of wars and sanctions have resulted in dramatic fluctuations in Iraq's oil production and economic involvement in the world market.
December 2011. 219" OPEC Opts to Increase Its Level of Output" New York Times 14 December 2011. 220" Iran calls for OPEC cuts, Arab members unlikely to agree" The Daily Star 12 November 2011. 221" Iran Energy Profile: Still OPEC's Second-Largest Oil Producer: Analysis" Eurasia Review News & Analysis 22 November 2011. 222" Iraq profile", BBC.com Retrieved 28 November 2011. 223" Were Sanctions Right?", New York Times Retrieved 27 July 2003. 224" CRS Report for Congress", Congressional Research Service, U.S. Library of Congress 23 September 2004. 225" Playing for Iraq's jackpot", CNN Money 16 April 2003. 74
Iran-Iraq War 1980-1988 Iraq's oil production reached its all-time peak of 3.5 million barrels per day (bpd) in 1979, prior to its invasion of Iran, but the war had a quick and debilitating impact on Iraq's production capability. Iraq's two primary offshore export terminals on the Persian Gulf, Mina al Bakr and Khawr al Amayah, as well as the Basra refinery, were severely damaged by Iranian attacks in the opening weeks of the conflict. 226 The destruction of Iraq's Persian Gulf terminals caused it to rely exclusively on pipelines to the Mediterranean for exports.227 Then in 1982 Syria, allied with Iran, closed the 650,000 bpd-capacity Banias pipeline, which had been a vital Iraqi access route to the Mediterranean Sea and European oil markets, 228 leaving Iraq with only the pipeline to Dortyol, Turkey.229 Oil production dropped to 2.5 million bpd in 1980 and by 1983 had fallen to less than 1 million bpd. By 1983, Iraq's export capabilities were only 700,000 bpd, or less than 30% of operable field production capacity at that time. Partially in an attempt to break a stalemate that had settled by 1984, Iraq intensified its attacks on Iranian commercial shipping. According to author Efraim Karsh, Saddam Hussein had hoped this would provoke Iran to close the Straits of Hormuz, a critical shipping lane in the Persian Gulf, which might have left powers such as the United States little choice but to intervene.230 Instead, Iran reciprocated the new wave of assaults by attacking tankers carrying Iraqi oil from Kuwait, along with any tanker of other Persian Gulf states supporting Iraq.231 The resulting "Tanker War", as it has come to be known, brought extensive damage to Iraqi and Iranian shipping capability and that of other Gulf states, and reduced shipping in the Gulf by 25% by 1984.
226" Oil in the 1980s", Country Studies, U.S. Library of Congress Retrieved 29 November 2011. 227" The Iran-Iraq war: an historical, economic, and political analysis" by M. S. El Azhary Routledge, 1984 p. 48. 228" Iran-Iraq War (1980-1988)", GlobalSecurity.org Retrieved 12 December 2011. 229" The Iran-Iraq war: an historical, economic, and political analysis" by M. S. El Azhary Routledge, 1984 p. 49. 230" The Iran-Iraq War, 1980-1988", by Efraim Karsh Osprey Publishing, 2002. 231" Tanker War 1984-1988", Dugdale-Pointon, TDP 27 October 2002. 75
While damage to oil installations both in Iraq and Iran was extensive, some observers, such as M. S. El Azhary, have suggested that the real damage to Iraqi and Iranian oil sectors came in the form of lost revenue, which were particularly acute in view of the huge cost of sustaining the war effort on both sides.232 The war depleted Iraq's foreign exchange reserves, devastated its economy, and left the country saddled with foreign debt of more than $40 billion,233 particularly to Saudi Arabia and Kuwait. By 1988, Iraq had to rely on a shrinking source of oil revenue which generated only $11 billion, compared with $26 billion in 1980.234 Iraq's need for the revenues that Kuwait's oil reserves could bring, on top of its refusal to forgive Iraq's debt, were two reasons for Saddam Hussein's invasion of that country in 1990, just two years after the end of the Iran-Iraq war.235
Persian Gulf War 1991 After Iraq invaded Kuwait in August 1990, a US- and UK-led coalition initiated a massive aerial campaign against Iraq in January 1991. Nearly a month of air strikes,236 targeted primarily against Iraq's electricity and fuel production infrastructure, saw the allies fly over 500 sorties against 28 oil targets,237 dropping about 1200 tons of bombs to shut down the national refining and distribution system.238 Iraq's three biggest refineries - Salaheddin at the Baiji complex, Basra and Doura - were all bombed in the coalition air campaign,239 as was the strategic Faw peninsula, site of the Korr Al Amaya and Mina al Bakr export terminals, which had only recently been restored to 232" The Iran-Iraq war: an historical, economic, and political analysis" by M. S. El Azhary Routledge, 1984 p. 47. 233" Iraq: ECONOMY" Travel Document Systems Retrieved 12 December 2011. 234" Iraq: economic sanctions and consequences, 1990–2000" Third World Quarterly 9 August 2010. 235" Conflict Without Victory: The Iran-Iraq War" Baylis et al: Strategy in the Contemporary World 2e Retrieved 12 December 2011. 236" The Encyclopedia of Middle East Wars" by Spencer C. Tucker ABC-CLIO, 2010 p. 591. 237" VIII - HYPERWAR: THE LEGACY OF DESERT STORM" Federation of American Scientists Retrieved 12 December 2011. 238" CHAPTER VI - THE AIR CAMPAIGN" Federation of American Scientists Retrieved 12 December 2011. 239" Historical dictionary of Iraq" by Edmund Ghareeb and Beth Dougherty Scarecrow Press, 2004 p. 177. 76
near full capacity after the Iran-Iraq war. The air campaign wiped out much of Iraq's naval assets and oil facilities approximately 80 percent of its refining capacity was damaged - as well as its telecommunications networks, fertiliser plants, industrial plants, schools, hospitals and storage facilities. Additionally, more than half of Iraq's 20 electrical generator sites were completely destroyed, rendering its remaining un-bombed assets dysfunctional, and 42 of its 53 bridges were rendered impassible.
Sanctions 1990-2003 Iraq was under sanctions imposed by the United Nations Security Council (UNSC) from August 1990, when Iraq invaded Kuwait, until May 2003, after Saddam Hussein's regime had been toppled. The sanctions were longest running, most comprehensive, and most controversial in the history of the United Nations, according to Foreign Affairs, 240 virtually cutting Iraq off from the world economy with catastrophic consequences for both the economy and the people of Iraq. The sanctions included a ban on all trade, an oil embargo, a freezing of Iraqi government financial assets abroad, an arms embargo, suspension of international flights, and banned financial transactions. The UNSC also called upon member states to enforce naval and air blockades against Iraq. Economic impacts included, but were not limited to: decreased imports of industrial and commercial parts and fuel; decreased exports and access to foreign currency; loss of trade partners leading to the closure of business and industry; inflation; emergence of black (parallel) markets; decreased overall economic activity (industry, commerce, agriculture, etc); and the collapse of public and private infrastructure.241 Sanctions also took a large human toll, with close to 1 million estimated dead between 1991 and 1998 due to mass starvation and disease, with up to half of these said to be children, according to UNICEF and other United Nations bodies.242
240" Containing Iraq: Sanctions Worked" Foreign Affairs July/August 2004. 241" Effects of Iraq Sanctions" Global Issues 2 October 2005. 242" Effects of Iraq Sanctions" Global Issues 2 October 2005. 77
Beginning in 1996, the United Nations implemented its Oil-for-Food Program, which allowed Iraq to sell oil to finance the purchase of humanitarian goods.243 Iraq was permitted to sell $2 billion worth of oil every six months, with two-thirds of that amount to be used to meet humanitarian needs. In 1998, the limit on the level of Iraqi oil exports under the program was raised to $5.26 billion every six months, and in December 1999 the ceiling on Iraqi oil exports under the program was removed. The program made available vast funds for the purchase of food, medicine, and essential civilian goods; $24.4 billion worth of goods were delivered to Iraq from the program's inception until November 2002, four months before the March 2003 invasion. This had the effect of substantially easing, though not eliminating, the severe economic hardships of Iraqi civilians.
Iraq War 2003 Iraqi oil installations suffered little damage during the 2003 US-led invasion of Iraq - an estimated nine wells were set on fire - but oil infrastructure was targeted for attack by insurgents and smugglers on many occasions in the invasion's immediate aftermath and in following years. 244245 Most of Iraq's power is generated from oil, and without a steady supply, power plants were unable to reach capacity and blackouts were frequent in the months following the invasion.246 Most attacks focused on pipeline systems in northern Iraq, especially the Kirkuk-Ceyhan oil pipeline, which impacted the governments ability to gain export revenues. Southern pipeline infrastructure was also targeted as a means of making oil and refined products more vulnerable to theft and diversion. Highly-organised smuggling operations leveraged supply and price imbalances in the Iraqi refined fuel market to create lucrative oil sale opportunities. The US Department of Defense estimated that in one case, “as much as 70% of the fuel processed at Baiji was lost to the black market — 243" About the Oil-for-Food Programme" UN website Retrieved 13 December 2011. 244" Iraq: Oil and Gas Legislation, Revenue Sharing, and U.S. Policy" US Congressional Research Service 3 November 2009. 245" Iraq Pipeline Watch" Institute for the Analysis of Global Security 27 March 2008. 246" Iraq's Oil Sector One Year After Liberation" Brookings Institution 17 June 2004. 78
possibly as much as $2 billion a year.” The sabotage of Iraq's network of pipelines served to create an inhospitable environment for international oil companies (IOCs), leading many to halt their operations in Iraq and divert investments to more stable security environments.247 Initiatives such as the Pipeline Exclusion Zones (PEZs), begun in 2007 to restrict access to vital oil arteries and build obstacles for attacks, subsequently helped improve the security of some of Iraq's oil infrastructure. 248 But violence and attacks on infrastructure have continued and, as of December 2011, the security situation in Iraq remained tenuous as best. 249
Federalism, Factionalism and Regional Differences Iraq's 2005 Constitution defines the country as a federal republic 250 comprising 18 governorates, or provinces, three of which make up Iraq's only semiautonomous region, the Kurdistan Regional Government (KRG).251 Many of Iraq’s provinces have long-standing differences with the central government on issues including the distribution of funds, security operations, and the provision of services.252 The Iraqi state established by the constitution falls short of best-practice federal models, according to the US Institute of Peace, and the Iraqi central government's foundation is "possibly the weakest of any federal model in the world."253 The constitution allows for the creation of semi-autonomous federal regions comprised of one or more of the 18 administrative governorates in Iraq. To the extent that its powers do not conflict with federal authority, a region may have its own constitution and exercise legislative, executive and judi247" Iraq's Oil Sector One Year After Liberation" Brookings Institution 17 June 2004. 248" Iraqi oil pipeline protection earns award for U.S. engineer" UPI.com 9 March 2009. 249" US military winds down Iraq withdrawal" Al Jazeera 8 December 2011. 250" IRAQI CONSTITUTION" UN Iraq Retrieved 13 December 2011. 251" Background Note: Iraq" US Department of State 2 May 2011. 252" Push To Make Iraq’s Diyala Province An Autonomous Region Fades" EKurd.net 30 December 2011. 253" Weak Viability: The Iraqi Federal State and the Constitutional Amendment Process" United States Institute of Peace July 2006. 79
cial authority over itself.254 The 2005 constitution states that a province can become a region two ways: either 1/3 of the provincial council votes to hold a referendum on the issue or 1/10 of registered voters in the governorate ask for one. A general election is then held, in which federal status is established only if a majority of voters approves it. Sectarian issues in Iraq have contributed to a complex political dynamic regarding federalism in the country. There have been federalist movements in both Sunni-dominated (Salahaddin, Diyala, Anbar) and Shia-dominated (Basra) provinces,255 while non-sectarian groups have also played a role in federalist trends, especially in Iraq's far south. 256 Some recent calls for federalism have advocated regions based on geographical, rather than sectarian, subdivisions, but sectarian tensions between pro-federalist Sunni and Shia leaders remain.257 Iraqi Prime Minister Nouri al-Maliki has regularly opposed a federalist sys tem that would divest him of a share of his current power as the country’s leader. The only federal region existing as of late 2011 was the Kurdistan Regional Government (KRG), but further pro-federal movements have been noted in both Shia (in the country's south) and Sunni (in the center-north) areas since 2010.
Southern regionalism Pro-federal noises have come intermittently from multiple provinces in Iraq's oil-rich south, including Maysan, Karbala, Najaf and Babel, but Basra has the south's most evident and persistent pro-federal tendency. 258 In 2005, a cadre of powerful, mostly secular Shia politicians pushed for the creation of an autonomous region, posing a direct challenge to the authority of the Iraqi central government. One of the primary drivers of the autonomy move254" Iraq Investment guide – second edition" Herbert Smith LLP Retrieved 13 December 2011. 255" A Political Landscape in Flux" Islamopedia Online Retrieved 13 December 2011. 256" Suffering, Oil, and Ideals of Coexistence: Non-Sectarian Federal Trends in the Far South of Iraq" Historiae.org Retrieved 30 December 2011. 257" Nujayfi Uses the F Word Again" Gulf Analysis 15 October 2011. 258" Shahristani and Maliki in Federalism Crossfire" Iraq and Gulf Analysis 6 September 2011. 80
ment according to the movement's backers was that, though the bulk of Iraq's oil reserves lie near Basra, at the head of the Persian gulf, the impoverished south has never received its fair share of oil revenues. Sectarian issues were also a point of contention, with Shia politicians arguing that they could not trust Baghdad because of decades of oppression under the Sunni Arab government of Saddam Hussein.259 The federalist sentiments in Iraq's south, centered in the Qurna and Zubayr areas within Basra province, 260 tend to focus overall on non-sectarian schemes for transforming Basra into a small federal region defined by its geography and history rather than by the Shia religion of the majority of its inhabitants.261 The Islamic Supreme Council of Iraq (ISCI), formerly known as the Supreme Council for the Islamic Revolution in Iraq (SCIRI), is one of the leading political factions supporting an autonomous Shia region in Iraq's south. Formed in Iran in 1982 to provide an opposition to Iraqi aggression against Iran, the organisation was directly funded with funds by Tehran and with arms by Iran's elite Revolutionary Guard. In the 1980s and 90s the group advocated Islamic rule for Iraq and conducted a low-level, cross-border guerrilla war against the regime of Saddam Hussein.262 The ISCI is widely viewed as the Iraqi political party most beholden to Iran.263 Showing a preference for decentralised government and federalism in Iraq, the ISCI went as far at one point to suggest that nine Shia provinces should unite into a single region enjoying an autonomous status like that of the KRG. The ISCI's stand on federalism is a major point of difference with the Sadrist movement, another major political faction in Iraq's south, which favors a more centralised Iraqi government.264 Members of the Basra provincial council have made several attempts at autonomy. In 2008, Basra parliamentarian Wail Abdul Latif made a failed bid to collect the signatures of 10 percent of Basra's voting population, in 259" Secular Shiites in Iraq Seek Autonomy in Oil-Rich South" EKurd.net 30 June 2005. 260" Sub-Governorate Separatism in Iraq: New Examples from Dujayl and Balad" Iraq and Gulf Analysis 26 November 2011. 261" Basra, the Failed Gulf State, Part II: Wail Abd al-Latif Concedes Defeat" Historiae.org 17 January 2009. 262" Islamic Supreme Council of Iraq (ISCI)" Global Security Retrieved 3 January 2012. 263" Down But Hardly Out: Isci 2008 Election Prospects" Wikileaks 1 February 2008. 264" Iraqi National Alliance" Carnegie Endownment Retrieved 3 January 2012. 81
order to formally request a referendum. While the autonomy idea had some support within the council, there appeared to have been little public support for the drive. A poll by the government-run National Media Center, for example, found that 94% of those questioned in Basra were against the idea. After that failed attempt, the Basra provincial council sent the central government in Baghdad another formal request for autonomy in September 2010,265 but received no response.266 Most recently in August 2011, the Basra provincial council sent another demand to the Council of Ministers in Baghdad to activate the legal measures (that is, to set up a referendum) to transform Basra into a federal region. The political elements supporting the federalist move, according to the Basra council chairman, were members of the State of Law Coalition, the alFadeela Party and some members of the Dawa Party. As of late 2011, the Iraqi government in Baghdad had again made no response to the Basra council's demand.267
Sunni federalism and Salahaddin There was a general upswing in pro-federal sentiments in Sunni-majority areas of Iraq by late 2011, headlined by a visit to Britain by Parliament speaker Usama al-Nujayfi. According to the BBC, al Nujayfi said that Sunnis of Iraq feel they are being treated by the central government in Baghdad as second-class citizens, and if no improvement takes place many will feel compelled to call for the establishment of "geographically-based federal regions". The pro-federal trend in Sunni-majority areas of Iraq is a testimony to how the country's politics have regressed since 2009 after having recovered from the sectarian strife of the preceding years. In 2009 Nouri al-Maliki, Iraq's Shia prime minister, championed a return to more centralist policies and was supported by Sunnis and Shias alike. However, many Sunni-majority areas have been unhappy with the distribution of power in the new Iraq government after the 2010 parliamentary elections. 265" Basra Wants Another Shot At Becoming An Autonomous Region" Musings on Iraq 14 September 2010. 266" Iraq oil hub Basra wants bigger say, more autonomy" Reuters 5 December 2011. 267" Southern Iraq’s Basra Province demands to transform it into a Federal Region" Aswat al-Iraq 6 August 2011. 82
The governorate of Salahaddin, in the center-north of Iraq north of Baghdad, has been one of the leading Sunni territories with federalist movements in the post-2005 era. In October 2011, the Salahaddin governorate council declared its own federal status in direct opposition to the procedures for such an action laid out in the 2005 constitution, which says that a governorate's people, not its politicians, ultimately decide such a move in the form of a referendum.268 The province's move was met with stern opposition from Iraqi Prime Minister Nouri al-Maliki's Shia-dominated government, who rejected the call, saying the formation of regions on a "sectarian basis" would lead to "dividing Iraq and to rivers of blood.".269 As the form of the demand made by the Salahaddin governorate council was illegal - because it was not founded on the basis of a popular referendum - it failed to affect Salahaddin's status within Iraq. As of December 2011, the Salahaddin governorate council was preparing to hold a referendum to formally establish Salahaddin as a semi-autonomous region. 270 Two other Sunni-dominated provinces, Diyala and Anbar, have also seen calls for more autonomy. Any further growth in calls for federalism in Sunni areas could create a dilemma for the central government, as Reidar Visser of Iraq and Gulf Analysis has noted. Maliki's government has virtually ignored federal referendum requests from areas such as Basra in the south and Mosul in the north, and the Salahaddin bid could put pressure on Maliki to allow such referendums to take place.
Other provinces Complaints about the central government are common in almost all of Iraq’s governorates, leading to pro-federal movements in many of them. Salahaddin's push for semi-autonomous status in October 2011 made waves across Iraq, with pro-federalist factions in Basra, Diyala, Anbar and Nineveh indicating their continued interest in achieving regional status as well. 271 268" In Salahaddin, a Confused Federalism Bid" Iraq and Gulf Analysis 27 October 2011. 269" Iraq PM chides Sunni sections pushing for autonomy" Yahoo News 24 December 2011. 270" Saladin is preparing for a referendum on the establishment of the Region" Investors in Iraq 7 December 2012. 271" Iraqi Salahaddin’s federalism declaration makes waves" EKurd.net 16 November 2011. 83
One day after the Salahaddin decision, Nineveh Governor Athiel Nujaifi was quoted as saying, "The steps toward creating an independent (federal) region for Nineveh province depends on the decision of its people. Whether the people vote in favor of an independent region or are against it, we support their decision." Nineveh includes thousands of Kurds and other ethnic and religious minorities. Because of the strong Kurdish presence in Nineveh and other regions such as Diyala and Kirkuk, the Kurdistan Regional Government (KRG) would need to be included in any discussions about their autonomous status. Creating an autonomous region in these areas would not be easy, according to Khasraw Goran, head of the Kurdish Brotherhood (Birayaty) bloc, which holds 12 seats in the Nineveh Provincial Council, as they contain territories disputed between the various ethnic groups. For its part, the KRG announced in November 2011 its support for the establishment of new regions in Iraq, provided that Baghdad would implement Article 140 of the constitution, related to the settlement of areas-in-conflict between Baghdad and other provinces and Kurdistan.272 Following in the footsteps of Salahaddin, the eastern province of Diyala demanded semi-autonomous status in December 2011. 273 A majority of Diyala's provincial council (15 out of 29) voted toward making the governorate a region, primarily members of the Iraqi National Movement (INM) and the Kurdish Alliance. The Kurds were drawn to vote for regional status after the INM agreed to back its demand to implement Article 140 of the constitution, which set out steps for disputed territories to be annexed by Kurdistan. The move to make Diyala a region has been hotly contested. Members of Prime Minister Maliki's ruling State of Law party declared the move unconstitutional, while members of the Sadrist party in Baghdad claimed it was illegal because the proposed region included disputed territories, such as the Khanaqin district along the Iranian border. Protests within Diyala province were violent and widespread, prompting the Kurdish Alliance to withdraw their support for autonomy. Without the Kurds, the INM had lost its only supporter in its bid for federalism, and as of December 2011 Diyala's attempts to become a region appeared to have been stalled.
272" Kurdistan Alliance supports establishment of Regions in Iraq" EKurd.net 10 November 2011. 273" Iraq's Diyala province demands semi-autonomous status" People's Daily Online 13 December 2011. 84
Regional Dynamics Iran-Iraq Snapshot Iran and Iraq have a long and complicated history in which factors of economic, religious and military nature are often intertwined. 274 The two countries fought the longest conventional war of the 20th century between 1980 and 1988 when Saddam Hussein invaded Iran after the Islamic Revolution there.275 Iraq and Iran have developed extensive economic ties since the fall of Saddam Hussein in 2003, with trade between the two states increasing tenfold between 2003 and 2010, according to Iranian officials.276 Tehran has wielded substantial political influence in Iraq since 2003 and enhanced its 'soft' power in the economic, religious and informational domains. Iran has also supported Shia insurgent groups and militias within Iraqi borders.277 Both countries are members of the Organization of Petroleum Exporting Countries (OPEC) which supplies about 40 percent of the world’s oil.278 After visiting Iran in October 2010 and meeting with president Mahmoud Ahmedinejad and Ayatollah Ali Khamenei, Iraqi Prime Minister Nouri alMaliki described the two countries’ relationship as "strategic", saying "we ask Iran and our neighbors to support our reconstruction and to boost economic and commercial co-operation, which will help improve stability in our region."279 274" Iran-Iraq relations revisited: energy cooperation, The Gulf Research Unit's Blog, 21 February 2011. 275" Iran and Iraq: a history of tension and conflict, The Guardian, 28 July 2011. 276" Iraq-Iran Foreign Relations, AEI Iran Tracker, 5 August 2011. 277" Iran and Iraq, UNITED STATES INSTITUTE OF PEACE, Retrieved 17 December 2011. 278" Iran, Iraq Reach Deal on Joint Oilfields, Iraq Business News, 10 January 2011. 279" Iraqi PM courts Iran during visit, Al Jazeera, 19 October 2010. 85
Iranian political influence in Iraq According to the US Institute of Peace, Iran has tried to influence post-Saddam Iraqi politics by working with Shia and Kurdish parties to create a weak federal state dominated by Shia and amenable to Iranian influence. By uniting Iraq's three major Shia political factions - the Islamic Supreme Council of Iraq (ISCI), the Dawa (Islamic Call) party and the Sadrists - Iran hopes to translate Shias' demographic majority into political influence. This influence has been achieved with mixed success. During 2003-2005, Iran helped assemble a Shia Islamist bloc, the United Iraqi Alliance, encompassing all three major Shia factions. The alliance won 128 of the 275 seats in the December 15, 2005 Iraqi parliamentary elections, with senior Dawa leader Nouri al-Maliki selected as Prime Minister. 280 The provincial elections in January 2009, however, demonstrated the Iraqi public's rejection of Iran's political influence. Maliki's nationalist State of Law party made some gains, but the other two Shia political factions, the ISCI and the Sadrists, suffered setbacks. Then in the parliamentary elections of 2010, Iran unsuccessfully encouraged ISCI, Dawa and the Sadrists to run in a unified bloc. A 2009 US Defense Department report stated that "Iraqi nationalism may act as a check on Iran’s ambitions..." but went on to say that Iran "continues to pose a significant challenge to Iraq’s long-term stability and political independence."
Cross-border fields and energy cooperation Oil fields in border regions have long been a point of vital interest for both Iraq and Iran. After decades of contentious relations while Saddam Hussein was in power, culminating in the Iran-Iraq war from 1980-1988, Saddam's fall in 2003 provided a new opportunity for Iran and Iraq to re-embark on the issue of their shared frontier. Iraq and Iran have 23 joint oilfields on border regions, including the Badra field and the Majnoon field, which geologists consider to belong to the same structure as Iran's Azadegan.281 The unitisation, or agreement between entities on how to divide geological structures divided by a border, of fields in the Iran-Iraq frontier have the potential to create bilateral tension, according to US diplomatic cables. Meet280" Iran-Iraq Relations, US Congressional Research Service, 13 August 2011. 281" Iraqi Oil Ministry Negotiating Unitization Of Cross-border Fields, Wikileaks, 1 March 2009. 86
ings between Iraqi and Iranian officials in 2009 helped negotiations on this issue gain some momentum, and as of March of that year the Iraqi Ministry of Oil was attempting to develop a model unitisation agreement to exploit the cross-border fields. In May 2010, Iraq and Iran agreed on a Master Development Plan (MDP) for the development of five shared, unnamed oilfields in the border region. Iran and Iraq have different legal and contractual systems to develop their oil and gas fields, but the MDP could be a step toward bringing shared field development onto the agenda.282 Iraq and Iran reached another deal to develop shared oil fields in January 2011, in which the two sides agreed to set up joint expert committees to finalise technical and financial details of the development agreement. Iraq and Iran have also increased cooperation in the natural gas sector. In May 2011, the two sides signed a provisional agreement that would allow Iraq to import 25 million cubic meters (mcm) of Iranian natural gas per day and use it to power electric plants northeast of Baghdad. Then in July 2011 Iraq, Iran and Syria signed a $10 billion deal in which the three states agreed to construct a natural gas pipeline from southern Iran through Iraq and extending to Syria; Iranian officials have indicated that the pipeline would eventually extend to the Mediterranean Sea through Lebanon. Under the deal, Iraq would initially receive about 20 million cubic meters of natural gas per day.283
'Reserve wars' and OPEC quota issue After Baghdad signed landmark agreements with international oil firms in 2009 to dramatically raise its oil output, Iraq and Iran began a series of 'reserve wars' in which each side successively revised up its proven oil reserve estimates. Proven reserves are a sensitive issue among OPEC member states, as reserves are a main consideration behind the production quota each member is entitled to. In late 2010, Iraq raised its proven crude oil reserve estimates to 143.1 billion barrels, a gain of 25 percent. Weeks later, Iran said its oil reserves now stood at 150.31 billion barrels, a 9 percent rise over the previous estimate.284 282" Iran, Iraq to Develop 5 Oilfields, Iraq Business News, 5 May 2010. 283" Iran inks gas pipeline deal with Iraq and Syria, AFP, 25 July 2011. 284" WRAP: Iran's oil reserves revised up to 150.31 billion barrels, Platts, 11 October 2010. 87
Iraq and Iran have a history of conflict over the OPEC quota; during the Iran-Iraq war of the 1980s, Iraq demanded an output quota equal to Iran's. As of December 2011 Iraq was exempt from a quota as it recovered from years of war. In late 2010, after Iraq raised its reserve estimate to 143 billion barrels, an Iraqi official said that its revised figure would help it get a higher OPEC quota in the future.285 If Iraq succeeds in its planned oil production increase from 2.7 million barrels per day (bpd) in December 2011286 to to 12 million bpd by 2017.287 the increased oil supply could cause oil prices to drop. OPEC could then be forced to slash other member states' quotas - reducing their global market share - to accommodate Iraq's new capacity and temper the drop in oil prices. In this case, Iran could be the hardest hit. Iran barely manages to break even on oil prices at today's level, according to IHS Senior Middle East Energy analyst Samuel Ciszuk, and permanent loss of its global market share could be a heavy blow.288 According to the International Business Times, Iran and Iraq's successive claims of higher reserves are a politically motivated attempt to build up a long-term defense of their respective OPEC quotas. Issam al-Chalabi, a former Iraqi oil minister, told Reuters that both Iraqi and Iranian claims of higher reserves were "unreliable" and unsubstantiated by proper evidence.
Saudi Arabia-Iraq Snapshot In December 2011, after the Arab Spring and while the United States military troops leave Iraq, Saudi Arabia was anxious about the influence that Iran might have in the formerly occupied country. The notion of a democratic Iraq under majority Shia rule was considered a threat to Wahhabism and the political authority that it grants the Saudi government. In order to pro285" Iran increases oil reserves estimate, passes Iraq, Daily Star, 12 October 2010. 286" Bloomberg View: Why Iraq's Oil Flows Slowly; Speaking More Clearly at the Fed, Bloomberg Businesweek, 15 December 2011. 287" Iraqi Oil Ministry Prepares 4th Licensing Round", Iraq-Business News 21 March 2011. 288" Middle East’s new oil war: Iran, Iraq gloat over reserve size, International Business Times, 14 October 2010. 88
tect Saudi military and political dominance among Gulf countries, the Saudi-dominated Gulf Cooperation Council has excluded Iraq in various ways. Fear that Iraq could regain its oil-output quota within OPEC had also led to complicated regional dynamics, since further growth of Iraq's - and Iran's - economies could weaken Saudi clout on regional geopolitics.289 The decision to send Saudi military troops to Bahrain earlier in the year only complicates relations between Iraq and Saudi Arabia even more, as the Iraqi federal government criticized the Iranian and Saudi sectarian-based interference in Bahrain, and also the international community's commitment to intervention in Libya parallel to its lack of interest in other Arab countries' similar situations.290
Political Relations between Saudi Arabia and Iraq During the Iran-Iraq war, Saudi Arabia supported neutral shipping in the Gulf and Iraq's war-strained economy. Saudi King Fahd helped broker the August 1988 cease-fire and also strengthened the Gulf Cooperation Council, a group of six Arabian Gulf countries dedicated to regional economic cooperation and peaceful development. In the early 1990s, King Fahd helped consolidate the coalition of forces against Iraq after its invasion of Kuwait.291 In early 2003, Saudi Arabia was very vocal against the occupation of Iraq, strongly protesting regime changes that did not occur "indigenously." 292 However, once Nouri al-Maliki became Prime Minister, this did not prevent Saudi authorities' attempts to undermine Shia political power in Iraq. Saudi Arabian authorities confronted a top United States envoy with documents, dismissed by the United States as forgeries, that supposedly proved al-Maliki was a Iranian political supporter. United States military and intelligence officials stated in 2007 that most suicide bombers in Iraq and that about 40% of insurgents were Saudi, but also clarified that the Saudi government 289" US withdrawal from Iraq: The kingdom betrayed" The Sunday Times 31 July 2011. 290" Crackdown in Bahrain" DAWN website 2 April 2011. 291" Background Note: Saudi Arabia" United States Department of State website 6 May 2011. 292" Saudis warn US over Iraq war" BBC 17 February 2003. 89
did not endorse Saudi Arabian insurgents in Iraq.293 In the years before the March 2010 elections, Iraqi Prime Minister alMalaki had tried to reach out to Saudi Arabia, but was rebuked since Saudi authorities backed former interim Prime Minister - and Sunni - Ayad Allawi. Suspicion of Iranian expansion into the Iraqi Shiite political class had made the Saudi authorities reluctant to work with Prime Minister al-Malaki. However, in November 2010, after months of reassessment of regional dynamics, King Abdullah invited the Iraqi president and the country's parliamentary coalitions to come to Saudi Arabia and hold talks that would help form the Iraqi federal government.294 During the February 2011 demonstrations in Bahrain, Saudi military support to the Bahrain's government was ill-received by Iraqi authorities. After Prime Minister al-Maliki criticized Saudi intervention in Bahrian, the Gulf Cooperation Council (dominated by Saudi Arabia) decided to cancel its Arab League summit in Baghdad and met in Djibouti instead.295 By December 2011 Saudi Arabia had yet not reciprocated with an embassy being set up in Baghdad, despite the fact that in already in 2009 Ghanim Alwan al-Jumaily had become the first Iraqi ambassador to Saudi Arabia after the Gulf War.296
Sectarian Politics The Saudi distrust of Shia politics has to do mostly with the state's historical reliance on a particularly austere interpretation of Islam, Wahhabism, to solidly establish its politic authority and the weight of a history of regional politics. Political decisions in the 1970s and 1980s were crucial to this stance, when Saudi authorities feared the rise of Shia Iran under Ayatollah Khomeini, which helped foster civil disobedience by Saudi Shia in 1979. Saudi Arabian authorities published and distributed anti-Shia materials into the early 1990s.297 293" Saudis’ Role in Iraq Frustrates U.S. Officials New York Times 27 June 2007. 294" Saudi Arabia's Iraq policy (p. 1)" The Weekly Standard 15 November 2010. 295" As U.S. departs Iraq, it leaves two allies that aren't speaking" McClatchy website 18 December 2011. 296" Envoy asks Japan to fix Iraq economy via investment in energy sector" Istockanalyst website 25 March 2009. 297" The Iraq Effect in Saudi Arabia" Middle East Research and Information Project website Retrieved 25 December 2011. 90
In the early 2000s, the possibility that Iraq could disintegrate along sectarian lines, and the fact that large numbers of Saudi Arabian Sunnis had taken part in the anti-occupation and anti-Shia insurgency, caused fear in Saudi Arabia that sectarian violence could follow in their country. The appearance of cooperation between the US and Shia Iraq and the concern that Iran intended to influence a wider conflict in Iraq accentuated these fears. However, liberal-minded Sunni reformers in Saudi Arabia had already lobbied for expansion of political rights and greater religious tolerance for several years. Setting aside decades of political oppression and distrust for the royal family, many Shia embraced King Abdullah's ascension to the throne in 2005. In early 2007, the Saudi Arabian authorities expressed concern over whether the United States could contain the violence in Iraq, among fear that minority Sunni would be at the mercy of Shiite. The Saudi primary concern was that minority Sunni would be at the mercy of Shiite, specifically in the Sunni population of Anbar province. An anonymous United States senior state official leaked that Saudi authorities would consider sending troops into the province if the American military failed to contain the violence. 298 In April 2007, despite the fact that Saudi Arabia has instigated sectarian politics in the past, King Abdullah condemned the "despicable sectarianism that threatens civil war" and stated that "the stirring up of sectarian conflicts [...] and the superiority of one part of the society over another contradicts Islam." This statement can be considered both a gesture to the Shi'a community and a critique to Iraqi Prime Minister Nouri al-Maliki's divisive policies.299
OPEC rivalry In December 2009, Saudi Arabia's Oil Minister Ali al-Naimi stated that negotiations could occur to determine the conditions in which some of his country's oil output could be cut to accomodate Iraq's increase of oil output in the future.300 In January 2010, CNNMoney reported that because Iraq's oil reserves and projected oil development could make the country become 298" Saudis consider sending troops to Iraq" MSNBC 16 January 2007. 299" Saudi Arabia, Iraq and the United States" OpenDemocracy website 22 April 2007. 300" Iraq to rival Saudi Arabia in OPEC oil stakes: Analysts The Daily Star Lebanon 24 December 2009. 91
on par in the next seven years with the world's top oil producers, Organization of Petroleum Exporting Countries (OPEC) member Saudi Arabia among them. This spike in global oil supplies could potentially send prices lower and strain relationships in OPEC.301 Baghdad-based oil expert Ruba Husari had stated that Iraq's rise would take "an important balancing act within OPEC to preserve the cohesion within the organisation while at the same time satisfy Iraq's hugh needs which are bigger than any other member's [...]. Iraq's potential return as a major oil producer undoubtedly creates a challenge for Saudi Arabia more than any other member in OPEC."302 In February 2010, Iraq offered to boost the sale of its oil to India by up to 60 percent in attempt to establish a bilateral agreement with the world's fifthlargest energy consumer, a move considered an expression of Iraq's vow to become OPEC's top oil producer.303 In June 2011, as in charitable rivalry, Iraq and Saudi Arabia courted a disaster-struck and energy-stricken Japan in the form of donations and oil supplies. The Iraqi federal government donated monetary aid to Japan and stated it was "ready for expressions of interest by Japanese companies to import Iraqi oil," whereas the Saudi authorities stated they would supply to a Japanese buyer in addition to unspecified volumes agreed by contract.304 The same month led to an unexpected twist to the Saudi-Iraqi rivalry when Iran successfully opposed a move led by Saudi Arabia to raise OPEC oil output quotas in order to meet shortfalls in supplies from Libya: 305 as a result, no formal agreement on OPEC production levels could be reached.306 At the time, Iraq - unexpectedly - supported Saudi Arabia's decision to boost oil output unilaterally.307 In November 2011, when Iran moved to reduce oil 301" Iraq oil may rival Saudi Arabia" CNNMoney 12 January 2010. 302" Iraq to rival Saudi Arabia in OPEC oil stakes: Analysts The Daily Star Lebanon 24 December 2009. 303" Iraq eyes OPEC top spot, seeks India pact" UPI 11 February 2011. 304" Saudi Arabia, Iraq woo Japan with oil" Tokyo Times 23 June 2011. 305" Iran calls for OPEC cuts, Arab members unlikely to agree" The Daily Star 12 November 2011. 306" Iran Energy Profile: Still OPEC's Second-Largest Oil Producer: Analysis" Eurasia Review News & Analysis 22 November 2011. 307" OPEC likely to Cut Output in December: Iraq Oil Minister" CNBC News 22 November 2011. 92
output back to the volumes before Libya's civil war, Iraq indicated its intentions to support Saudi Arabia's position once again. An alternative to rivalry, as these more recent events indicate, could be that Saudi Arabia welcome higher production quotas for Iraq in order to return some of their own capacity to reserves and maintain their role of swing producer while Iraq refrain from artificially high prices.308
Export Infrastructure In June 2001, Saudi Arabia expropriated the Iraqi Petroleum Saudi Arabia (IPSA) pipeline after claims and threats and aggression from Iraq had destroyed any reason to maintain the pipeline on their behalf. The year before, Iraq had contacted the United Nations to demand that Saudi Arabia be held liable for any damage done to the $ 2.2 billion pipeline infrastructure. 309 In September 2003, unnamed official sources stated that Saudi Arabia would reopen the Iraqi Petroleum Saudi Arabia (IPSA) to allow Iraq to export oil from its southern oilfields to the Saudi port of Yanbu. 310 By October of the same year, however, a Saudi Aramco official stated that Iraqis "don't know what they are talking about. [...] The pipeline is not in a usable form because of its long-term and sudden closure." In December 2011, in view of Iranian threats to close the Persian Gulf from international oil trade, alternatives to the Strait of Hormuz have lead to renewed considerations about the various oil pipelines that run across Saudi Arabia. The IPSA pipeline, deactivated after the Iraqi invasion of Kuwait in 1990, and the Trans-Arabian Pipeline (also called Tapline), could carry the equivalent of up to two million barrels of oil per day to ports on the Red Sea and Mediterranean coasts.311
308" Saudi Arabia and Iraq: Oil, Religion, and an Enduring Rivalry" United States Institute of Peace website January 2006. 309" Iraq-Saudi oil pipelin is unusable" Gas And Oil website 20 October 2003. 310" Saudi to reopen Iraq pipeline" AMEinfo 11 September 2003. 311 " Circumventing the Strait of Hormuz' Bottleneck" Atlantic Sentinel 20 December 2011. 93
Kuwait-Iraq Snapshot As of mid-2011, Iraqi-Kuwaiti relations remained politically-charged and contentious, with disputes lingering over several contentious issues, including: the development oil and gas fields near or crossing the border; finalising their land and sea boundary, which has been unclear since Iraq's 1990 invasion of Kuwait; and agreeing to a price tag of reparations for Saddam Hussein-era grievances.312 Relations between Baghdad and Kuwait have made substantial progress in some areas. Kuwait re-opened its embassy in Iraq in 2008 after nearly 19 years of broken diplomatic relations between the two countries, while the Consulate of Iraq was opened in Kuwait in 2010.313 Nevertheless, the outstanding problems between Iraq and Kuwait are numerous and continue to lead to periodic tensions in the bilateral relationship.
Cross-border fields and territorial disputes Cross-border fields One of the immediate reasons for Iraq's invasion of Kuwait in August 1990 was Saddam Hussein's allegation that Kuwait was drilling at an angle over the agreed international borders of the Rumaila oil field, effectively stealing Iraq’s oil.314 As of December 2011, there remained potential for disagreement over access to fields in border zones. The Iraqi government announced in December 2011 that there were 10 oil fields in frontier regions that still needed an international boundary drawn between them, and that oil would be extracted from these fields only after finding joint mechanisms between the countries. There has never been unitisation of these fields, meaning that the Iraq and Kuwait have never agreed to an equitable division of the fields' oil based on 312" Unresolved disputes mar Iraq-Kuwait relations, Iraq Oil Report, 14 July 2011. 313" Oil fields on Iraqi-Kuwaiti border await demarcation, AK News, 4 December 2011. 314" The Invasion of Kuwait, The Finer Times, Retrieved 18 December 2011. 94
a technical assessment of how much of the reservoirs lie under each country.315 A high rate of production on one side of the border essentially sucks the oil from the other side and damages the reservoir, 316 and unitisation of these fields would preserve the life of the reservoirs and allow both sides to recover more of the resources. The Iraqi oil ministry formed a Border Committee in 2007 to examine all fields and structures adjacent to and crossing Iraq's borders, including those with Kuwait, but the lack of agreement on this issue remains a sore point in relations between the two countries.
Territorial disputes Among the fundamental border issues between Iraq and Kuwait is the latter's desire for the Iraqi government - and the Iraqi government's abstention, as of late 2011 - to formally recognise the international border as demarcated by the United Nations in 1993.317 Maritime issues are a major point of friction between the two sides. Access to Iraq's only significant commercial port, at Basra’s Umm Qasr, is via the narrow northern Persian Gulf and through the Khor Abdullah waterway, which Iraq shares with Kuwait. Over three quarters of Iraq's oil exports flowed through pipelines in this area as of mid-2009, and Iraq's efforts to strengthen its economic lifeline have been hampered by the lack of agreement with Kuwait on a maritime boundary. Tensions were raised when Kuwait began building its $1.1 billion Mubarak al-Kabir port on Bubiyan Island, just a few kilometres from Iraq’s planned $4.6 billion Grand al-Faw terminal. The Mubarak port will directly compete and limit the traffic flow to al-Faw, and congestion could affect oil tankers sailing to Iraq's nearby al-Basra and Khor al-Amaya oil terminals. As of late-2011 there were worries in Iraq that the Mubarak project could cause the country to lose up to 60 percent of its maritime traffic – mostly the larger cargo ships that already struggle to dock in Umm Qasr, the country’s only deep-water port.318 315" Iraq-kuwait: Cross-border Issues Affecting Iraq's Economy, Wikileaks, 2 July 2009. 316" Kuwait signs oil pact with Iraq, The National, 22 December 2010. 317" Port rivalry tests Iraq-Kuwait relations, Financial Times, 14 September 2011. 318" Iraqis Fear Impact of New Kuwait Port, Institute for War & Peace Reporting, 9 November 2011. 95
Though the Mubarak port officially lies within Kuwaiti borders, its location has angered Iraqi politicians, workers and tribal leaders, with Transportation Minister Hadi al-Ameri saying in mid-2011 that the Mubarak Port "demonstrates the clear intention of Kuwait to block shipping lanes from Iraqi ports." The construction of the port has prompted militant groups in southern Iraq to threaten to attack targets inside Kuwait. In August, the Shia militia Kataeb Hezbollah fired rockets into Kuwait, and warned further attacks would follow if work on the port continued. The leader of Iraq's Ghatarna tribe, meanwhile warned that if the Kuwaiti project went ahead, “the clans will take the law into their own hands”.
Reparations issue Kuwait claims over $20 billion in reparations owed from Iraq's 1990 invasion. Iraq has agreed to continue setting aside 5 percent of its oil sales for this purpose, but has argued that the $20 billion figure is excessive. The United Nations' Chapter VII sanctions on Iraq, which had supervised and enforced the compensation fund, expired on 30 June 2011 319 and the two sides have yet to establish a new mechanism for the payments since then. Without an agreement, according to Iraq Oil Report, Kuwait could take advantage of the absence of legal protection for Iraq's funds, which were removed when sanctions ended, and try to seize the funds in court. Remaining issues to be resolved before Iraq can be considered for full relief from Chapter VII sanctions, as of December 2011, include: the restitution of stolen property from Kuwait's national archives,320 the identification and repatriation of citizens who died as a result of the occupation, and an official statement by Iraq that it would not attack Kuwait in the future. Kuwaiti Airlines is also owed $1.2 billion by Iraqi Airlines for planes and parts a court ruled Iraq had stolen in the 1990s.
319" Full Details of UN Statement on Iraq, Iraq Business News, 15 December 2010. 320" France attentive to pending Kuwaiti demands, urges Iraqi progress, Dinar Guru, 16 December 2011. 96
Turkey-Iraq Snapshot America's NPR reported in 2010 that Turkey is vying with Iran to be the most influential regional power in Iraq and that Northern Iraq has become the 'staging ground' for Turkey's bid for economic dominance. In the energy sector, state companies are exploring for oil in the South, while private oil companies are discovering oil near Irbil in Iraqi Kurdistan. Academic Greg Gause went so far as to say that "the Turks have predominant influence of any foreign power, even rivaling the U.S, and they have done it through a clever and low-key strategy,". This is said to be in line with Turkey's aspirations to become an energy bridge between Europe and Asia. 321 Turkey's Trade Ministry estimates that the trade volume between Turkey and Iraq exceeded $6 billion in 2010, up from only $940 million in 2003, boosting Iraq from Turkey's tenth largest trade partner to the fifth largest. As of 2011 there were over 117 Turkish companies working on energy, agriculture and industrial projects in Iraq. Energy is a key feature of bilateral relations between the two countries. In the third round of licensing in 2010, Turkey's state-owned TPAO was among the companies to sign deals for gas fields.322
Historical Relations Following World War II Turkey was a key ally of the West in the Middle East in order to contain those countries seen as 'Soviet clients', including Iraq. During the 1990s Iraq was Turkey's lead trading partner, with the Turkish port of Ceyhan receiving oil by pipelines from Iraq's northern fields. However UN sanctions on Iraq took their toll on Iraqi-Turkish trade relations. Since the 2003 invasion and the deep structural changes it triggered in the Middle East, contemporary Iraq is torn by competing power plays between Saudi Arabia, Iran and, to a lesser extent, Turkey. Turkey meanwhile has gained international acclaim for pursuing a 'zero problems with the neigh321" Turkey Flexes Economic, Political Muscle In Iraq, NPR, 31 December 2010. 322" Turkey and Iraq, Academia, 2011. 97
bours policy', a policy nurturing positive ties with neighbouring countries.
Turkish position on Kurdish Issue Despite increasingly strong economic ties, bilateral engagement between Iraq and Turkey has been constrained by Turkey's rejection of rising Kurdish autonomy and the presence of PKK (Kurdistan Workers' Party) bases in northern Iraq, according to academic Hasan Turunc. Turkey also dominates the economy of the KRG region, with an estimated 80% of food and clothes sold imported from Turkey. Private Turkish companies have made significant investments in the region and Turkish energy companies such as Pet-Oil and Genel Energy have also won bids to develop gas and oil fields in northern Iraq.323 Turkey attaches a great deal of importance to Iraq's stability and territorial integrity and sees those matters as crucial to its own security and stability. In particular the future status of ethnically mixed Kirkuk, home to some of Iraq's largest oil reserves, is of great concern to the Turks. He comments that Turkey's principal anxiety is that the oil riches of Kirkuk will only encourage the Kurdistan Regional Government (KRG) to seek greater autonomy, which could spill over and spark unrest amid Turkey's own Kurdish population. In his words, 'energy, economy and infrastructure form the crux of Turkish involvement in Iraq.' According to the Economist, the US has encouraged the two sides to rebuild relations and telephoned Turkish president Abdullah Gul to praise "the growing Turkish-Iraqi relationship", in the hope that friendship with Turkey would enable Iraq's Kurds to export their oil and gas and check Iran's influence in the region.324
Export Infrastructure As a result of the country's rapid economic growth, Turkey has become dependent on energy imports in order to satisfy growing domestic energy demand, particularly oil and gas.
323" Erasing the Frontier:Turkey’s Trade and Investment in Iraqi Kurdistan, Tufts Global Leadership, 2011. 324" An unusual new friendship, Economist, 19 February 2009 98
Turkey is also located geographically in close proximity to around 72% of the world's proven gas reserves and 73% of oil reserves in its neighbourhood.325 According to Khaled Al-Sharikh of Tufts University, the Turkish AK Party looks to become a regional energy transit point and to diversify the source of its oil and gas imports. As a geographically pivotal though energy-poor nation surrounded by energy-rich neighbors, Turkey hopes to increase its weight in the international community through pipeline projects. In light of this, Turkey is said to be eagerly searching for opportunities in Iraqi oil and gas.
Kirkuk-Ceyhan Pipeline In order to meet its ambitious oil and gas production expansion plans, landlocked Iraq will need to rapidly develop and expand its pipeline network. The 0.5 million barrels per day (bpd) Kirkuk-Ceyhan oil pipeline is one of the country's most significant operational export links.326 Although attacks by insurgents have repeatedly interrupted the flow of oil between Iraq and Turkey, the rate in 2011 was around 450,000-500,000 barrels per day (bpd).
Gas Pipeline Iraqi gas is of particular importance to Turkey as a possible source of gas for the Nabucco pipeline project to supply gas to Europe.327 There is potential to connect Iraqi gas to the Turkish national grid through a pipeline to be constructed parallel to the Kirkuk-Yumurtalik oil pipeline. A Memorandum of Understanding (MoU) was signed on this matter in October 2009 in order to establish a natural gas corridor. The Petroleum Economist reported in September 2011 that Iraq was looking to export gas found in the blocks on offer in its fourth licensing round to Europe by pipeline through Turkey. Deputy Oil Minister Al-Shamma said that gas exports would only begin if gas fields were found and that associated gas would not be exported by pipeline. He also commented that Iraq 325" Turkey's Energy Strategy, Turkish Ministry of Foreign Affairs, January 2009. 326" Oil Export Routes - Iraq Looks for a Way Out, Petroleum Economist, 14 December 2010. 327" Northern Iraq looks to export gas via Turkey and Nabucco, Hurriyet Daily News, 5 July 2010. 99
did not need the Nabucco pipeline to deliver gas to Europe.328
Common Environmental Concerns Iraq faces the threat of desertification at an average rate of 0.5% a year and desertification is also expected to impact Turkey. For example, in the Konya basin around 80% of water depletion has occurred over the last decade and the basin faces complete desertification by 2030. The regional water crisis is though to be influenced significantly by exploration activities in the oil sector. According to Muhammad Amin Fars, General-Director of Kurdistan’s Irrigation and Water department 696,000 hectares of Iraqi agricultural land are now facing drought because of Turkish dams. There is also some disagreement over the national boundaries of the Euphrates and Tigris rivers, with Iraq asking for 65% of the water potential of the Euphrates and 92% of the Tigris, and Turkey planning to use around 52% of the Euphrates and 14.1% of the Tigris. According to Hasan, 'few commentators believe that water alone can become the cause of war between Turkey and Iraq; nevertheless its destabilizing impact is apparent'.
328" Iraq Eyes EU Gas Exports Through Turkey, Petroleum Economist, 8 September 2011. 100
International Entities Firms with Contracts with Kurdistan Regional Government (KRG) The Kurdistan Regional Government (KRG) has awarded a total of 45 contracts to foreign companies to develop its oil sector as of November 2011, 329 despite the fact that the Iraqi government in Baghdad has declared any oil deals signed with the KRG illegal.330 Major oil companies operating in Kurdistan include ExxonMobil, Hunt, Marathon, Talisman, Genel, DNO and Heritage.
Additional Companies in Kurdistan China: Addax Petroleum, a unit of Sinopec (China) United States: Aspect Energy, Hillwood, Prime, Murphy Oil Canada: Forbes, Manhattan, Western Zagros Resources, NIKO Resources, Ground Star, Shamaran South Korea: Korea National Oil Company Turkey: Petoil, Dogan Britain: Gulf Keystone Petroleum, Sterling Energy, Perenco Austria: OMV Hungary: MOL India: Reliance Industries Papua New Guinea: Oil Search Russia: Norbest 329" Iraq profile", BBC.com Retrieved 28 November 2011. 330" Iraq sees Exxon's interest in south larger than Kurd deal", Reuters 19 November 2011. 101
United Arab Emirates: Dana Petroleum331
BP Type
Public Limited Company
Founded
1909 (as Anglo-Persian Oil), 1954 (as British Petroleum)
Headquarters
London, UK
Key people
Carl-Henric Svanberg (Chairman), Bob Dudley (CEO)
Products
Petroleum products and derived products, service stations.
Revenue
US $308.9 billion (2010)332
Operating income
US -$3.7 billion (2010)
Net income
US -$3.3 billion (2010)
Total assets
US $272.2 billion (end 2010)
Total equity
US $94.98 billion (end 2010))
Employees
79,700 (end 2010)333
Website
www.bp.com
Global Snapshot Current Global Profile BP is a British global energy company, ranked in 2010 by Platts as the second largest energy company in the world based on financial performance, trailing ExxonMobil. It improved its position from fourth in the rankings in 2008.334 331" FACTBOX-Oil companies active in Iraqi Kurdistan", Reuters 5 Jan 2011. 332“ Annual Report and Form 20-F 2010” BP 333“ Annual Report 2010” Eni 334" Platts Top 250 Global Energy Company Rankings" Platts Energy, retrieved 25 102
BP began business as Anglo-Persian Oil in 1909,335 which exported its first cargo of oil in March 1912 from Abadan in Iran. From 1914 until the 1980s, the British government were the company's principal stockholder and since then BP have acquired the Standard Oil Company in 1987, merged with US company Amocco in 1998 and acquired Atlantic Richfield and Burmah Castroland in 2000.336 However, BP has since 2010 been dealing with the aftermath of the Macondo oil spill in the Gulf of Mexico in April 2010, the US's largest ever oil disaster. The Deepwater Horizon oil well explosion killed 11 workers and is estimated to have affected around 1,000 miles of shoreline, 200 miles of which were thought to be 'heavily oiled'. However, the exact extent of the spill has been disputed by different parties. 337 The company made the decision to sell none-core assets in order to pay for the clean-up operation and to compensate victims. In October 2011, BP finally received authorization to resume drilling at the site.338
Company Report Highlights BP's Annual Report released for 2010 acknowledges the difficult nature of the year passed, given the explosion at the Deepwater Horizon rig, admitting that this grew into a corporate crisis which "threatened the very existence of the company". The document reports a loss in 2010 of $3,324 million, compared to 2009 annual profits of $16.76 billion.339 However, in October 2011 BP announced a near tripling in third-quarter profits on the previous year, reaching £3.2 billion ($5.4 billion). The CEO claimed that the company had reached a 'turning point' for its oil and gas operations and production.340
October 2011. 335" Business: The Company File From Anglo-Persian Oil to BP Amoco" BBC News, 11 August 1998. 336" BP PLC" History.com, retrieved 25 October 2011. 337" Deepwater Horizon and the Gulf oil spill - the key questions answered" The Guardian, 20 April 2011. 338" Oil giant BP reaches 'turning point'" BBC News, 25 October 2011. 339" Annual Reporting" BP, retrieved 25 October 2011. 340" Oil giant BP reaches 'turning point'" BBC News, 25 October 2011. 103
CSR Activities According to BP's official website341, the following comments were made about the previous year's corporate social responsibility activities: • BP took responsibility immediately for the clean up after the Macondo spill. The clean up effort at its peak involved 48,000 people, 6,500 vessels and 125 aircraft. The company set up the $20 billion Deepwater Horizon Oil Spill Trust for claims and certain other costs, and provided hundreds of millions of dollars for economic, health and environmental programmes. They suspended dividend payments for three quarters and initiated $30 billion of asset sales to pay for the effort. • A new safety and operational risk function was set up with specialist personnel and the company is co-operating with a series of investigations. • BP are building their business in natural gas, providing a lower-carbon alternative to coal. They are also including a carbon price in new project development plans to encourage efficiency and continue to invest in low-carbon renewable energies. • Since 2005, BP has invested more than $5 billion in its alternative energy businesses and expected to invest a further $1 billion in 2011.
Transparency EITI Supporter Status As of December 2011, BP was a supporter company of EITI.
UN Global Compact As of December 2011, BP was a member of the UN Global Compact, having joined in 2000.
341" Group chief executive's letter" BP, retrieved 29 October 2011. 104
BP Operations in Iraq History BP's relationship with Iraq dates back as far as 1927, when along with Exxon, Total and Shell, it had a 23.75% share in the Iraq Petroleum Company (IPC)342. Following contracts signed in the 1930s, the IPC gained full control over Iraq's oil343 and thus kept Iraq's oil reserves under foreign control for more than 40 years. BP continued working in Iraq for many years and helped to discover the super giant field Rumaila in 1953344 before closing their representative office there due to the war with Kuwait in 1990345. They restarted work in Iraq, more specifically on Rumaila, in April 2005 when they signed a Services Agreement with the Ministry of Oil for an “Integrated Rumaila Oil Field Study.”346.
Activities and Service Contracts BP and China National Petroleum Company had their field bid accepted in June 2009 by Iraq’s Oil Ministry for the service contract for Rumaila oil field, Iraq’s largest oil field. 347 in what has been called an historic televised oil field auction.348 BP was the first oil major to secure a long-term contract in Iraq, when it agreed to cut its fee per barrel from $3.99 to $2.
342" | Oil Giants Return to Iraq ", The Independent, Friday, 20 June 2008 343" | BP – Stealing Iraq’s Future ", Shareholder Briefing by PLATFORM April 2008. 344" | Rebirth of Rumaila ", O&G Next Generation Magazine, February 2010 edition 345" |BP-Led Consortium Wins Iraq Oil Deal ", CBS News, 17 October, 2009 346" |BP in Rumaila ", from speech by Michael C Daly, BP Head of Exploration, on 16 February 2010 347" | Iraq, Oil and Gas Legislation, Revenue Sharing, and U.S. Policy ", by Christopher M. Blanchard, Analyst in Middle Eastern Affairs, November 3, 2009 348" | BP's Iraq oil deal faces court battle ", 23 Jan 2010 105
BP holds a 38% stake in the venture, while CNPC holds 37% and Iraq takes the remaining 25%.349 After the initial agreement awarding BP the Rumaila contract area, an informed Iraqi industry expert said the company renegotiated the terms of the service contract. The negotiations took place during December 2009 and January 2010 and resulted in a final contract that differed from the model contract published by the government in 2009.350 BP has announced that, together with both CNPC and the Iraqi State Oil Marketing Organization (SOMO), they intend to grow production in Rumaila from approximately 1 million barrels per day (bpd) to 2.85 million bpd351 and together with CNPC are to spend around $15 billion in Rumaila.352 At the end of March 2010 the company announced that it had awarded $500 million in contracts to drill wells at Rumaila 353 and over the course of 2010, BP and CNPC drilled 41 out of the 70 wells originally planned. 354. BP’s former head of production Andy Inglis has suggested that the field may become the world’s second-largest by 2015. According to reports in the Wall Street Journal, the Rumaila deal is considered crucial for the world’s oil industry, as if successful it could be part of one of the largest expansions of crude-oil production ever achieved anywhere in the world. Reports in the UK's Guardian newspaper in 2011 accused BP of taking a 'stranglehold' on the Iraqi economy after secretly renegotiating their service contract for the Rumaila field, to the effect that BP would be immediately compensated for civil disruption or government decisions to cut production. Critics see this as a major step away from the original terms of the deal signed in the summer of 2009.355
CNOOC Founded
1982
349" | BP-China National Group Signs Pact for Iraq Oil Field ", The Wall Street Journal, November 4 2009 350Interview by EITI Reporting with Iraqi oil executive, June 2010 351" | BP's Annual Review 2009 352" | BP to Be Paid in Crude for Iraq Investment Costs ", 28 April 2010 353" | BP Begins Big Push to Revive Iraq's Oil ", 31 March 2010 354" Petrofac JV snags Rumaila job" Oil Online, 29 June 2011 355" BP 'has gained stranglehold over Iraq' after oilfield deal is rewritten", 31 July 2011 106
Headquarters Beijing, China Key People
Mr. Fu Chengyu (Chairman), Mr. Yang Hua (CEO) 356
Revenue
RMB 183.1 billion (approx. US$29 billion), 2010.
Net Income
RMB 54.4 billion (approx. US$8.6 billion), 2010.
Total Assets
RMB 327.9 billion (approx. US$51.9 billion), end 2010.
Total Equity
RMB 215.8 billion (approx. US$34.2 billion), end 2010.
Employees
4,650 (end 2010)
Website
http://www.cnoocltd.com
Global Snapshot Current Global Profile CNOOC Ltd is the listed unit of the China National Offshore Oil Corporation357 and is listed on the New York and Hong Kong stock exchanges. The CNOOC Group is China's largest producer of offshore crude oil and natural gas and mainly engages in exploration, development, production and sales of oil and natural gas. The Group has four major producing areas in offshore China (Bohai Bay, Western South China Sea, Eastern South China Sea and East China Sea) and has overseas assets in Indonesia, Australia, Nigeria, Argentina and the US, among others. As of December 2010, the Group had access to net proved reserves of approximately 2.99 billion barrels of oil equivalent (boe). Average daily production was 900,702 boe/day. As of December 2010, the company's overseas proved reserves and production accounted for approximately 25.4% and 20.1% of operations respectively. In 2005, CNOOC withdrew an $18.5 billion takeover bid it had made for US oil and gas producer Unocal in the face of strong political opposition in the US. However, the company said that its bid had been based on purely
356" Annual Report 2010 CNOOC, 2011. 357" Cnooc bags oil field deal in Iraq, China Daily, 18 May 2010. 107
commercial objectives.358
Company Report Highlights Chairman Chungyu summed the year's activities up in the company report as “a new era of growth”. The stock price appreciated by 51.1% over the year and CNOOC Ltd was the leader of Hong Kong’s blue chip companies. The year saw a significant increase in production, breakthroughs in exploration, and "remarkable financial results". In 2010 Mr. Chungyu stepped down from his position as CEO to become Chairman of CNOOC. Net production over 2010 saw a 44.4% increase on 2009 figures. 13 new discoveries were made, including the deepwater discovery of Liuhua 29-1, and 9 new oil and gas fields commenced production. Overseas development also made progress as the business moved into South America and the Middle East, as well as making its debut in the shale gas business. The report recognizes that, with the rapid growth of production volume, the pressure on finding new reserves and expanding the current reserve base has increased significantly. In 2011, the company’s annual production target is 355 to 365 million boe, and over the next five years the production target of the compound annual growth rate is between 6% and 10%.
CSR Activities CNOOC's 2010 Annual Report highlights the following achievement in corporate social responsibility: • The company received the award for “Best Chinese Company” in the “Corporate Governance Asia Recognition Awards 2010". • In 2010 there was no accident causing critical casualties and HQ organized numerous training session to improve the emergency response capability, in which more than 400 employees participated. • CNOOC constructed three pipelines to bring natural gas from south Bohai Bay to the oil fields in west Bohai Bay so that natural gas can be used for power generation and thus reduced carbon emissions in the area. • Continued support for charitable activities in developing infrastructure in Tibet and donations to the "Mother's Water Cellar" project. 358" Chinese oil firm drops Unocal bid, Guardian, 2 August 2005. 108
• Assistance to children in various provinces of China through construction of schools, provision of stationary and books, and monetary donations.
Transparency EITI Supporter Status As of December 2011, CNOOC was not a supporter company of the EITI.
UN Global Compact As of December 2011, CNOOC was not a participant in the UN Global Compact.
CNOOC Operations in Iraq History The 2009 service contract signed marked the start of CNOOC's work in Iraq.
Activities and Contracts In May 2010 CNOOC signed a final deal with the Iraqi government to develop the Maysan oilfield complex along with Turkish state-run TPAO. CNOOC's original partner for developing the field Sinochem pulled out of the deal when CNOOC decided to reconsider their first offer and accept the Iraqi government's proposed remuneration fee of $2.30 per barrel of oil produced. TPAO then joined the venture to fill the gap. CNOOC and TPAO set a production plateau target for the field at 450,000 barrels per day (bpd). CNOOC holds a 63.75% stake in the venture, while TPAO holds 11.25% 359 and the Iraq Drilling Company company holds a 25% stake.360
359" Iraq in deal with CNOOC, TPAO for Maysan oilfields", Best Growth Stock quoting Reuters, May 12, 2010 360International Activities" TPAO, retrieved 13 December 2011. 109
Chairman Chengyu commented that "it is a pleasure for CNOOC to participate in rebuilding of the oil industry in Iraq" and analysts told the China Daily that the move underlines domestic oil companies' focus on developing oil resources in Iraq, saying that "the country remains one of the few regions in the world where Chinese companies can still find big opportunities".361
China National Petroleum Corporation Type
Government-owned Corporation
Founded
1988
Headquarters
Beijing, PR China
Key people
Jiang Jiemin (President)
Products
Oil, natural gas, petrochemicals, oil exploration.
Revenue
US $240.2 billion (2010)362
Net income
US $14.4 billion (2010)
Total assets
US $399.1 billion
Total equity
US $211.8 billion
Employees
1,674,541 (2011)
Website
www.cnpc.com.cn
Global Snapshot Current Global Profile Government-owned CNPC is China's largest integrated oil and gas company, with exploration and production projects in China and 30 other countries. It is an oilfield services provider in 50 countries and operates some older refineries and a gas pipeline network in China (including 70% of the 361" Cnooc bags oil field deal in Iraq, China Daily, 18 May 2010. 362" Fortune 500: China National Petroleum Corporation", CNN Money, retrieved 9 December 2011 110
country's crude oil pipelines). The CNPC has a network of 18,000 gas stations across China. In 2009 the company completed more than 1,900 exploration wells and reported proved reserves of more than 1 billion metric tons of oil equivalent.363 In 2011, CNPC was ranked 6th on CNN's Global 500 list of the world's largest corporations.364 According to the Fortune Global 500, part of CNPC's strength comes from its partnerships with governments of oil-rich countries and the multinational companies that operate there. In 2011 CNPC was working with Russia, Venezuela, Iraq and Qatar, and had partnered with BP, Total S.A. and Shell.
Company Report Highlights CNPC's 2010 Annual Report365 notes that 2010 was the final year of China's 11th Five-Year Plan and that CNPC has been seeking a greater international role over the past five years. The Report claims that the company's operating performance exceeded expectations in 2010, with operating income up 41% on the previous year's figures and total profit up 34.5%. In its Exploration and Production activities, CNPC made significant strategic discoveries, contributing to sustained high growth in reserves. Natural gas operations maintained rapid growth, now accounting for 35.4% of domestic production in terms of oil equivalent. CNPC's overseas business continued to grow in scale as a result of expanding cooperation with host countries and international oil companies, with important cooperation with Russia, Kazakhstan, Turkmenistan, Venezuela and Canada. The company acquired Australia's 'Arrow Energy' and established a presence in Qatar's hydrocarbon exploration in partnership with Shell. In Iraq, the CNPC was continuing its cooperation with BP, Total and Petronas.
363" China National Petroleum Corporation: Company Description", Hoovers, retrieved 8 December 2011 364" Global 500", CNN Money, retrieved 8 December 2011 365" Annual Report", CNPC, 2011 111
Looking ahead to 2011, the first year of the 12th Five Year Plan, CNPC claims to feel positive. The company plans to adapt their development to changes at home and abroad, focusing on the oil and gas business but promoting technological innovation, strengthening safety procedures and environmental protection, and enhancing energy efficiency.
CSR Activities CNPC’s CSR Activities are outlined in its 2010 Annual Report, and include the following highlights: • Energy saving and water efficiency measures saved 1.87 million tons of standard coal equivalent and 38.21 million cubic metres of water in 2010. • During the 11th Five-Year Plan period, CNPC cumulatively saved 9.37 million tons of standard coal equivalent and 302 million cubic metres of water, and met their target one year ahead of schedule. • In July 2010, CNPC was honoured with 'Outstanding Award for Energy Conservation and Emission Reduction' by the State-Owned Assets Supervision and Administration Commission of the State Council. • In 2010, the CNPC launched a new round of risk control by monitoring safety risks and promoting HAZOP assessment with the mechanical cleaning of oil tanks. They also conducted examination of the construction of long-distance pipelines, the operation of refining facilities and offshore operations in order to manage safety risks and prevent accidents.
Transparency EITI Supporter Status CNPC is not a supporter company of EITI.
UN Global Compact CNPC does not form part of the UN Global Compact.
112
CNPC Operations in Iraq History CNPC's relationship with Iraq dates back to 1997, when talks took place over oilfield contracts and a deal was signed with Saddam Hussein's government to develop the Ahdab oilfield. 366 The deal was between Al-waha Petroleum Company, (a Joint Venture between the CNPC and China North Industries Corporation) and the Iraqi government at the time. However, this agreement was postponed due to the UN sanctions on Iraq and the subsequent US-led invasion in 2003.367. The deal was renegotiated in 2008 with Iraq's Ministry of Oil at a value of $3 billion to produce 110,000 barrels per day (bpd), up from the 90,000 bpd forecast in the original deal.368. Work began in March 2009 and came up against the obstacle of protests from local farmers, 369 however in June of 2011 the company announced that it had completed construction of the first phase of the field project.
Activities and Service Contracts In 2009 the CNPC led a consortium which won the contract to develop the Halfaya oil field, with CNPC holding a 37.5% stake in the project, Total and Petronas holding 18.75% and Iraqi state-run South Oil Company holding the remaining 25% stake.370. The contract envisages a remuneration fee of $1.40 per barrel and the consortium was to pay Iraq a non-recoverable signature bonus of $150 million371 The consortium has pledged to boost output at Halfaya to 535,000 barrels per day (bpd) from a 2010 level of 3,100 bpd.372 366" | The Chinese National Petroleum Company ", The International Resource Journal, March 10 2010 367" | CNPC in Iraq ", CNPC Worldwide 368" | China's CNPC seals $3bn Iraq deal ", BBC News, 28 August 2008 369" CNPC completes Al-Ahdab Iraq oilfield construction", Arabian Oil and Gas, 27 June 2011 370" | Iraq : CNPC's Halfaya project in Iraq to start operation in H2 , The Free Library, 9 March 2010 371" | Iraq inks CNPC, Total, Petronas Halfaya deal ", Iraq Oil Field, Jan 30, 2010 372" CNPC and partners sign development and production contract on Iraq's 113
In 2009 CNPC was also part of a consortium alongside BP, which won a contract to develop the Rumaila oil field. BP and CNPC had their field bid accepted in June 2009 by Iraq’s Oil Ministry for the service contract for Rumaila oil field, Iraq’s largest oil field. 373 in what has been called an historic televised oil field auction.374 BP was the first oil major to secure a long-term contract in Iraq, when it agreed to cut its fee per barrel from $3.99 to $2. CNPC holds a 37% stake in the venture, with BP holding 38% and Iraq the remaining 25%.375 BP has announced that, together with both CNPC and the Iraqi State Oil Marketing Organization (SOMO), they intend to grow production in Rumaila from approximately 1 million bpd to 2.85 million bpd376 and together with CNPC are spending about $15 billion in Rumaila. 377 Over the course of 2010, BP and CNPC drilled 41 out of the 70 wells originally planned.378.
DNO Type
Public Limited Company
Founded
1971
Headquarters
Oslo (Norway)
Key People
Helge Eide (President, MD), Berge Larsen (Chairman)
Products
Oil and gas.
Revenue
NOK 1.25 billion, (approx. $208.3 mill), 2010.379
Operating Income
NOK 156.8 million (approx. US $26.1 mill) 2010.
Halfaya Oilfield" CNPC, 28 January 2010 373" | Iraq, Oil and Gas Legislation, Revenue Sharing, and U.S. Policy ", by Christopher M. Blanchard, Analyst in Middle Eastern Affairs, November 3, 2009 374" BP's Iraq oil deal faces court battle" Telegraph, 23 January 2010 375"BP-China National Group Signs Pact for Iraq Oil Field ", The Wall Street Journal, November 4 2009 376 BP's Annual Review 2009 377 BP to Be Paid in Crude for Iraq Investment Costs ", 28 April 2010 378" Petrofac JV snags Rumaila job" Oil Online, 29 June 2011 379 “Annual Report and Accounts”. DNO International, 21 July 2010. 114
Net Income
(-NOK 282.9 million) (approx. US $47.1 million), 2010.
Total Assets
NOK 5.4 billion (approx. US $899.2 mill), 2010.
Total Equity
NOK 2.1 billion (approx. US $349.7 mill), 2010.
Website
www.dno.no
Global Snapshot Current Global Profile DNO International ASA is a Norway-based oil and gas exploration and production company. Its operating activities are primarily undertaken in the Middle East, Africa and in the UK. The company holds oil and gas assets in Yemen, the Kurdistan region of Iraq, the North Sea, Mozambique and Equatorial Guinea. The company is also active on the Norwegian Continental Shelf.380
Company Report Highlights DNO's operating revenues for 2010 increased by 44% on 2009 figures, mainly due to higher production from Iraq's Tawke field and higher oil prices. However provisions for 'special items', such as arbitration costs, negatively affected the net profit result. The company's working interest production in 2010 was 17,381 barrels of oil per day (bpd), compared to 12,285 bpd in 2009. Partners in Yemen approved the first phase of the field development for the Yaalen discovery and DNO commenced the drilling of three exploration wells in three countries in the last quarter of 2010. Hydrocarbons were discovered in two of the wells. In 2010 DNO was awarded exclusive rights to negotiate for substantial exploration acreage in Mozambique and Yemen.
380“ ASA”. Reuters, retrieved 22 December 2011. 115
CSR Activities DNO's Annual Report for 2010 highlights the following achievements in corporate social responsibility: • DNO was not able to meet all of the Global Reporting Initiative (GRI) in 2010, but is committed to continue using the standard to improve, and an internet-based GRI table was due to be launched during 2011. The company is also meeting the reporting requirements set by the EITI. • During 2010 a separate business ethics and anti-corruption program was rolled out to employees both at corporate headquarters and in the business units. • All licenses and PSCs are subject to an Environmental Impact Assessment (EIA), developed in accordance with the World Trade Bank Standard. • During 2010 social investments in Mozambique included the refurbishment of two schools and local health services. Investments in Kurdistan have continued with the water purification project in the Dohuk governorate, exchange programs between Kurdistan and Norway and financial support for the education of students of oil industry-related subjects, scholarships and investments in infrastructure. In Yemen, DNO continued to support the Yemen Smile initiative to help children born with open clefts.
Transparency EITI Supporter Status DNO became an EITI supporting company in July 2011.381
UN Global Compact As of December 2011, was not a participant in the UN Global Compact.
381“ Annual Report and Accounts 2010”. EITI, 5 July 2011. 116
DNO Operations in Iraq History DNO's activities in Iraq began in 2004.
Involvement with KRG DNO entered Kurdistan in 2004 and has a local office in Erbil, while its activities in Kurdistan are managed from another office in Dubai. DNO as currently has three PSCs in the region, including the Tawke oilfield, 382 (55% working interest), Duhok (40%) and Erbil (40%). Tawke had a production capacity of 70,000 bpd but actually produced about 50,000 bpd as of November 2011,383 while exploration drilling began at Duhok in 2010 and Erbil in 2011.384 The KRG temporarily suspended DNO's oil contracts in September 2009 after a document issued by the Oslo Stock Exchange implied that KRG Natural Resources Minister Ashti Hawrami was involved as a benefactor in the sale of DNO shares to Genel Enerji in October, allegations that the KRG denied and responded two by suspending DNO's contracts for six weeks.385 DNO has been involved in two controversies regarding the hiring of senior US officials to promote its activities in Kurdistan. 386 In 2005, Peter Galbraith was paid by DNO to advise it even as Galbraith in his official capacity as a US diplomat was advising on constitutional arrangements which resulted in providing an interpretation that allowed the KRG authorities to claim support for regional management of the oil industry. 387 Then in mid2010, former US ambassador to Iraq Zalmay Khalilzad was nominated for 382" 2010 Annual Report", DNO International Retrieved 30 November 2011. 383" DNO to Boost Capacity at Iraq’s Tawke Oil Field", Iraq Daily Times 15 November 2011. 384" 2010 Annual Report", DNO International Retrieved 30 November 2011. 385" KRG suspends DNO oil contracts", United Press International 22 September 2009. 386" The Khalilzad DNO affair and the Galbraith parallels", Gulf Analysis website 24 June 2010. 387" DNO Pays Galbraith and Keeps Business in Kurdistan", Rudaw 11 October 2010. 117
the board of DNO, though he later declined to fill the post.388
Eni Type
Public Limited Company
Founded
1953
Headquarters
Rome, Italy
Key people
Roberto Poli (Chairman), Paolo Scaroni (CEO)
Products
Oil and natural gas exploration, production, refining and marketing, electricity generation, oil and gas engineering and construction.
Revenue
€99.48 billion: 2010 (approx. US $136.83 billion)389
Operating income €16.11 billion: 2010 (approx. US $22.16 billion) Net income
€6.318 billion: 2010 (approx. US $8.72b)
Total assets
€131.86 billion: end 2010 (approx. US $181.97 billion)
Total equity
€55.73 billion: end 2010 (approx. US $76.92 billion)
Employees
79,940 (end 2010)
Website
www.eni.it
Global Snapshot Current Global Profile Eni is one of Italy’s largest companies. It operates in the oil and natural gas, petrochemicals, and oil field services industries, and has expanded into power generation. The Italian government holds a share of more than 30% in the company390, which currently operates in more than 70 countries.391 388" Khalilzad won't join DNO", Iraq Oil Report 12 August 2010. 389 “Annual Report 2010” Eni. 390“ Eni SpA Company Profile”. Yahoo Finance,retrieved 04 October 2011. 391“ ENI SPA”. Bloomberg Business Week,retrieved 04 October 2011. 118
In 2009, the European Commission announced that it had lodged formal antitrust charges against Eni after suspicions were raised that the Italian energy group conspired to keep competitors from using its gas pipelines, following initial antitrust proceedings initiated in 2007.392
Company Report Highlights In 2010 Eni reported a net profit of €6.32 billion. Adjusted net profit saw a rise of 32% from a year ago, due to a recovery in the oil price environment. Production grew by 1.1% for the full year, thanks to delivery of 12 startups, particularly the Zubair field in Iraq, which contributed 40 kilo barrels of oil equivalent (kboe)/day of new production. Highlights of recent exploration activities include a joint venture to develop the giant Junin 5 oilfield and the discovery in 2009 of the giant Perla discovery in Venezuela. Eni is leading the consortium in charge of redeveloping the Zubair field in Iraq over a 20 years period and holds a 32.8% share. 2010 also saw Eni divest its subsidiary Societa Padana Energia in Italy and sign a preliminary agreement with an affiliate of Petrobras for the divestment of its 100% interest in Gas Brasiliano Distribuidora.
CSR Activities According to official company publications, Eni's corporate social responsibility policies and achievements include:393 • In 2009, Eni was awarded "Best in Class" for the "Code of Conduct/Compliance" area within the Dow Jones World Sustainability Index. • Eni joined the Extractive Industries Transparency Initiative in 2005, with the aim of progressively integrating the concept of transparency into its management system. • Eni is committed to protecting and promoting human rights in all its areas of operations in compliance with the Guidelines adopted in 2007. • As part of a Human Rights Compliance Assessment project in 2008, two pilot projects were completed in Nigeria and in Kazakhstan; in 2009 three self-assessments were carried out in Algeria, Egypt and in the DRC. 392“ EU hits Italian energy group ENI with antitrust charges” EUbusiness, 20 March 2009. 393“ Sustainability Report” Eni, retrieved 04 October 2011 119
• The year 2007 saw the introduction of the Guidelines for the Protection and Promotion of Human Rights, where Eni set out its commitment to implementing the principles outlined in its own Code of Ethics and respecting key international standards, above all the United Nations' Universal Declaration of Human Rights. • When planning and constructing infrastructure for transporting energy, the route is chosen on the basis of its environmental impact. • Eni is committed to the environmental remediation of contaminated areas by adopting state-of-the-art technology such as bioventing and phytoremediation.
Transparency EITI Supporter Status As of December 2011, Eni was a supporter company of the EITI.
UN Global Compact As of December 2011, Eni was a member of the UN Global Compact, having joined in 2001.
Eni Operations in Iraq History Since the 1980s Eni has been involved in carrying out engineering studies in various oilfields on behalf of the Iraqi Oil Ministry. In 1992 the Oil Ministry signed a Production Sharing Agreement (PSA) with a number of international oil companies (IOCs) for the development and production of oilfields in the country. Eni negatiated a PSA with the Ministry for the Nasiriya oilfield and in 1997 a Memorandum of Understanding (MoU) was signed between the two parties. However, this agreement was never followed through due to UN sanctions imposed on the country.
120
Eni began operating in the country once again when awarded a licence for the Zubair deposit during the 2009 bidding rounds, following Saddam Hussein's fall from power in 2003.394
Activities and Service Contracts In 2009, Eni was part of a consortium including Occidental and Kogas which won the contract to develop Zubair oil field in Missan province. Eni holds a 32.81% stake, while Occidental Petroleum holds a 23.44% stake, Kogas 18.75% and Iraq's state-run Missan Oil Company holds the remaining 25%. The service contract has a duration of 20 years, and as part of the contract the consortium was due to pay the Iraqi Oil Ministry $300 million as a refundable five-year loan, instead of paying a signature bonus as was the case in other deals made following the second round of the oil field bids held in December 2009.395. Development of Zubair pushed up Eni's estimates for global investment to approximately $72 billion in the 2010−2013 time frame, an increase of 8% from the 2009−2012 plan, 396 with target production expected to be progressively reached over the next six years and maintained for seven years thereafter.397. The deal has the potential to be extended to 25 years and the consortium plans to increase the field's production to 1.2 million barrels per day (bpd) from 2010 levels of 185,000 bpd398 Eni had originally proposed a service contract of over $4 a barrel, but agreed to accept $2 a barrel after BP accepted the same for the Rumaila field in November 2009. An article in Business Week quoted Eni as saying that "clarifications from Iraq on tax-related issues were critical in the decision to accept a lower price". 399
394Iraq: Exploration and Production Eni, retrieved 9 December 2011 395| Eni Consortium Finalizes Deal to Develop Iraq Oil Field The Wall Street Journal, January 25 2010 396| Eni Gains Momentum in Iraq Zacks Investment Research, May 26 2010 397| Eni Consortium to Redevelop Zubair Field in Iraq Rigzone News, January 22, 2010 398| Eni Consortium Finalizes Deal to Develop Iraq Oil Field The Wall Street Journal, January 25 2010 399| Why Oil Majors Are Coming Back to Iraq Business Week, November 4, 2009 121
Production at the Zubair field over 2010 increased from 183,000 bpd to more than 201,000 bpd. 400 In November 2011, Eni signed a preliminary agreement for a $240 million project to drill 22 oil wells and more than double production at Zubair, pending approval from the Iraqi Oil Ministry.401 During a 2011 meeting with Iraqi PM Nouri al-Maliki, Eni CEO Paolo Scaroni commented that his company was interested in participating in the upcoming bidding round for development of the Nasiriya field.
ExxonMobil Type
Public Limited Company
Founded
1999
Headquarters
Texas, USA
Key people
Rex Tillerson (Chairman and CEO)
Products
Fuels, lubricants, petrochemicals
Revenue
US $383.221 billion (2010)402
Operating income US $52.96 billion (2010) Net income
US$ 30.46 billion (2010)
Total assets
US$ 349 billion (2010)
Total equity
US$ 146.839 billion (2010)
Employees
83,600 (end 2010)
Website
www.ExxonMobil.com
Global Snapshot 400ENI chief meets Iraq's prime minister UPI, 27 September 2011 401Eni Signs $240 Million Iraq Oil-Wells Agreement, Official Says Bloomberg, 3 November 2011 402 “FORM 10-K/A: ExxonMobil Corporation” United States Security and Exchange Commission 122
Current Global Profile US-based firm ExxonMobil is currently ranked second on the Fortune 500 list of the largest American corporations, ranked by revenue. 403 It began life as the Standard Oil Company in 1882 and became ExxonMobil in 1999 as an alliance of of two of the direct descendants of John D. Rockefeller's Standard Oil Company, Exxon and Mobil. 404 The company has several divisions and hundreds of affiliates with names including ExxonMobil, Exxon, Esso or Mobil.405 In 2008, on the back of soaring global oil prices, ExxonMobil became the world's most valuable firm when shares soared by over 40% in a year. 406 In 2010 they acquired XTO Energy, a leading developer of unconventional resources including shale oil and gas which requires advanced drilling techniques.407 In August of 2011, Exxon secured a $3.2 billion joint venture with Rosneft on high risk deep-sea exploration in the Arctic and Russian Black Sea.408 Over 2010, Exxon's total net production of liquids and natural gas was 4.4 million barrels of oil equivalent (boe)per day. Over 25% of their upstream production came from the US and roughly the same proportions from Africa and Asia.409 Exxon is said to be considering the potential, currently being developed by Shell, of using revolutionary Floating Liquified Natural Gas (FLNG) in order to build a fleet of ships that could be utilized for offshore gas discoveries.410
403" Fortune 500: ExxonMobil" CNNMoney, retrieved 07 October 2011. 404" Our History" ExxonMobil, retrieved 07 October 2011. 405" ExxonMobil Corp Profile" Reuters, retrieved 07 October 2011. 406" The age of oil" The Economist, 24 February 2005. 407" Exxon Mobil to buy XTO Energy in big U.S. gas bet" Reuters, 14 December 2009. 408" Exxon Mobil clinches Arctic oil deal with Rosneft" BBC News, 30 August 2011. 409" Annual Report 2010" ExxonMobil, Retrieved 07 October 2011. 410" Oil Majors Seek FLNG Support to Build $5 Billion Ships" Oil and Gas Eurasia, October 2008. 123
Company Report Highlights ExxonMobil's Annual Report for 2010411 shows that capital and exploration expenditures for the year were a record $32.2 billion, and that the company planned to invest more than $165 billion over the following five years. The company's market valuation had increased 12.9% to $364 billion in 2010 on the back of rising oil prices, after a significant dip in 2009. Net in come also rose by 58% from 2009 levels to $30.46 billion, but remains some way off 2008 levels of $45.2 billion. These figures include record Chemical earnings. In 2010, Exxon also started up three major Upstream projects and finalized an agreement with the Iraq Ministry of Oil to redevelop and expand the West Qurna oil field, in which they hold a 60% interest. The company's takeover of XTO Energy allowed them to become the largest natural gas producer in the US and their percentage of proven reserves replacement increased from 100% in 2009 to 211%.
CSR Activities Exxon's 2010 'Corporate Citizen Report' marks the following highlights in corporate social responsibility: • A 10% reduction in lost-time incident rate since 2009. • 40 technical scholarships awarded and 1263 global internships and co-op assignments sponsored. • Over 33,000 employees received anti-corruption training. • The company received a 10/10 rating from GovernanceMetrics International and was ranked among the top 1% of companies rated. • 2,600 hectares of protected wildlife habitats were added. • The company managed a 20% reduction in upstream flaring. • $1.6 billion had been invested to improve energy efficiency and reduce greenhouse gas emissions since 2006.412 411 " Annual Report 2010" ExxonMobil, Retrieved 07 October 2011. 412" Corporate Citizen Report 2010" ExxonMobil, Retrieved 9 January 2012. 124
Transparency EITI Supporter Status As of December 2011, ExxonMobil was a supporter company of the EITI, having joined on its creation in 2002. CEO Rex Tillerson co-authored the foreword to the EITI Business Guide.413 In addition to the company's membership of the EITI, ExxonMobil announced in 2010 that they would serve on the Iraq EITI Board after the country joined the initiative. The company has also been active in the multistakeholder committee working to implement the EITI process in Equatorial Guinea.414
UN Global Compact On their official website, ExxonMobil state that while they were not a signatory of the UN Global Compact as of December 2011, its values regarding human rights, labour standards, the environment and anti-corruption are embedded in their own Corporate Standards.415
ExxonMobil Operations in Iraq History Historically, ExxonMobil held a 23.75% share (held in two equal parts by the then-separate companies of Exxon and Mobil) in the Iraq Petroleum Company (IPC) along with Total, Shell and BP416. After being formed in 1928417 the IPC gained full control over Iraq's oil after contracts signed in the 1930s418 and thus kept Iraq's oil reserves under foreign control for more than 40 years. 413" REITI Business Guide: Extractive industries can be part of the solution" EITI, 12 May 2008. 414" Corporate Citizen Report 2010" ExxonMobil, Retrieved 9 January 2012. 415" Safety in our operations" ExxonMobil, retrieved 07 October 2011. 416" | Oil Companies Hold Down Production in Iraq 417 Oil Giants Return to Iraq ", The Independent, Friday, 20 June 2008 418 BP – Stealing Iraq’s Future ", Shareholder Briefing by PLATFORM April 2008. 125
Activities and Service Contracts In 2009 the company formed part of a consortium alongside Shell which won the contract to develop West Qurna Phase 1, a field which holds holds 8.7 billion barrels in proven oil reserves,419 thus ensuring their position as one of the largest players in postwar Iraq.420 This agreement was formalised in January 2010 when ExxonMobil Iraq Limited, an affiliate of ExxonMobil, signed an agreement with the Iraq Ministry of Oil. The agreement designated ExxonMobil as the lead contractor with a 60% interest in the consortium, with the Iraqi state-owned Oil Exploration Company holding a 25% interest, and Shell holding a 15% interest.421 The consortium guaranteed to increase oil production levels from the 201 level of 270,000 barrels per day (bpd) to 2.25 million bpd within seven years, for which a licence fee of $1.90 a barrel would be paid by the Iraqi government.
Water Injection Project Abdul Mahdy Al Ameedi, director of the Oil Ministry’s Petroleum Contracts and Licensing Directorate, announced in April 2010 that ExxonMobil has been picked to lead a multibillion-dollar water-injection project on behalf of international oil companies (IOCs) that won contracts in southern Iraqi oilfields.422. The water injection project aims to provide water to maintain reservoir pressure to fields such as Rumaila, West Qurna Phase 1 and 2, and Zubair and Majnoon. After disputes over costs suspended the project for some time, the Iraqi government and the oil majors came to an agreement in October 2011. Ameedi said the project would process some 10 to 12 million barrels of water a day from the Persian Gulf for injection into the southern fields. The plan is scheduled to take two to three years, ramping up as the southern oil fields increase their production. He commented that "We are now having a problem to secure water from the Tigris and Euphrates rivers because water 419" | Exxon Consortium OKs Iraq Contract Changes ", Rigzone, January 19, 2010 420" | ExxonMobil wins $50bn contract ", The Guardian, 5 November 2009 421" | ExxonMobil Signs Agreement with Iraq ", Business Wire, 25 January 2010 422" | ExxonMobil to lead Iraq water injection project ", Bloomberg Business Week, March 4, 2010 126
flow in both are declining".423 Other companies which are expected to join forces with Exxon, are Shell (operator of the Majnoon oil field), Italian Eni (operator of Zubair ), Lukoil (operator of West Qurna Phase 2), CNPC, (operator of Halfaya ) and Malaysia's Petronas (operator of the Garraf field).424
Negotiations with the KRG In November 2011 ExxonMobil became the first oil major to sign an oil and gas exploration contract with the Kurdistan Regional Government (KRG),425 in a deal that includes six exploration agreements. 426 Large international oil companies (IOCs) such as ExxonMobil had refrained from signing deals with the KRG427 because, as of November 2011, a deal had yet to be finalised on the sharing of oil revenues between the Iraqi central government in Baghdad and the KRG.428 Baghdad considers any oil deals signed with the KRG illegal429 and in signing the deal, Exxon may have put its field development contract at the supergiant West Qurna Phase 1 field in southern Iraq at risk, according to Abdul Mahdy al-Ameedi, head of the Iraqi Ministry of Oil's Petroleum Contracts and Licensing Directorate. al-Ameedi told Dow Jones Newswires that Exxon could be replaced at West Qurna 1 by Shell, which holds a minority (15%) interest in the development contract, or potentially any other company. The Iraqi government is also considering imposing sanctions on ExxonMobil, according to Deputy Prime Minister for Energy Hussain alSharistani, though as of November 2011 it was not clear under what legal 423" Exxon Spearheads Iraqi Water-Injection Project", Rigzone quoting Dow Jones, April 10, 2010 424" Iraq and IOCs to Build Oil Field Water Injection Plant", Iraq Business News, 19 October 2011 425" Exxon's Kurdistan move set to trigger raft of oil mergers", Telegraph 13 November 2011. 426" Exxon may face Iraq sanctions, lose West Qurna", ArabianOilandGas.com 22 November 2011. 427" Iraq Criticizes Exxon Mobil on Kurdistan Oil Pursuits", New York Times 12 November 2011. 428" Exxon's Kurdistan move set to trigger raft of oil mergers", Telegraph 13 November 2011. 429" Exxon may face sanctions from Kurdistan deal", The Globe and Mail 22 November 2011. 127
authority it would do so.430 The Ministry of Oil said on 26 November 2011 it would prevent ExxonMobil from participating in the fourth round of petroleum licensing if it did not cancel its contracts with the KRG.431 However, in December 2011, al-Ameedi seemed to back away from his previous decision when he stated that the Iraqi federal government would uphold agreements with ExxonMobil, despite the fact that it was "considering measures" in response to the oil company's contracts with the KRG. At the time, the Director General also declined to specifiy what measures would be taken or to rule out that punitive steps could be decided upon at a later date.432
Genel Energy Type
Public Limited Company
Founded
2011
Headquarters
Ankara (Turkey)
Key People
Tony Hayward (CEO), Mehmet Sepil (President)433
Products
Oil and gas.
Website
www.genelenergy.com
Global Snapshot Current Global Profile Genel Energy plc is incorporated in Jersey and with offices in the UK, Turkey and Kurdistan. It was formed following the merger of Vallares PLC and Genel Energy International Limited in November 2011. The company's primary assets are oil and gas licenses located in the Kurdistan region of 430" Exxon may face Iraq sanctions, lose West Qurna", ArabianOilandGas.com 22 November 2011. 431" Iraq to exclude Exxon Mobil from 4th oil licensing round", AKnews 26 November 2011. 432" Iraq to Uphold Accord With Exxon Mobil ‘For Now,’ Al-Ameedi Says" Bloomberg Businessweek 14 December 2011. 433Message" Genel Energy plc, retrieved 19 December 2011 128
Iraq.434 Before founding Genel, CEO Tony Hayward was previously Chief Executive of BP, a post he was force to leave following the oil spill in the Gulf of Mexico.435 According to Iraq Oil Report, Hayward's multi-billion dollar acquisition of Genel Enerji represented "an enormous vote of confidence in Iraq's semi-autonomous Kurdistan region."436 The company engages in exploration, appraisal, development and production of oil fields and has over 500 direct and seconded employees located in the Kurdistan region and Ankara. In the first half of 2011 the company grew its working interest production to 41,000 barrels per day (bpd).437
CSR Activities According to Genel's official website, the company policy on social responsibility comprises the following: • The HSSE (Health, Safety, Security and Environment) Management System defines the approach to managing these issues across all facilities and activities, providing practical guidance and procedures for all staff. • At new well sites, Genel's planning process incorporates the latest guidelines for waste management, pit location and construction, handling of water discharges and waste disposal. The location and size of new pits are selected so as to minimize disruption of the surface resources and to preserve the potential for reclamation of the site. • The company is committed to providing education, training and awareness activities for workers and representatives in order to make them conscious of their roles and responsibilities regarding the communities where they operate, and in order to raise and improve awareness of issues facing the local communities.438
434About Us" Genel Energy plc, retrieved 19 December 2011 435Tony Hayward moves into Kurdistan with Genel Energy as tensions rise" Telegraph, 17 November 2011 436Q&A: Genel Energy's Tony Hayward and Mehmet Sepil" Iraq Oil Report, 22 November 2011 437About Us" Genel Energy, 22 November 2011 438Corporate Social Responsibilitiy" Genel Energy, retrieved 19 December 2011 129
Transparency EITI Supporter Status As of December 2011, Genel Energy was not a supporting company of the EITI.
UN Global Compact As of December 2011, Genel Energy was not a participant in the UN Global Compact.
Genel Operations in Iraq History Genel Energy began operations in Iraq in 2004.
Involvement with KRG Genel has signed six PSCs with the KRG, and is the largest holder of reserves in Kurdistan. Genel Enerji AS,439 the predecessor to Genel Energy,440 was the first company to execute a PSC with the Interim Joint Regional Administration of Northern Iraq (represented by the Sulaimaniyah Regional Government) for exploitation of the Taq Taq oilfield; this PSC was reinstated and signed by the KRG and Genel Energy International Limited in 2004. Genel has stakes in two producing oil fields in Kurdistan, with a 44% working interest in the Taq Taq field 441 (producing 90,000 bpd as of November 2011)442 and Tawke (25% working interest) licence areas, having acquired the latter in March 2009. Genel's exploration interests lie in the Ber Bahr, 439" Company Profile", Genel website Retrieved 30 November 2011. 440" Genel Energy Plans New Iraq-Turkey Pipeline", Iraq-Business News 15 November 2011. 441" Company Profile", Genel website Retrieved 30 November 2011. 442" Tony Hayward moves into Kurdistan with Genel Energy as tensions rise", Telegraph 17 November 2011. 130
Dohuk, Miran (all acquired March 2009) and Chia Surkh (June 2009) license areas.443 The company is headed by Tony Hayward, former chief executive of BP. Vallares, an investment vehicle Hayward founded after resigning from BP after the Gulf of Mexico oil spill in 2010, bought Genel in a $2.1 billion deal in September 2011. Under the terms of the transaction, the owners of Vallares and Genel own equal shares in the new company.444
Heritage Type
Public Limited Company
Founded
1992445
Headquarters
Jersey
Key People
Michael Hibberd (Chairman), Tony Buckingham (CEO)
Products
Oil and gas exploration and production.
Net Income
US 1.2 billion (2010)
Website
www.heritageoilplc.com
Global Snapshot Current Global Profile Heritage Oil is an oil and gas exploration and production company listed on the Toronto and London stock exchanges. The company owns producing assets in Russia, exploration projects in the Kurdistan region of Iraq, the Democratic Republic of Congo, Malta, Pakistan, Tanzania and Mali, as well as an investment in Libya.446
443 444" Ex-BP Chief’s Firm to Buy Iraqi Oil Company in $2.1 Billion Deal", DealBook 7 September 2011. 445 “2010 Annual Report", Heritage Oil. 446 About Heritage", Heritage Oil, retrieved 22 December 2011. 131
The company was founded in 1992 and was initially formed to hold interests in offshore Angola. In 1997 it was awarded interests in onshore Congo and went on to discover the M'Boundi Field in 2001, which brought substantial gains. According to the UK's Independent, Heritage has a history of moving early into unstable, oil-rich regions that pose significant personal and operational risks, such as Uganda and Kurdistan. The company was thought to be the first foreign oil company to enter Libya after the 2011 uprising when it acquired small Benghazi-based services company Sahara for $19.5 million in October 2011. Prior to founding Heritage, CEO Tony Buckingham was a partner at private security firm Executive Outcomes. Buckingham transformed Heritage from a company valued at $15 million on the Toronto Stock Exchange in 1998 to a FTSE 250 company valued at $1.1 billion in 2011. As of early 2011 he owned 30% of the group through his investment vehicle Albion Energy.447 In September 2011 the UK-based Petroleum Economist reported that the Libyan National Transitional Council (NTC) had been approached by individuals linked to Heritage Oil seeking a contract to provide security at Libyan oil fields. However the request was rejected by the chairman of Libya's National Oil Corporation (NOC), who called the offer "not acceptable". It was also reported that the firm had been lobbying UK Foreign secretary William Hague for support.448
Company Report Highlights The sale of Ugandan assets left Heritage with a strong balance sheet for 2011. Following the completion of the sale of the assets, the company paid a special dividend to shareholders and bondholders of 100 pence per share. Over 2010 petroleum revenue increased by 85%, thanks to a $1.25 million increase in sales volumes and an increase in average commodity prices.
447 Profile: Tony Buckingham, chief executive of Heritage Oil", Telegraph, 26 January 2011. 448[ UK Firm Lobbies Hague over Libya Security Deal", Petroleum Economist, 26 January 2011. 132
During 2010 Heritage discovered the largest gas field in Iraq in the last 30 years, achieved nearly a twelve-fold increase in contingent resources and completed 3D seismic acquisition in offshore Tanzania. Production in Russia also increased by 65% in 2010.
CSR Activities Heritage's Annual Report 2010 highlights the following as achievements in corporate social resonsibility: • In 2010 a Board-level CSR Committee was established, in order to regularly review community involvement. • A total of $945,991 was spent on CSR related activities in 2010. • The company continued with an excellent health and safety record with no lost time incidents or fatalities. • Programmes were continued in Uganda with the completion of the water gravity system in Hoima, providing clean water to over 6000 villagers across five villages and continued support to the Carl Nefdt School. Programmes on this model also progressed in Kurdistan and Tanzania.
Transparency EITI Supporter Status As of December 2011, Heritage was not one of the supporting companies of EITI.
UN Global Compact As of December 2011, Heritage was not a member of the UN Global Compact.
Heritage Operations in Iraq History Heritage's activity in Iraq began in 2007. 133
Involvement with KRG Heritage entered into a PSC with the KRG on 2 October 2007 for the Miran Block449 in the south of Kurdistan. Heritage announced in April 2009 that Genel Energy had entered the Miran Block as a third party participant,450 holding a 25% participating interest in the license while Heritage, the operator, holds the remaining 75%.451 The Miran Block contains two large structures, Miran West and Miran East, and Miran West is believed to be one of the larger structures in Kurdistan, with an estimated areal extent of about 200 square kilometers. Heritage announced in early 2011 the discovery of a large gas field with the Miran West-2 well which,452 containing up to 12.3 trillion cubic feet of gas, it believes to be the largest gas field to be discovered in Iraq in the last 30 years. The company has a 75% working interest in the Miran Block, though the KRG have a back-in right what is a back-in right? why wouldn't they exercise it? which, if exercised, could reduce Heritage’s interest to 56.25%. The first export production from the Miran Block is targeted for 2015 using planned regional infrastructure, according to Heritage's 2010 Annual Report.
Hunt Type
Private
Founded
1934453
Headquarters
Dallas, Texas (USA)
Key People
Steve Suellentrop (President)
Products
Oil and gas
449" Heritage Notes KRG's Third Party Nominee in Miran License", Rigzone 9 April 2009. 450" Operations - Iraq", Heritage website Retrieved 1 December 2011. 451" Heritage Notes KRG's Third Party Nominee in Miran License", Rigzone 9 April 2009. 452" 2010 Annual Report", Heritage Retrieved 1 December 2011. 453Hunt Oil Company Profile" Yahoo Finance, retrieved 19 December 2011 134
Revenue
US $4 billion454
Employees
4700
Website
www.huntoil.com
Global Snapshot Current Global Profile Hunt Oil was founded in 1934, reportedly with H.L. Hunt's poker winnings. The company engages in exploration and production with interests worldwide in 13 different countries (2011). 455 In 2011 Forbes magazine ranked Hunt Oil in 90th place on their annual list of America's largest private companies. The company is headquartered in Dallas, Texas and operates as a subsidiary of Hunt Consolidated Inc.456 Hunt has significant operations in Peru where its 50%-owned Camisea project is developing estimated gas reserves of more than 13 trillion cubic feet. The company also operates a liquefied natural gas (LNG) plant in Yemen and in 2011 was exploring in North America as well as in Iraq, Morocco, Namibia, Oman, Romania and Senegal.
CSR Activities Hunt's official details the following highlights in corporate social responsibility: • In 2009 Hunt was awarded "Best Corporate Social Responsibility Campaign" for its Hunt Global Partnerships program by the London-based Petroleum Economist Magazine. • In 2010, Peru’s National Society of Mining, Petroleum and Energy named Hunt Global Partnerships the winner of its Sustainable Development Award for promoting local development.
454#90 Hunt Consolidated/Hunt Oil" Forbes, retrieved 19 December 2011. 455Global Operations Overview" Hunt Oil Company, retrieved 19 December 2011. 456Hunt Oil Company" Bloomberg Businessweek, retrieved 19 December 2011. 135
• In 2007 Hunt achieved its lowest ever employee injury incident rate and the best combined employee/contractor rate in company history. 457
Transparency EITI Supporter Status As of December 2011, Hunt was not a supporting company of the EITI.
UN Global Compact As of December 2011, Hunt was not a participant in the UN Global Compact.
Hunt Operations in Iraq History The contracts signed by Hunt in 2007 mark the beginning of Hunt's operations in Iraq.
Involvement with KRG The production sharing contract (PSC) signed by Hunt in September 2007 was the first to be signed with the Kurdistan Regional Government (KRG) since the enactment of the Oil and Gas Law of the Kurdistan Region in August 2007. Hunt entered into the contract, which covered petroleum exploration activities in Kurdistan's Duhok area, with Impulse Energy Corporation as its junior partner.458 Hunt and Impulse each held 50 percent working interests in the Ain Sifni block as of mid-2011; 459 in July 2011, London-based oil company Afren bought a 20 percent stake in the field, with Hunt, the field's operator, and the KRG owning 60 and 20 percent stakes in the field, respectively.460 457Hunt Global Partnerships" Hunt Oil Company, retrieved 19 December 2011. 458" KRG signs oil and gas contract with US-based Hunt Oil", KRG Website Retrieved 08 September 2007. 459" Oil & Gas – International E&P", Scotia Capital April 2010. 460" Afren raises £113 million for Kurdistan acquisitions", Proactive Investors 28 136
The US government discouraged companies from signing oil deals with the KRG until Iraq had enacted its regional hydrocarbons law. However a senior Hunt manager told a US official in Erbil that the area's high potential for oil production "trumped" the risks and legal ambiguities associated with its involvement in a disputed territory such as northern Nineveh.461 The Huffington Post has questioned the involvement of the American Bush Administration in the deal, given that the former head of Hunt Oil Ray L. Hunt previously served on the President's Foreign Intelligence Advisory Board.462
Japex (Japan Petroleum Exploration Company Limited) Type
Publicly Trade Company (Kabukishi Gaisha)
Founded
1955
Headquarters
Tokyo (Japan)
Key People
Osamu Watanabe (President/CEO)
Products
Petroleum and natural gas exploration, production and transportation.
Revenue
US$ 1.932 billion (2010)463
Operating Income
US$ 141.068 million (2010)
Net Income
US$ 198.895 million (2010)
Total Assets
US$ 5.602 billion (2010)
Employees
1,735 (end 2010)
Website
www.japex.co.jp
July 2011. 461" Hunt Oil Signs Agreement With Krg Under Krg Oil Law", Wikileaks 12 September 2007. 462" Kurdistan 'Hunts' for Oil: The Kurds Make Their Own Rules", Huffington Post 16 September 2007. 463" Japex: Annual Report 2010" Japex Website Retrieved 25 December 2011. 137
Global Snapshot Current Global Profile Japex' principal operating areas are, domestically, Hokkaido, Akita, Yamagata and Niigata in Japan, and overseas, Canada, the United States, Iran, Iraq, Indonesia, China, the Philippines, Russia and Libya.464 In 2009, Japex acquired the oil product sales unit of a Mitsubishi Materials subsidiary, thus expanding its portfolio. The Japanese government owns a 34% share in Japex, which currently has proved reserves of 272 million barrels of oil equivalents (boe).465 In September 2011, the Japanese government stated it was considering selling its stakes in Japex in order to use the funds for reconstructions of the northeastern areas of the country that were devastated by the March 2011 earthquakes and tsunami. The stakes, which are held in a special account, are worth approximately ¥ 700 billion in investments oil and gas-related developments.466
Company Report Highlights Japex reported a growth in total assets from ¥ 578,059 million yen in 2007 to ¥ 620,946 million (about $7.5 billion) in 2008. In their 2008 Annual Report, they set out a number of targets, including the figure of recoverable reserves of 350 million boe by the end of March 2013, and the estimated investment of estimated ¥110 billion over five years for exploration work in existing projects.467 Average net production volume during the fiscal year of 2008 was 20,167 barrels of oil per day, including bitumen, and 3,521 thousand m3/d (124 million cubic feet per day (mmcf/d)) of natural gas - equivalent to another 42,316 barrels of oil equivalent per day (boe/d). 464" | Japex Financial Analysis Review ", Companies and Markets, 04/02/2010 465" Japex Company Profile " Yahoo Finance Retrieved 25 December 2011. 466" Japan Government Mulls Selling Stakes In Inpex, Japex For Quake Reconstruction - Report" Fox Business 6 September 2011. 467" Japex: Annual Report 2008" Japex website Retrieved 25 December 2011. 138
By March 2010, Japex's annual report indicated that total assets had shifted to ¥521,009 million (about $5.6 billion). The company's net production volume during the same year was 17, 681 boe/d, including bitumen, and the oil equivalent of 21,551 boe/d of natural gas.
CSR Activities According to official company documents, Japex's CSR Activities include: • Sponsored lectures at universities and graduate schools to help develop human resources that can contribute to future energy resource development by promoting academic research at universities and supporting the education of engineers. • Participation in and sponsorship of local festivals and other events to deepen mutual exchanges among the residents of regional communities in which domestic operations are located. The company is also promoting a greater understanding about their business activities. • From 2010 onward, safety initiatives which included a zero occupational accidents policy, pollution prevention, and improving company workplaces' healthiness and comfort.
Transparency EITI Supporter Status Japex is not a supporting company of EITI.
UN Global Compact Japex is not a member of the UN Global Compact.
139
Japex Operations in Iraq History Japex’s relationship with the Iraqi Ministry of Oil dates back to March 2005 when they began to conduct evaluation studies of undeveloped oil fields jointly with the Ministry’s engineers. Since 2007, Japex has worked with more than 450 trainee engineers dispatched from the Ministry of Oil.468 In 2008 Japex supplied 3D seismic survey equipment and software for the Ministry’s surveys of the Gharraf oil field.
2009 Service Contracts Japex together with Petronas signed a contract in 2009 to explore and produce oil from the Gharraf oil field. The consortium is expected to invest up to $8 billion in the field469 and will be paid a remuneration fee of $1.49 a barrel under the 20-year long service contract. 470 Japex will hold a 30% stake, Petronas a 45% stake and Iraq’s South Oil Company will hold the remaining 25% stake in the field.471 In March 2010, Japex' annual company report stated that although the Iraqi state-owned South Oil Company was the deal's contracting party, the similarly state-owned North Oil Company would be the partner development contractor that would hold the 25% share in the project. The consortium is promising to reach a plateau production target of 230,000 barrels a day by 2016-2017. 472 In February 2011, Reuters reported that state-owned Japan Oil, Gas and Metals National Corporation (JOGMEC) would provide about $198 million of capital to the development of the Gharraf oilfield project. In return, JOGMEC would take a stake of less than 50% in Japex' wholly owned subsidiary that is taking part in the
468" Annual Report 2008 " Japex website Retrieved 25 December 2011. 469" | Iraq: Petronas and Japex sign deal for Gharraf oil field ", Energypedia News, Jan 18, 2010 470" Iraq, Petronas, Japex in Gharaf oilfield accord" The Saudi Gazette Retrieved 25 December 2011. 471" JAPEX, Petronas to develop Iraq oil field" AME info 20 January 2010. 472" International Exploration and Production: Iraq" Japex website Retrieved 25 December 2011. 140
project473 - that is to say, Japex Garraf Limited.474 -
KazMunayGas Type
State-owned company
Founded
2002
Headquarters
Astana, Kazakhstan
Key people
Bolat Akchulakov (President)475
Products
Oil, natural gas.
Employees
70,121476
Website
www.kmg.kz
Global Snapshot Current Global Profile KazMunayGas (KMG) is 100% owned by Kazakhstan's National Sovereign Wealth Fund and is the owner of 44 onshore oil and gas fields in the Mangistau and Atyrau regions. The company accounts for 65% of all oil transportation, 100% of gas transportation and 50% of tanker transportation in Kazakhstan. In December 2011, state-owned KMG announced it planned to spend more than $3.8 billion on geological and exploration work between 2012-16, conducting large-scale drilling in the Kazakh sector of the Caspian sea shelf. The company planned to boost oil output to 24.4 million tonnes by 2015, and 33.7 million tonnes by 2010, from the 22.1 million tonnes expected in 473" Japan's JOGMEC to invest in Gharraf Oilfield" Iraq Business News 11 February 2011. 474" International Exploration and Production: Iraq" Japex website Retrieved 9 January 2011. 475“ KazMunayGas O&G Company ex head Kairgeldy Kabyldin appointed head of KazTransOil”. Tengri News, 11 October 2011. 476“ KazMunayGas: Participant Information” UN Global Compact, retrieved 9 December 2011 141
2011.477 One of the principal subsidiaries of KMG is KazMunayGas Exploration and Production (KMG EP), established in 2004 following the merger of Uzenmunaigas JSC (UMG) and Embamunaigas JSC (EMG). The company's shares are listed on the Kazakhstan Stock Exchange (KASE) and its global depositary receipts (GDRs) on the London Stock Exchange (LSE). KMG EP is the Kazakhstan's second largest oil producer, however in 2010 the Board of Directors approved the Company's participation in several projects outside Kazakhstan. These included the 'White Bear' project in the North Sea and a tender to develop the Akkas field in Iraq together with Kogas.478
KMG EP Company Report Highlights According to the 2010 Annual Report for KMG's Exploration and Production subsidiary, production continued to grow in 2010, rising by 16% to around 270,000 barrels of oil per day (bpd). Over 2010 the reserves replacement ratio at the Uzen and Emba fields was, at 73%, significantly better than in 2009, but still not entirely satisfactory given the depletion of deposits. KMG EP intended to make additional efforts to ensure a higher level of reserves replacement at its core assets in the future. Capital expenditure for 2011 had been approved at US $709 million, and the company was expanding its exploration assets. 2010 was marked by the company's first significant onshore oil discovery at the Liman Block in West Kazakhstan, but the CEO commented that they should not limit their business activities to Kazakhstan alone. The development strategy of KMG EP up to 2029 set an ambitious goal of becoming one of the world's top 20 oil and gas companies and states that the company's main goal is to increase shareholder value, increasing the profitability of existing assets and continuing to develop the business in new directions. Chairman Askar Balzhanov commented that KMG EP has the responsibility of representing the oil and gas sector of Kazakhstan on the London Stock Exchange. 477“ Kazmunaigas to spend $3.8 bln on exploration by 2017”. Yahoo Finance, 2 December 2011. 478“Annual Report 2010”. KazMunaiGas, 25 March 2011. 142
CSR Activities KMG EP's 2010 Annual Report highlights the following achievements in corporate social responsibility: • Total 'Social Expenses' in 2010 were $28 million. • In 2008 KMG EP started to allocated $6.1 million annually to its contractual obligations to the Social Infrastructure Development Programme for the town of Zhanaozen aand Karakiya district. Funds are spent on the development of municipal housing, public services and social infrastructure. In addition, the company provided additional financial support of $6.6 million in addition to the company's contractual commitments. These funds were used to create 1000 social jobs in Zhanaozen, a 200-apartment residential building and the expansion of a subsistence farm in Tenirekshin village. • The company annually provides sponsorship and charitable assistance in the Atyrau region, including the Ak-Bot Orphanage, the Association of Disabled Persons, city sports organizations and financial assistance to World War II veterans. In 2010 the company spent $0.8 million on these projects. • KMG EP allocated $10.7 million in 2010 to the development of a program for improvement of social and living conditions at the subdivision of UMG for 2009-12, to be spent on new dining halls, first aid medical stations etc. • In 2010, 4,500 employees improved their level of qualification through participation in seminars, training, certification programs and conferences. The company also publishes the Munaily Meken newspaper, which is distributed to all employees to discuss important social and HR-related problems.
Transparency EITI Supporter Status As of December 2011, KazMunayGas was not a supporting member of the EITI.
143
UN Global Compact As of December 2011, KazMunayGas was a participant in the UN Global Compact, having joined in 2006.
KazMunayGas Operations in Iraq History In December 2010 the Board of Directors of KMG's Exploration and Production subsidiary KMG EP approved the Company's participation in several projects outside Kazakhstan. These included participation in a tender to develop the Akkas field in Iraq together with Kogas.479 However since pulling out of the the contract for the Akkas field, KMG was not participating in any projects in Iraq as of December 2011.
Activities and Contracts Along with Korea's Kogas, KazMunayGas won the rights to develop the Akkas field during Iraq’s third energy bidding round in October 2010. Under the terms of the bid, Kogas was the operator of the project, the plateau production target was 100 MMscf/day and the proposed remuneration fee was $7.50 per barrel of oil equivalent (boe) produced.480 According to KMG EP's CEO, the new project would be of benefit to the company's employees, who would gain important experience in the area of gas field development, given that their specialists had not been fully engaged in gas production in the past, other than with 'associated gas'. In May 2011 however KazMunayGas pulled out of the venture, leaving Kogas as the sole investor and operator and forcing the company to double its share in the project.481
479 “Annual Report 2010”. KazMunaiGas, 25 March 2011. 480“ Bidding Results Overview for Licensing Round 3”. Iraq Energy, retrieved 13 December 2011. 481“ Anbar, central governments poised for fight over Akkas”. Iraq Oil Report, 1 June 2010. 144
Kogas (Korea Gas Corporation) Type
State-owned
Founded
1983
Headquarters
Seongnam, Gyeonggi, South Korea
Key People
Gang Soo Joo (President, CEO)482
Products
Oil and gas
Revenue
KRW 22,611,276 million (2010)483
Operating Income
KRW 831,479 million(2010)
Net Income
KRW 206,216 mill: 2010 (approx. US$19.5 mill)
Total Assets
KRW 24,292,411 million (end 2010)
Shareholder Equity KRW 5,296,880 million(end 2010) Employees
2,931 (June 2011)484
Website
www.kogas.or.kr
Global Snapshot Current Global Profile Korea Gas Corp. (KOGAS) was established in 1983 by the Korean Government, who in 1999 began to privatise the company 485. Consequently, Kogas is currently shared between the South Korean government, with a 27% stake and the state controlled Korea Electric Power Corporation (KEPCO) with 25%, with the the remaining equity split among local government and institutional investors.486 482" Korea Gas Corporation", Reuters 483" Consolidated Financial Statements" Kogas, retrieved 15 December 2011. 484" Our Profile" Kogas, retrieved 15 December 2011. 485| Energy profile of South Korea The Encyclopedia of Earth, Last updated Sep 20 2007 486" | South Korea Profile ", US Energy Information Administration, June 2007 145
Kogas engages in the production and distribution of natural gas and in 2011 was the world's largest importer of liquefied natural gas (LNG). The company is the sole provider of LNG to the Korea, operating three terminals and a nationwide pipeline network. The Company acquired 100% of Kogas Australia Pty Ltd., to invest in Australia Gladstone liquefied natural gas (GLNG) project, on February 28, 2011. The Company's business scope also includes natural gas exploration and production, with gas field development projects in Myanmar, Canada, Russia, Africa, Australia, Indonesia, Uzbekistan and others in 2011. In May 2010 Kogas revised its Articles of Association and reported plans to enter into the new business of exploration, production and sales of crude oil, mainly targeting Iraq.
Company Report Highlights The Kogas 2010 Annual Report notes that competition among countries for energy security is intensifying with each year. Kogas is said to be actively contributing to the nation's goal of becoming an 'energy powerhouse'. Net income for 2010 fell for the second year in a row, dropping 13.4% from 2009 figures, however sales rose 16.6% on the previous year after falling between 2008-9. With a goal of becoming a leading global energy enterprise, Kogas will focus on overseas resource development projects, as well as on its mid- and downstream businesses. The company landed Exploration and Production (E&P) projects in Zubair, Badr, Mansuriya, and Akkas of Iraq, as well as mining blocks in Myanmar, Mozambique and Indonesia. As part of the 'Kogas Vision 2017' plan, the company has set a natural gas self-sufficiency goal of 25%. A stable supply of natural gas is deemed a top priority business objective.
CSR Activities On the Kogas official website, the following achievements in corporate responsibility are highlighted: • The year 2004 was designated as the starting point for 'enterprise-wide ethical management', the ultimate goal of which is to transform the company into a 'clean energy supplier'. This is intended to 'go beyond simple 146
rhetoric' and result in greater transparency and fairness. The company 'Code of Ethics' has the following 4 missions: to firmly establish a framework for practicing ethical management in the workplace; to act responsibly when dealing with other Kogas workers; to fulfil duties and obligations to shareholders and customers; to fulfil obligations to the community and nation as a whole.487 • In 2007, the Corporation announced VISION 2017, setting the foundation for a global standard management system and clarifying their commitment to a safe and agreeable environment. • In 1999 Kogas launched Cheongyeon Service Corps, a body dedicated to organized social service activities. The Volunteer Service Corps in 2007 had 4,207 participants. • Kogas was selected as the best company in gas sector on the Dow Jones Sustainability Index Korea for two consecutive years as a result of its diver sified evaluation on financials, social contribution, environmental and corporate governance. • The company established the Blue Sky project agreement, building on a previous 'clean air campaign', which is to monitor air pollution in 120 locations in the Daejeon area on a continual basis. Photovoltaic generators will also be installed in childrens' libraries, with the aim of passing down 'blue skies' to future generations.488
Transparency EITI Supporter Status As of December 2011, Kogas was not an EITI supporter company.
UN Global Compact As of December 2011, Kogas was not a participant in the UN Global Compact.
Kogas Operations in Iraq 487" Ethical Management", Kogas, retrieved 15 December 2011. 488" EHS", Kogas, retrieved 15 December 2011. 147
History 2009 marked the start of Kogas's work in Iraq.
Activities and Service Contracts Oil fields In 2009, Kogas formed part of a consortium along with Italy's Eni and Occidental to develop the Zubair oil field in southern Iraq. Kogas holds an 18.75% share, Eni has 32.81%, while Occidental holds 23.44% and Iraq's state-run Missan Oil Company holds the remaining 25%. Together, the consortium plans to invest approximately $20 billion over the life of the 20year contract, which has the potential to be extended to 25 years, and Kogas has said it plans to invest around $6.5 billion in the field489 According to the contract, the consortium will boost the field's production from its current level of about 200,000 barrels per day (bpd) by 10 percent, and earn $2 for each extra barrel produced.490 The consortium initially askd for $4.80 a barrel produced but later revised its bid to $2 after BP accepted the same amount for the Rumaila field.491 Kogas has also formed part of a consortium to develop the Badra oil field, together with Gazprom, Petronas and TPAO. The consortium, in which Gazprom holds a 40% stake, Kogas 30%, Petronas 20% and TPAO 10%,492 originally requested $6 per barrel of oil extracted from the field but later accepted the Oil Ministry's offer of $5.50 493. Kogas has said that it will invest $1.05 billion in the project, with the consortium as a whole investing a total of $3.52 billion to pump 170,000 barrels of oil per day.494 489Eni Consortium Finalizes Deal to Develop Iraq Oil Field The Wall Street Journal, January 25 2010 490Eni Consortium to Redevelop Zubair Field in Iraq Rigzone News, January 22, 2010 491Eni Consortium Finalizes Deal to Develop Iraq Oil Field The Wall Street Journal, January 25 2010 492" Iraq signs deal with Gazprom group for Badrah ", Reuters, Jan 28, 2010 493" Russian energy giant Gazprom wins contract for Iraq's Badra oil field ", Taiwan News, 13 Dec 2009 494" Iraq signs deal with Gazprom group for Badrah oil field ", Energy-pedia news, Jan 28, 2010 148
Gas fields When Iraq launched its third licensing round in 2010, Kogas was favored among 15 companies invited to bid for the Akkas, Mansuriya, and Siba gas fields because of their experience in the industry, and was among 13 companies that finally registered for the auction round.495 Turkey's TPAO, Kuwait Energy Company and Kogas finalised deals in June 2011 to jointly develop the Mansuriya field in eastern Iraq, 496 which pays $7 per barrel of oil equivalent (boe) extracted 497 and has a plateau production target of 9.06 million cubic meters (mcm) per day. Despite that fact that in June 2011, Sabah Abdel Kadhim, an Iraqi Ministry of Oil official, stated that the ministry had signed an agreement with Kogas to begin developing the Akkas natural gas field 498, it was not until October of the same year that various delays were solved and the Iraqi Ministry of Oil and Kogas signed a definitive deal. Already in June, Kogas had agreed to double its stake in the project from 37.5% up to 75%, after its consortium partner KazMunaiGas withdrew unexpectedly from the project. The Iraqi state-owned North Oil Company will hold the other 25%. The deal Kogas signed for the Akkas field in October 2011 will pay the company a remuneration of $5.50 per boe extracted. The production plateau target in Kogas' winning bid was 11.3 million cubic meters (mcm) per day over 13 years. The gas produced at the two fields will be used domestically mainly for power plants and the petrochemical industry, according to Iraqi officials, and the surplus will be exported. Both deals will run for 20 years. Added to its minority stakes in the Zubair and Badra oil fields, Kogas' most recent gas deals have helped it strengthen its position in the Iraqi petroleum sector.
495" Gas Fields Bid Round In Iraq: Success With Risk", Middle East Economic Survey 27 December 2010. 496" Iraq inks final deal SKorea's KOGAS", Yahoo!News 13 October 2011. 497" Mansuriyah Contract Area - Bidding Results", Petroleum Contracts and Licensing Directorate 20 October 2011. 498" KOGAS Deal for Akkas Gas-Field Is Signed" Iraq Business News 1 June 2011. 149
Kuwait Energy Company Type
Private
Founded
2005
Headquarters
Salmiya, Kuwait499
Key People
Sara Akbar (CEO, Director), Roger Phillips (CFO)
Products
Oil and gas exploration.
Revenue
US $141.8 million (2010)500
Net Income
US $21.9 million (2010)
Total Assets
US $740.9 million (2010)
Total Equity
US $631.3 million
Employees
464 (Sept 2011)
Website
http://www.kec.com.kw
Global Snapshot Current Global Profile Kuwait Energy Company (KEC) operates as an independent oil and gas exploration and production company. It engages in the exploration, production and development of oil and gas reserves in the Middle East, North Africa and Eurasia regions. Countries where KEC has operations include Kuwait, Egype, Yemen, Iraq, Oman, Russia and Pakistan. The company, formerly know as Zahra Oil and Gas, was founded in 2005 and is headquartered in Salmiya, Kuwait. The company operates as a subsidiary of the Zahra Group. CEO Sara Akbar said in November 2011 that the planned initial public offering (IPO) of the company is intended to help it in pursuing potential acquisitions in the Middle East and North Africa region. 499Kuwait Energy Company" Bloomberg Businesweek, retrieved 15 December 2011 500Company Profile September 2011" Kuwait Energy Company, retrieved 15 December 2011 150
The company's vision is to become the pre-eminent oil and gas company in the Middle East, and aims to be producing 75,000 barrels of oil equivalent (boe) per day by the end of 2015, with 400 million boe of proved and probable reserves.
Company Report Highlights According to the company report for 2010, since 2006 production levels for the KEC have rised from just 680 barrels of oil equivalent (boe) per day, to 13,258 boe/day. Between 2009-2010 production output grew by 15.3%. Net profit for 2010 was up 291% on 2009 levels, after a steep drop in earnings from 2008 to 2009. The report highlights Iraq, Kuwait, Egypt and Yemen as key growth opportunities for the company and comments that the company's long term focus is increasingly on the Middle East and North Africa region. In October 2010 a Memorandum of Understanding (MoU) was signed with the Yemen government to develop a long-term Yemen Gas Master Plan (YGMP) to utilize domestic natural gas.
CSR Activities According to the KEC's official website, the following are the highlights of their corporate social responsibility activities: • Conducting Environmental Impact Assessments (EIAs) and Social Screening Studies prior to initiating any new or existing operational project, in order to preserve social and environmental equilibrium of the area. Studies have been carried out in the Ukraine and Yemen. • Provision of humanitarian advisory assistance to the Somalian federal government, as well as advising on Somalia's Petroleum Law and fiscal regime. • The company is committed to playing an important part in society by generating student interest and excitement in maths and science from an early age. In 2008 KEC partnered with ExxonMobil Exploration and Production Kuwait Ltd to launch the annual Kuwait Science Fair competition, which attracted over 550 students over three years.
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• Support for various community projects in countries of operation, such as the RESALA Charity Foundation, a campaign for the recycling of unneeded paper and tyres. • Establishment in 2009 of the Kuwait Oil Company Professional Women Network (KOCPWN) to empower and motivate KOC female professional workers.501
Transparency EITI Supporter Status As of December 2011, the KEC was not a supporting company of the EITI
UN Global Compact As of December 2011, the KEC was not a participant in the UN Global Compact.
Kuwait Energy Company Operations in Iraq History The contracts signed in 2011 with the Iraqi government mark the beginning of KEC's operations in Iraq.
Activities and Contracts In June 2011 the KEC announced that it had been awarded 20-year term gas development contracts for Siba and Mansuriya gas fields in Iraq's third postwar bidding round. The KEC jointly bid with the Turkish Petroleum Corporation (TPAO) for both gas fields. Kuwait energy will be the operator of Siba, with a 45% share (with TPAO holding 30% and Iraqi state-owned South Oil Company 501Corporate Social Responsibility Report" Kuwait Energy Company, retrieved 15 December 2011 152
25%). At Mansuriya, TPAO will be the operator, with a 37.5% share, while KEC will hold 22.5% and Midland Oil Company a further 25%.502 The remuneration fee bid for Siba was $7.50 per boe, with a plateau production target of 100 million square cubic feet (MMscf) of gas. For Mansuriya, the consortium bid $7 per boe with a plateau production target of 320 MMscf of gas. Kuwait Energy Chairman Dr Manssour Aboukhamseen commented: “We are excited to start today a long-term partnership with Iraq for the development of their natural gas resources and look forward to applying our experience and technology towards building gas production in Iraq that meets domestic needs and export opportunities. Kuwait Energy has been working towards obtaining such contracts for over three years, and today marks a significant milestone for Kuwait Energy.”503
Gazprom Type
Public Limited Company
Founded
1989
Headquarters
Moscow, Russia
Key people
Victor Zubkov (Chairman), Alexei Miller (ViceChairman and CEO)
Products
Natural gas, petroleum, gas pipeline transport.
Revenue
US $117.2 billion (2010)504
Net income
US $31.9 billion (2010)
Employees
376,300 (end 2010)
Website
www.gazprom.com
Global Snapshot 502 "Company Profile September 2011", Kuwait Energy Company, Retrieved 15 December 2011. 503 Future Gas Exports From Iraq Fields Possible", Arab Times Online, 20 October 2011. 504" Annual Report 2010" Gazprom, retrieved 10 October 2011 153
Current Global Profile Moscow-based Gazprom, along with its subsidiaries, is primarily engaged in the operation of gas pipeline systems and gas supply to European countries. It is also involved in oil production and refining activities, as well as energy generation. Via its subsidiaries and affiliates, the company has operations established in the UK, Serbia, Uzbekistan, Kyrgyzstan, Tajikistan, Vietnam, India, Iraq, Algeria, Libya, Equatorial Guinea, Bolivia and Venezuela, among others.505 Gazprom is a global leader in natural gas reserves and production, accounting for 18% of the world's gas reserves, 70% of Russian gas reserves and 15% of global gas production. The company operates 6,806 gas-producing wells in Russia and 5,941 oil-producing wells in Russia. In addition, Gazprom presides over 161.7 thousand km of gas pipelines, the largest gas transportation system in the world. From a marketing perspective, Gazprom enjoys more than a 70% share in the Russian gas market and a 23% share in the European gas market.506 Russia's significant share of the world's gas makes it the country's most important asset. The Economist magazine suggests that this makes Gazprom arguably its most important company. 507 Founded in 1989, Gazprom grew out of the USSR's Gas Industry Ministry and was part-privatized from 1993 with the much-criticized sale of state assets in post-Soviet Russia. The Russian Government holds a controlling stake of just over 50%. President Dmitri Medvedev previously occupied the post of Gazprom Board Chairman and several of the company's top executives have links to Prime Minister Vladimir Putin. The press has extensively criticized the company for its close ties to the Russian political leadership.508 In 2001 Gazprom controversially took over NTV, a television station whose founder was an 'oligarch' who the press claimed had fallen out with President Putin. Furthermore, Gazprom's gas export monopoly over former Soviet countries is seen by many as the Kremlin's most powerful foreign-policy tool and best hope of regaining control over what it perceives as a key
505" Gazprom OAO" Reuters, retrieved 10 October 2011 506" Annual Report 2010" Gazprom, retrieved 10 October 2011 507" Russia's energetic enigma" The Economist, 06 October 2005 508" Gazprom reports quarterly profits of $16bn" The Guardian, 30 August 2011 154
sphere of influence.509 In 2009 Gazprom sparked a Europe-wide energy crisis when it cut off gas supplies to the Ukraine on New Year's Day, following the collapse of price negotiations between the two countries. Gazprom was demanding market rates rather than the subsidized rates which the Ukraine had previously enjoyed, as well as $1.6 billion in backdated bills and another $450 million in fines for late payments from Ukrainian state company Naftogaz. Gas supplies were cut off completely on the 7 January, when Russia accused the Ukraine of siphoning off gas destined for Europe. A similar row had taken place in 2006 when Gazprom shut down pipelines across the Ukraine. 510 A deal was eventually reached, the terms of which implied a move from subsidized to market rates for the Ukraine.
Company Report Highlights Gazprom's Annual Report for 2010 showed a rise of 17.4% in sales between 2009-10, reaching 3,661.7 billion (Russian Rubles). Net profit also rose by 22.36% in the same period to 775.9 billion RR. Crude oil production increased by 1.3% during the period and gas production by 10.2%. In natural gas production, the Yamal Peninsula in North West Siberia remained the focus of efforts to implement advanced technology in 2010. However, efforts were also made to develop conventional projects on the continental shelf such as the Kirinskoye field, as part of the Sakhalin-3 project. The launch of the construction of the Portovaya compressor station in 2010 is hoped to ensure gas transportation through the Nord Stream gas pipeline, the first line of which has been laid. On the international front, Gazprom made discoveries in Algeria (Berkine Basin), drilled a second exploration well at the Dzhel are in Uzbekistan and signed an agreement with France's Total to reassign shares for a project at the Ipati and Aquio blocks in Bolivia.
CSR Activities According to Gazprom's Annual Report 2010511, the following are the key achievements regarding Corporate Social Responsibility: 509" Russia's energetic enigma" The Economist, 06 October 2005 510" Q&A: Russia-Ukraine gas row" BBC News, 20 January 2009 511 " Annual Report 2010" Gazprom, retrieved 10 October 2011 155
• A 5.4 % reduction in methane emissions into the atmosphere and an 83 % decrease in payment for impacts in excess of limits. • The 'number of accidents and incidents at hazardous production facilities' fell from 156 in 2009 to just 115 in 2010. • Implementation of energy savings programs resulted in fuel and resource savings of 29.8 million tce (trichloroethene) over the period from 2002 through 2010, including some 2.7 million tce in 2010. • Social programs implemented include the Gazprom to Children program, aimed at developing youth sport activities and creative work, covering 69 Russian regions. Underway since 2006, the Group had to date invested 10.9 billion Russian rubles into the Program and constructed 659 sports facilities.
Transparency EITI Supporter Status As of December 2011, Gazprom was not a supporter company of the EITI.
UN Global Compact As of December 2011, Gazprom was not a participant in the UN Global Compact.
Gazprom Operations in Iraq History The beginning of Gazprom's work in Iraq was marked by the 2009 contract detailed below.
2009 Service Contracts In 2009, Gazprom participated in a consortium also involving Kogas, Petronas, and TPAO which won a contract to develop the Badra oilfield in southeast Iraq. Gazprom holds a 40% stake in the consortium, with Kogas hold-
156
ing another 30%, Petronas 20% and TPAO a further 10%.512 The group originally requested a price of US$6 per barrel of oil extracted from the field but later accepted the Oil Ministry's offer of US$5.50 513. The consortium announced it would invest a total of $3.52 billion to pump 170,000 barrels of oil per day (bpd). In December 2009 Gazprom Neft's Deputy Chief Executive for Exploration and Production Boris Zilbermints said that the company would invest $2 billion in developing Badra and that they expected to pump the first crude from the field within three years. Zilbermints has also said that it plans to reach full production of 170,000 barrels per day within six to seven years of signing the contract. In May 2011 Gazprom Neft, the oil arm of Gazprom announced that a 3D seismic survey had been completed at the Badra deposit, carried out by the Iraqi Oil Exploration Company. The survey was intended to give a better understanding of the structure of the deposit and to aid with the assessment of reserves.514 In November 2011, the company announced they had commenced drilling at the first appraisal well at Badra and that they expected to start commercial production o 15,000 bpd at the field in August 2013.515
Lukoil Type
Public Limited Company
Founded
1991
Headquarters
Moscow, Russia
Key people
Vagit Alekperov (CEO)
Products
Petroleum and derived products, petrol stations
Revenue
US $104.96 billion (2010)516
Net income
US $9.119 billion (2010)
512" Iraq signs deal with Gazprom group for Badrah ", Reuters, Jan 28, 2010 513" Russian energy giant Gazprom wins contract for Iraq's Badra oil field ", Taiwan News, 13 Dec 2009 514" Gazprom Neft completes seismic survey in Iraq", Gazprom Neft, 17 May 2011 515" Gazprom Neft to begin oil output in Iraq in 2013", Reuters, 25 November 2011 516“Annual Report 2010” Lukoil 157
Total assets
US $84.02 billion (2010)
Total equity
US $59.61 billion (2010)
Employees
130,000 (end 2010)
Website
www.lukoil.com
Global Snapshot Current Global Profile Lukoil is a major Moscow-based international vertically-integrated oil & gas company, accounting for 2.2% of global output of crude oil and is the largest privately owned oil & gas company in the world by proved oil reserves.517 In 2011, Lukoil ranked in 69th place in the Fortune Global 500 List of the most valuable countries in the world. 518 The company was formed following the dissolution of the Soviet Union when three state-run western Siberian companies (Langepasneftegaz, Uraineftegaz and Kogalymneftegaz) merged and the initials of the original three companies were maintained to form the new company name. 519 According to the New York Times, CEO Alekperov has kept an unusually low profile in Russian politics.520 In 2011, Lukoil claimed proved reserves of more than 19.3 billion barrels of oil equivalent (boe), the majority of which is located in Russia. It had operations in 60 regions in Russia and 25 other countries, and owned seven refineries and 6,750 gas stations. A significant 89.8% of the company’s proved reserves and 90.6% of marketable hydrocarbon production are in Russia, but the company also explores for oil and gas in Azerbaijan, Colombia, Egypt, Iran, Kazakhstan, and other areas in the Middle East and Central Asia.521
517“ General Information” Lukoil 518“ Global 500: Lukoil” CNN Money, retrieved 9 December 2011 519" ", OAO Lukoil Company history 520“ Lukoil” New York Times Business 521“ Lukoil Company Profile” Yahoo Finance, retrieved 9 December 2011 158
In July 2010 US oil major ConocoPhillips sold its entire 20% stake in Lukoil, valued at around $9 billion. Lukoil agreed to buy back 7.6% of its stock from ConocoPhillips for $3.44 billion.522
Company Report Highlights According to Lukoil's 2010 Annual Report, the Group's business progressed well in 2010 as the world made a gradual recovery from the financial crisis. Net income increased for 2010 increased by 28.5% to $9,006 million, which helped to increase income for shareholders. Lukoil reacted to the decision by ConocoPhillips to exit its shareholding in Lukoil by carrying out one of the largest ever buyback transactions on the Russian market, in excess of $3.4 billion. In the Exploration and Production segment, the company increased its hydrocarbon output thanks to strong growth of gas production, rapid development of international projects and stabilization of production levels in Western Siberia. Daily hydrocarbon production by the Group rose by 1.2% to 2.24 million barrels of oil equivalent (boe) per day. A major achievement in the company's exploration business over 2010 was the discovery of a deepwater oil field on the continental slope of the Gulf of Guineau in Ghana.
CSR Activities According to Lukoil's official website, the following corporate responsibility achievements can be highlighted for 2010: • A 4-fold reduction in the discharge of contaminated waste water, due to measure taken to enhance the efficiency of treatment facilities. • Hazardous waste products decreased by 56,000 tons over the year. • Special attention was paid to the construction of facilities to utilize associated gas produced during operations in the Republic of Kazakhstan, including the construction of electricity-generating facilities. • The sponsoring of a number of orphanages in Western Siberia, Komi Republic, Volgograd, Astrakhan, Leningrad, Kirov, Vologda, Saratov, Kaliningrad and other regions, over the past 20 years. 522“ ConocoPhillips to Sell Lukoil Stake After Posting Profit Gain” Bloomberg, 28 July 2010. 159
• In order to promote socially responsible behaviour, the company adheres to the corporate Social Code published on its website, by creating internal mechanisms on both management and trade union levels.523
Transparency EITI Supporter Status As of December 2011, Lukoil was not a supporter company of the EITI.
UN Global Compact As of December 2011, Lukoil was a participant in the UN Global Compact, having joined the initiative in 2008.
Lukoil Operations in Iraq History Lukoil was granted the rights to develop oilfields in 1997 by Saddam Hussein. The company held a 68.5% share in the consortium, a project which was then cancelled by Hussein's regime after Lukoil refused to violate UN sanctions against Iraq by drilling.524. Lukoil had been trying to revive the deal since 2003 after Moscow wrote off most of Iraq's $12.9 billion in debts525 and in April 2009 Lukoil’s CEO unsuccessfully lobbied Iraqi Prime Minister Nouri al-Maliki to reinstate the contract from the Hussein era.526
Activities and Service Contracts After unsuccessfully bidding for the first phase of the West Qurna project, Lukoil and partner Statoil won rights in 2009 to develop the second phase of Iraq’s “super giant” West Qurna crude deposit, the largest offered to foreign investors in the second round of bidding in Iraq. The consortium 523“ Lukoil” Lukoil, retrieved 9 December 2011. 524" | Iraq: Lukoil Chief Says Prewar Deal Still Valid CorpWatch, March 11, 2004 525" | Russia's Lukoil Has Won Iraq's 'Crown Jewel' Oil Field Business Insider, Dec 29 2009 526" | Lukoil, Statoil Win West Qurna ", December 12, 2009 160
offered to develop the field in exchange for $1.15 for each barrel of oil it extracted, outdoing bids from companies including BP and Total. Under the terms of the contract, Statoil would hold an 18.75% stake in the consortium, with Lukoil holding 56.25% and the Iraqi state's North Oil Company holding the remaining 25%.527 Lukoil announced in 2010 that they planned to invest $4.5 billion at West Qurna 2 over the following 4-5 years and $300 million over 2010.528. As of October 2011, West Qurna 2 remained a 'green field' that was yet to produce any oil. However Lukoil was inviting bids for contracts to build facilities at the site, which would enable the consortium to produce 400,000 barrels per day (bpd) at the field by 2014 as part of the first-stage development. First output of around 150,000 bpd was expected to flow by 2013, according to officials from the consortium.
Marathon Type
Public Limited Company
Founded
1887
Headquarters
Houston, Texas
Key people
Thomas J. Usher (Chairman), Clarence P. Cazalot Jr (President and CEO)
Products
Petroleum and Natural Gas
Revenue
US $72.3 billion (2010)529
Net income
US $2.6 billion (2010)
Total assets
US $50.0 billion (end 2010)
Total equity
US $23.8 billion (end 2010)
527" | Oil Field Project in Iraq Won by Lukoil and Statoil New York Times, December 29, 2009 528" | Statoil, Lukoil ink Iraq oil contract RiaNovosti, Jan 31, 2010 529 “2010 Annual Review” Marathon Oil Corporation, retrieved 11 October 2011. 161
Employees
29,667 (end 2010)
Website
www.marathon.com
Global Snapshot Current Global Profile Marathon Oil Company is a Houston-based international energy company engaged in exploration and production, oil sands mining and integrated gas. Its worldwide production operations are currently focused in North America, Africa and Europe.530 The company's origins lie in the purchase of the Ohio Oil Company by John D. Rockefeller's Standard Oil Trust in 1889, but the company resumed independent production following its dissolution in 1911. The Ohio changed its name to the Marathon Oil Company in 1962 in honour of its brand name motor fuel. Having been bought out by United States Steel in 1982, the steel business was finally sold off in 2001.531 In May of 2011, Marathon's Board approved the spin-off of its downstream business, Marathon Petroleum Corporation.532 Upstream, the company's major areas of liquid hydrocarbons production are offshore fields in Norway, gas liquids recovery in Equatorial Guinea, the US Gulf of Mexico, in Wyoming, Oklahoma and Texas and the Athabasca Oil Sands Project in Canada. Marathon is also developing strategic growth assets in US unconventional liquid-rich plays and deepwater Angola. Production in these assets is expected to grow at a 25% annual growth rate through until 2015, with liquids accounting for around 70% of the mix.533
Company Report Highlights Marathon's Annual Report for 2010 reveals that net income of $2.6 billion was 76% higher than 2009 figures. In the Exploration and Production (E&P) segment, oil and natural gas sales were slightly down on 2009 res530“ About Us”. Marathon Oil Corporation,retrieved 11 October 2011. 531“ About Us: History”. Marathon Oil Corporation,retrieved 11 October 2011. 532“ Marathon's Board Approves Spin-Off of Marathon Petroleum Corporation”. OilVoice, 25 May 2011. 533“ 2010 Annual Review”. Marathon Oil Corporation, retrieved 11 October 2011. 162
ults, partly due to disappointment at the Gulf of Mexico Droshky development. Net proven reserves for oil and gas producing activities fell slightly by 3.9% on 2009 levels to 1,638 million barrels of oil equivalent (boe). Other highlights for the year included full operational capacity being reached at the expanded Garyville refinery in Louisiana and the launch of operations at the Athabasca Oil Sands Mining expansion. Over the course of 2010, Marathon also acquired four blocks in the Iraqi Kurdistan Region, where two exploration wells had been established. Largely because of low US natural gas prices, they reduced their current drilling for gas with a renewed focus on liquids.
CSR Activities Marathon's 2010 Social Responsibility Report534 highlights the following achievements made over the year: • Marathon's business is rooted in 'Living Our Values', a philosophy encompassing longstanding commitments to health and safety, environmental stewardship, honesty and integrity, corporate citizenship and a high performance team culture. • Ethics training includes mandatory computer-based training (CBT) in the first 60 days of employment and biannual thereafter. Marathon achieved 100% participation in required ethics training in 2010, reaching more than 7,300 employees. • Marathon's comprehensive annual anti-corruption compliance audit program covers operations and outside-operated interests in countries that are not in the Organisation for Economic Co-operation and Development (OECD). • The company decreased greenhouse gas emissions intensity for the second consecutive year, with 2010 intensity 8% below 2008 levels. • The overall number of spills increased approximately 14% in 2010, but the total volume decreased 58% compared to 2009. THe company claims to investigate spills to identify their causes and take incident-specific corrective actions to prevent recurrence. 534“ Social Responsibility Report 2010”. Marathon Oil Corporation, retrieved 11 October 2011. 163
• Marathon's major strategic social responsibility project continued to be the Bioko Island Malaria Control Project in Equatorial Guinea.
Transparency EITI Supporter Status As of December 2011, Marathon was a supporter company of the EITI.
UN Global Compact As of December 2011, Marathon was not participating in the UN Global Compact.
Marathon Operations in Iraq History 2009 marked the beginning of Marathon's operations in Iraq.
Involvement with KRG Marathon acquired a position in four exploration blocks in Kurdistan in October 2010, signing production sharing contracts (PSCs) to operate and take 80% ownership in two blocks northeast of Erbil, Harir and Safen, with the Kurdistan Regional Government (KRG) holding a fully carried 20% interest, and acquired working interests (WI) in two additional blocks, Atrush (20% WI) and Sarsang (25% WI).535 Atrush is operated by the joint-venture company General Exploration Partners, a subsidiary of Aspect Holdings, LLC and Canadian company ShaMaran Petroleum, which holds an 80 percent working interest in the block,536 while US-based HKN Energy holds a 75% interest in and operatorship of the Sarsang licence area.537
535" Marathon Acquires Positions in 4 Exploration Blocks in Kurdistan", IraqBusiness News 20 October 2011. 536" Atrush Well Delivers for Marathon Consortium", Rigzone 14 April 2011. 537" Maersk Oil Buys 20% of HKN Energy", Iraq-Business News 31 August 2011. 164
In April 2011 Marathon announced the discovery of oil at the Atrush site, where the remaining 80% WI is held by the joint-venture company General Exploration Partners Inc.538
Occidental Type
Public Limited Company
Founded
1920
Headquarters
Los Angeles, USA
Key people
Ray R. Irani (Executive Chairman), Stephen I. Chazen (President and CEO)
Products
Oil, natural gas, petrochemicals.
Revenue
$19.16 billion (2010)539
Net income
$4.53 billion (2010)
Total assets
$52.43 billion (end 2010)
Total equity
$32.48 billion (2010)
Employees
11,000 (2010)
Website
www.oxy.com
538" Marathon Strikes Oil in Iraq", Zacks Equity Research 20 October 2011. 539 "Annual Report 2010", ROxy 20 October 2011. 165
Global Snapshot Current Global Profile Occidental Petroleum, often referred to as Oxy due to its abbreviation on the NYSE stock exchange, covers three main sectors; Oil and Gas, Chemical, and Midstream Marketing.540 Occidental's oil and gas operations are consolidated in three core areas: the US, the Middle East and Latin America. In 2010, US operations provided 51% of Oxy's production and the US represented 66% of total proven reserves.541 In 2005, Occidental numbered among the 53 organisations that donated the maximum $250,000 towards George Bush's presidential inauguration.542
Company Report Highlights Occidental's Annual Report 2010 reports that net income in 2010 improved by 55% on 2009 figures, reaching $4.5 billion, and that the company ended 2010 with stock at its highest year-end closing price in company history of $98.10. This surpassed the year-end 2009 closing price by more than 20%. The encouraging financial results were attributed to high commodity prices and increased production volumes. 2010 operating cash flow from continuing operations (excluding Argentina, where operations have been discontinued) saw a 60% increase on the previous year's figures. Sales of oil and natural gas climbed 3.9% between 2009-10 to 748 thousand barrels of oil equivalent (boe) per day. Proven reserve additions from all sources totalled 409 barrels of oil, 63% of which resulted from improved recovery techniques, 35% from acquisitions and the remainder from extensions and discoveries.
CSR Activities Oxy's 2010 Social Reponsibility Report Growth With Responsibility reports the following activities and achievements in corporate governance, labour, human rights and health, environment and safety:543 540“ Occidental Petroleum Corp Profile”. Reuters,retrieved 06 October 2011. 541“ Annual Report 2010”. ROxy,retrieved 06 October 2011. 542“ Financing the Inauguration”. USA Today, 16 January 2005. 543“ OAnnual Report 2010: Social Responsibility”. Oxy, retrieve 06 October 2011. 166
• Employee Injury and Illness Incidence Rate (IIR) of 0.40 was approximately nine times better than the US industry average and the second lowest in Oxy's history. • The company received an overall perfect 10 corporate governance ranking from Governance Metrics International (GMI). • The company had seven programs recertified by the Wildlife Habitat Council (WHC) and one new program established in 2010. • Oxy was included on Forbes' 2010 list of 'America's 20 Most Responsible Companies' and on Corporate Responsibility Magazine's 12th Annual (2011) 'Best Corporate Citizens List'.
Transparency EITI Supporter Status As of December 2011, Occidental was not a supporter company of the EITI.
UN Global Compact As of December 2011, Occidental was not a participant in the UN Global Compact.
Occidental Operations in Iraq History The 2009 service contract signed marked the start of Occidental's work in Iraq.
Activities and Contracts In 2009, a consortium consisting of Occidental together with Eni and Kogas signed a contract with the state owned South Oil Company and Missan Oil Company to develop the Zubair oil field. The consortium is led by by Eni, which enjoys a 32.8% share, followed by Occidental with 23.44%, and Ko-
167
gas with 18.75%544. The consortium has announced that they plan to increase production from the Zubair field to 1.2 million barrels of oil per day (bpd), investing approximately $20 billion over the life of the 20 year contract, which includes the possibility of extending the contract to a duration of 25 years.545
Petronas Type
state-owned
Founded
1974
Headquarters
Kuala Lumpur, Malaysia
Key People
Dato' Shamsul Azhar Bin Abbas (CEO, President)
Products
Oil, natural gas, petrochemicals, shipping.
Revenue
RM 421.2 billion (approx. US$133.6 billion) 2011
Net Income
RM 54.8 billion (approx. US$17.4 billion) 2011
Total Assets
RM 439 billion (approx. US$ 139.3 billion) end 2011
Website
www.petronas.com.my
Global Snapshot Current Global Profile Petronas, short for Petroliam Nasional Berhad, was founded in 1974 and is Malaysia's state-owned national oil company and the country's most profitable company. The company is Malaysia's only representative in the Fortune 500.546 Petronas' subsidiaries operate in more than 20 countries, primarily in Asia and Africa. The company has reserves of more than 27 billion barrels of oil equivalent (boe) and is a major producer of liquefied petro544" | Occidental Petroleum and partners to develop massive Iraqi oil field ", LA Times, January 23, 2010 545" | Eni, Occidental Petroleum and KOGAS sign the technical service contract ", Eni official website, 22 Jan 2010 546" | Malaysia's Petronas profit falls 23 percent ", The Boston Globe, July 1 2010 168
leum gas (LPG) and liquefied natural gas (LNG).547 In 2007, the Financial Times identified Petronas as one of the "new seven sisters"- one of the most influential energy companies from countries outside the Organisation for Economic Co-operation and Development (OECD).548 In turn, the Economist refers to Petronas as "a successful example of a national oil company" commenting that, in contrast to Brazil's Petrobras, Malaysia has not made significant domestic oil discoveries in recent years. Subsequently, in the 1990s the company began expanding abroad, mostly in Africa and by 2007 had invested in 66 upstream projects in 22 countries.549
Company Report Highlights According to the Petronas 2011 Annual Report, Group Revenue for the year ending March 2011 stood at RM241.2 billion, an increase of 14.4% on the previous year. Profit before tax also rose by 24.5% year-on-year. This followed sharp falls in profit between 2009 and 2010. The report notes that a marked turnaround in industry conditions provided the backdrop for this improvement on performance. For the fourth year running, revenue from international operations continued to make the largest contribution to the Group's revenue, at 41.1% of total revenue. However Petronas exited Ethiopia and Timor Leste in 2010 and divested interests in Pakistan, in a move to deploy resources in favour of ventures more focussed on the company's strategic goals. The company's first venture in the unconventional gas business at Gladstone LNG plan in Queensland, Australia, reached a final investment decision and achieved the highest ever level of production and exports of liquefied natural gas (LNG) from the Petronas LNG Complex.
CSR Activities The 2011 Annual Report highlight the following achievements on in corporate social responsibility:
547" Petronas" Hoovers, retrieved 15 December 2011. 548" The New Seven Sisters" Financial Times, 12 March 2007. 549" Drilling and nation-building" Economist, 8 October 2009. 169
• The successful launch of the community outreach initiative 'Program Sentuhan Harapan' in Miri, Sarawak, where the Malaysian prime minister and company officials presented hampers containing basic food items to deserving families. • Continued commitment to cancer research in Malaysia, with a RM 3 million contribution to the Cancer Research Initiatives Foundation (CARIF). • Membership of the Oil Spill Response Limited (OSRL), from June 2011. • 2010 launch of ZeTo, or Zero Tolerance Rules, for high-risk activities, aiming to improve safety performance. Over the year under review there were 52 cases of ZeTo rules violations and 25 staff and 27 contractors were investigated. • Fall in the 'Fatal Accident Rate' for the fifth year in a row.
Transparency EITI Supporter Status As of December 2011, Petronas was not a supporter of the EITI.
UN Global Compact As of December 2011, Petronas was not a member of the UN Global Compact.
Petronas Operations in Iraq History The contracts signed by Petronas in 2009 marked the beginning of their operations in Iraq.
Activities and Service Contracts Petronas bid for three separate contract areas during Iraq's second round of petroleum contract licensing following the 2003 invasion.
170
A consortium led by Petronas submitted a bid for development of the Garraf field on the first day of bidding in December 2009. According to leaked US diplomatic cables, the undeveloped Garraf field was one of the first two fields offered, which received bids at 'stunningly low prices'. The international partners in the winning consortium were made up of Petronas, with a 60% interest, Japex with 40%. According to the deal, the remuneration fee offered was $1.49 and the 'plateau production target' was 150,000 barrels per day (bpd).550 Petronas also signed a 20-year service contract to develop the Majnoon field, along with international oil company Shell. The project is intended to boost production to 1.8 million barrels per day (bpd) from 45,000 bpd (2010). Shell is the lead operator in the consortium with a 45% stake, Petronas holds 30% and the Iraqi state holds 25%.551 Only one consortium, led by Gazprom, bid for the Badra contract area in the second licensing round. The Oil Ministry announced in December 2009 that it had accepted a revised bid from the consortium, which comprised of Gazprom (30%), Korean Gas Company (22.5%), Petronas (15%) and TPAO (7.5%). The 25% Iraqi state partner was the Oil Exploration Company. 552 The contract specified the consortium would pay a $100 million signature bonus. The remuneration fee would be $5.50 per barrel. The official press release announcing the contract said the consortium had originally offered $6 a barrel but ultimately accepted the lower figure. The release specified that the state partner also born the costs of development of the field. As well as crude oil, the contract stipulates that the fee is also payable on liquified petroleum gas (LPG) and natural gas handed over to the state partner from a gas processing plant. The fee was to kick in when production reaches 15,000bpd.
Shell Type
Public Limited Company
550" Oil Stampede: Iraq,s 2nd Bid Round Results Wikileaks, 14 December 2009. 551" Iraq Signs Majnoon Oilfield Agreement With Shell, Petronas", Bloomberg 17 January 2010 552" Iraq’s Second Petroleum Licensing Round Badra Contract Area – Bidding Results", Iraqi Ministry of Oil 171
Founded
1907
Headquarters
The Hague (Netherlands), London (UK)
Key People
Peter Voser (CEO), Jorma Ollila (Chairman)
Products
Petroleum, natural gas, petrochemicals.
Revenue
US$ 368,056 billion (2010)553
Operating Income
US$ 35,344 billion (2010)
Net Income
US$ 20,474 billion (2010)
Total Assets
US$ 322,560 billion (2010)
Total Equity
US$ 148,013 billion (2010)
Employees
102,000554
Website
www.shell.com
Global Snapshot Current Global Profile Anglo-Dutch company Shell was ranked in 2nd place on the 2011 Global Fortune 500 list of the world's most valuable companies. 555 It engages worldwide in the principal aspects of the oil and gas industry in the Upstream, Downstream and Corporate segments, and also has interests in chemicals and other energy-related businesses.556 In 2009 the company produced about 2% of the world's oil, a figure of 3.1 million barrels of gas and oil daily, and have 44,000 service stations world wide in over 90 countries, 557 which constitutes the world's largest retail fuel network.558 5534TH QUARTER AND FULL YEAR 2010 UNAUDITED RESULTS" Royal Dutch Shell plc, 3 February 2011 554Royal Dutch Shell" CIO 100, retrieved 12 December 2011 555" Global 500:Royal Dutch Shell", CNN Money, retrieved 12 December 2011. 556" Royal Dutch Shell Profile", Reuters, retrieved 12 December 2011. 557" | Shell At a Glance ", Shell, 2009 558" | Royal Dutch Shell Company Profile ", Yahoo Finance 172
According to CNN, as access to oil gets tighter Shell is looking to develop its alternative energy assets and in 2010 signed an agreement with a Brazilian biofuel company called Cosan that makes ethanol from sugarcane. In 2011 Shell was also developing technology to build the first floating, liquefied natural gas (LNG) plant, which would give the company an edge over competition when it comes to accessing fuel in deep water. This will be particularly critical as Shell has signed off on new drilling projects in the Gulf of Mexico and off the coast of Brazil.559
Company Report Highlights According to Shell's 2010 Annual Review560, 2010 was a 'good year for Shell', in which new business opportunities were generated for further growth over the 2014-20 period. Earning for the year were at $20.5 billion, a 61% rise on 2009 figures, and earnings per share rose by 90%. Oil and gas production volumes increased by 5% and sales volumes of liquefied natural gas (LNG) were up by 25%. Sales volumes of oil products and chemical products also grew by 5% and 13% respectively. The company brought six key projects on-stream over 2010. In Nigeria, the Gbaran-Ubie project started producing oil and gas and production started at the Perdido offshore platform in the Gulf of Mexico. The company also saw the first output increases from the expansion of the Athabasca Oil Sands project in Canada. Downstream, the business was restructured and many refining and marketing assets were sold in Finland, Sweden, New Zealand and other locations. These divestments are aimed to allow the company to focus on its commercial strengths in large markets and markets with growth potential.
CSR Activities In the 1990s, Shell was a member of the Global Climate Coalition in the US which campaigned against signing the Kyoto protocol on the grounds that there was not enough proof that global warming was being made worse by man-made carbon dioxide pollution. 559" Global 500:Royal Dutch Shell", CNN Money, retrieved 12 December 2011. 560" Review of the year 2010", Shell, retrieved 12 December 2011. 173
According to company documents, Royal Dutch Shell's CSR activities include the Shell Foundation, which was established by the Shell Group in 2000 as an independent, UK registered charity operating with a global mandate. They received an initial 250 million dollar endowment from the Shell Group and an additional 10 year commitment of 160 million dollars. 561 and was set up after Shell was associated in public opinion with two damaging rows in the mid-1990s - the disposal of the Brent Spar oil rig and the execution of the poet and anti-oil activist Ken Saro-Wiwa in Nigeria.562 Another initiative from Shell is LiveWIRE, a social investment programme that aims to help young people around the world explore the option of starting their own business as a real and viable career option, launched in 1982 and now working in 21 countries worldwide.563
Transparency EITI Supporter Status As of December 2011, Shell was a supporting company of the EITI
UN Global Compact As of December 2011, Shell was a member of the UN Global Compact, having joined in July 2000.
Shell Operations in Iraq History Shell first entered Iraq before it was a sovereign country, as part of the Turkish Petroleum Company (predecessor of the Iraq Petroleum Company). The company enjoyed monopoly rights to the country's oil fields and dictated the terms of production and development until 1972, when Iraq fully nationalized its oil sector and expelled the foreign oil companies. 561" | Home ", Shell Foundation Official site 562" | Campaigners attack Shell's charity arm ", The Guardian, Sep 28 2006 563" | Shell LiveWIRE International ", Shell LiveWIRE Official Site, accessed July 13 2010 174
After the U.S.-led invasion in 2003, Shell was among the many international oil firms who returned seeking to explore Iraq's reserves.564
Activities and Contracts In 2009, Shell was part of a consortium including Petronas that won the contract to develop the Majnoon oil field. Shell holds a 45% share in the contract, Petronus 30% and an Iraqi state company holds the remaining 25%.565 The fee was set at $1.39 per barrel and the consortium pledged to increase output from the field to 1.8 million barrels per day (bpd), more than twice what Iraq had expected.566 In October 2010, Shell CEO Peter Voser announced that the company had already raised production at the Majnoon field to 70,000 bpd, up from 45,000 bpd previously, however acknowledging that the risk of operating in Iraq had increased in recent months.567
South Gas Utilization Project (for further detail please see South Gas Utilisation Project) In September 2008, Shell signed a Heads of Agreement (HOA) with the Oil Ministry to capture some of the gas flared at Basra in the south, for a project which later came to be known as the 'South Gas Utilisation Project'. The final documents for the project and the resultant creation of the Basra Gas Company (BGC) to manage the Joint Venture between the South Gas Company, Shell and Mitsubishi Corporation were approved by the Energy Committee at the Council of Ministers in September 2011, and ratified by the Cabinet on the 15 November. Gas is to be supplied from the southern oil fields of Rumaila, Zubair and West Qurna-1 and the lifetime investment was estimated at more than $17 billion. 568 However when reacting to leaked dip564" The secret history of the Shell gas deal Iraq Oil Report, 21 January 2010 565" | Royal Dutch Shell plc welcomes Iraq Majnoon contract award ", Shell website, 11/12/09 566" | Iraq Oil Field Goes to Royal Dutch Shell and Petronas ", New York Times, Dec 11, 2009 567" Shell Already Reports Success at Majnoon Iraq Business News, 12 October 2010 568" Iraq’s Challenges On Its Path Toward A World Class Gas Industry MEES, 21 November 2011 175
lomatic cables in 2011, the Iraq Oil Report suggests that in contrast to the transparent and competitive bidding rounds of 2009 and 2010 for oil and gas contracts, the Shell gas deal was brokered behind closed doors and may have put Shell's prerogatives ahead of Iraq's interests.
Sonangol Type
Parastatal
Founded
1976
Headquarters
Luanda, Angola
Key People
Manuel Vicente (President)
Products
Petroleum, natural gas.
Website
www.sonangol.co.ao
Global Snapshot Current Global Profile Sonangol U.E.E was established in 1976 following the nationalisation of Angol, as a state-owned company with the mission of managing hydrocarbon resource exploration in Angola. Sonangol U.E.E. became Sonangol E.P. in 1999.569 The company claims that, despite having the government as its sole shareholder, Sonangol has always been governed as a private company and is under strict performance standards to ensure efficiency and productivity.570 Sonangol E.P. engages in research, exploration, and production of oil and gas. Its activities include prospecting, development and refining of hydrocarbons and their derivatives. The company also operates a network of gas and service stations and operates an airline, which provides air transportation to the oil industry through a fleet of airplanes and helicopters in Africa and internationally.571 569“ Our History”. Sonangol, retrieved 19 December 2011. 570“ About Sonangol EP”. Sonangol, retrieved 19 December 2011. 571“ Sonangol EP”. Bloomberg Business Week, retrieved 19 December 2011. 176
According to a 2011 Organisation for Economic Co-operation and Development (OECD) report, the revenues earned from oil and gas sales have made Sonangol the second largest company in Africa in terms of turnover and profits. The report also claims that Sonangol has also been behaving like a sovereign wealth fund (SWF), using oil-based funds for investments in other countries, such as investments in West African iron ore mines. 572 In December 2011 CEO Manuel Vicente was re-elected for another term, quashing media speculation that he may succeed Angolan President Jose Eduardo dos Santos. During the 12 years Vicente has been CEO, Angola has more than doubled its output and was expected to boost oil production to over 2 million barrels per day (bpd) by 2012 and possibly overtake Nigeria's spot as the continent's largest producer.573
CSR Activities According to Sonangol's official website, the following are the highlights of the company's corporate social responsibility activities: • Over 36 social projects implemented in Cabinda province. In 2003 more than $6 million was spent in areas related to public health, education, cul ture, sports and agriculture. • Sponsorship of the 'Sonangol Literature Award' • Since 2002 the company has allocated $2 million and 2000 employees to the implementation of their QHSE (Quality, Health, Safety and Environmental Impact) policy.574
Transparency EITI Supporter Status As of December 2011, Sonangol was not a supporting company of the EITI.
572“OECD Sonangol EP”. OECD Publishing, 3 May 2011, p70. 573“OECD Sonangol re-appoints Vicente as CEO for another term”. Reuters, 13 December 2011. 574“ Society and Environment”. Sonangol EP, 19 December 2011. 177
UN Global Compact As of December 2011, Sonangol was not a participant in the UN Global Compact.
Sonangol Operations in Iraq History The contracts signed in 2009 marked the beginning of Sonangol's operations in Iraq.
Activities and Service Contracts Sonangol won two contract areas during Iraq's second round of licensing in 2009, Najmeh and Qayara. Both lie in Nineveh province, known as one of Iraq's most troubled areas. "We know that the area where we are going is risky but we are also sure that with the cooperation with the Iraqi authorities we will be able to fulfil our compromise and be able also to produce oil for Najmah and Qayara," said Gaspar Martins, Sonangol's Chief Executive Officer and President.575
Qayara Field At the Qayara field, Sonangol took a 75% stake in the venture. Under the terms of the deal, the company is to receive a remuneration fee of $5 a barrel and has an output target of 120,000 barrels per day (bpd). Sonangol said that it would invest $2 billion at the field.576 Originally, the firm had rejected cutting its bid fee of $12.50 per barrel. However, it won the deal after revising estimates that excluded the cost of facilities to lighten the heavy oil, according to a senior Sonangol official.577.
575" Angola's Sonangol sign Iraqi oilfield deals", ITN Source, January 28, 2010 576" FACTBOX-Oil deals between Iraq and global majors" Reuters, 26 February 2010. 577" Sonangol wins oil deals in Iraq", Reuters News Agency, December 12, 2009 178
In March 2011 Sonangol started work at the Najmah field and was due to start to dig wells in April 2011, according to a report from Aswat al-Iraq. 578
Najmah Field Sonangol was the only company to bid for the Najmah contract area in the second licensing round and the Oil Ministry announced on 12 December 2009 that the company had been awarded the contract area.579 Sonangol became the operator of the project with an 100% stake and committed to reaching a production plateau of 110,000 bpd580 The contract also specified the company would pay a $100 million signature bonus. The Angolan firm originally offered to accept a remuneration fee of $8.50 per barrel, but later accepted the maximum figure of $6 per barrel allowed by the Ministry of Oil. The deal specified that the state partner, the Iraq Drilling Company, also bore the costs of development of the field.
Statoil Type
Public Limited Company
Founded
1972
Headquarters
Stavanger, Norway
Key people
Helge Lund (CEO), Svein Rennemo (Chairman)
Products
Oil and natural gas exploration and production, petrochemicals.
Revenue
NOK 529.65 bill (approx. US $90.95 bill) 2010.581
Operating income NOK 137.23 billion (approx. US $23.56 bill), 2010. Net income
NOK 37.65 billion (approx. US $6.51 bill) 2010
578" Sonangol to Start Work on Ninewa Oilfields, Iraq Business News, 14 March 2011. 579" Iraq’s Second Petroleum Licensing RoundNajmah Contract Area – Bidding Results" Ministry of Oil Petroleum and Licensing Directorate, 12 December 2009 580" Oil Stampede: Iraq,s 2nd Bid Round Results, WikiLeaks, 14 December 2009. 581 "Annual Report 2010” Statoil, Retrieved 07 October 2011. 179
Total assets
NOK 643.01 bill (approx. US $110.55 bill) 2010.
Total equity
NOK 226.40 billion (approx. US$40.56 bill), 2010.
Employees
30,340 (end 2010).
Website
www.statoil.com
Global Snapshot Current Global Profile Statoil, formerly known as StatoilHydro, became the largest offshore operator in the world following its merger with Norsk Hydro in 2007. As Norway holds around half of Europe's remaining oil and natural gas reserves, the company's exports are of strategic importance to Western Europe. 582 The Norwegian government is the largest shareholder in Statoil. In March 2009 the Goverment announced that the state's ownership interest had reached 67%.583 Internationally, Statoil has operations in 34 countries, are listed on the New York and Oslo stock exchanges.584 In 2004, Statoil suffered damage to its reputation when it was found guilty of bribery and fined 20 million Norwegian Kroner ($2.9 million), after it was found to have paid consultant Horton Investment to influence decision makers and secure contracts in Iran. Both the Chairman and CEO at the time resigned over the affair.585
Company Report Highlights The company's Annual Report for 2010 states that Statoil was engaged in production in 11 countries: Canada, the US, Venezuela, Algeria, Angola, Libya, Nigeria, the UK, Azerbaijan, Russia and Iran.
582" Statoil to buy the natural gas and oil operations of Norsk Hydro for $28 billion" New York Times, 18 December 2006 583" The Norwegian State" Statoil, retrieved 07 October 2011 584" Statoil in Brief" Statoil, retrieved 07 October 2011 585" Statoil fined over Iranian bribes" BBC News, 29 June 2004 180
Financially, Statoil's operating income in 2010 rose 12.8% from 2009 figures, reaching 137.2 billion NOK. Production volumes were higher during the first half of 2010, however during the second half specific operational issues in the Gulf of Mexico resulted in lower than expected volumes. Over the course of 2010, Statoil was awarded shares in eight exploration licences in the Norwegian continental shelf, signed a development and production contract for West Qurna 2 field in Iraq with Lukoil, and signed a $6 billion investment agreement to develop the Chirag Oil Project in Azerbaijan. In addition, in October 2010 Statoil acquired 67,000 net acres in the Eagle Ford shale gas formation in Southwest Texas in order to complete their existing onshore portfolio, having formed a 50/50 joint venture with Talisman.
CSR Activities Statoil's Annual Report for 2010 highlights the following CSR achievements over the year:586 • Fortune Magazine ranked Statoil as the 'World's Most Admired Company' within the category of sustainability. • The company increased from 57% to 80% the percentage of non-OECD countries with CSR plans. • The company increased from 2.5% to 4% their estimated expenditure on local non-OECD suppliers. • Human rights awareness training is integrated into Statoil's general training in corporate social responsibility, covering policies and commitments to human rights, core labour standards, awareness of CSR responsibilities. • Statoil supports the World Economic Forum's Partnering Against Corruption Initiative (PACI), the Business Principles for Countering Bribery (BPCP), and the OECD Guidelines for Multinational Enterprises. • Spending on social investments was approximately 202 million NOK. Investments were made largely in Angola, Canada, Azerbaijan, Russia, Ireland and Nigeria
Transparency 586" Annual Report 2010: Sustainability" Statoil, retrieved 07 October 2011 181
EITI Supporter Status As of December 2011, Statoil was a supporter country of the EITI and had been a Board member since 2009.
UN Global Compact As of December 2011, Statoil was a member of the UN Global Compact, having joined in 2000.
Statoil Operations in Iraq History 2009 marked the beginning of Statoil's involvement in Iraq.
Activities and Service Contracts After unsuccessfully bidding for the first phase of the West Qurna field, Statoil and partner Lukoil won rights in 2009 to develop the second phase of Iraq’s “super giant” West Qurna crude deposit, the largest offered to foreign investors in 2009's second round of bidding587. The consortium offered to develop the field in exchange for $1.15 for each barrel of oil it extracted, outbidding offers from companies including BP and Total. Under the terms of the contract, Statoil was to hold an 18.75% share of the consortium, with Lukoil holding 56.25% and the state-owned North Oil Company holding the remaining 25%.588 Peter Mellbye, Statoil's Head of International Exploration and Production said in 2010 that the company would invest $1.4 billion over the following 4-5 years.589 As of October 2011, West Qurna 2 remained a 'green field' that was yet to produce any oil. However the consortium was inviting bids for contracts to build facilities at the site, which would enable production of 400,000 barrels 587 "Lukoil, Statoil Win West Qurna", December 12, 2009 588" | Oil Field Project in Iraq Won by Lukoil and Statoil New York Times, 29 December 2009. 589" | Statoil plans to invest $1.4bn in Iraq oilfield Gulf Daily News, Jan 9 2010 182
per day (bpd) at the field by 2014 as part of the first-stage development. First output of around 150,000 bpd was expected to flow by 2013, according to officials from the consortium.590
Talisman Energy Type
Public Limited Company
Founded
1925
Headquarters
Calgary (Canada)
Key People
John A. Manzoni (CEO, President)
Products
Oil and gas.
Revenue
US $4 billion (2010)591
Net Income
CAD $648 million (approx. US $631 million), 2010.592
Total Assets
CAD $24.2 billion (approx. US $23.6 billion),2010.
Total Equity
CAD $10.5 billion (approx. US $10.2 billion), 2010.
Employees
3,078 (2011)
Website
www.talisman-energy.com
Global Snapshot Current Global Profile Talisman Energy Inc. is an upstream oil and gas company that engages in the exploration, development, production, transportation, and marketing of crude oil, natural gas, and natural gas liquids. It primarily operates in North America, the UK, Scandinavia, and south-east Asia. The company was 590" Lukoil, Partners to Award Deals at Iraq West-Qurna Oil Field, Fox Business, 21 October 2011 591 #90 Hunt Consolidated/Hunt Oil" Forbes, retrieved 19 December 2011. 592Financial and Operating Highlights" Annual Report, retrieved 19 December 2011. 183
founded in 1925 and is headquartered in Calgary, Canada. 593 In 2010 the company produced 417,000 barrels of oil equivalent (boe)/day globally, approximately 50% oil and 50% natural gas.594 In 2011 Talisman Energy was ranked at number 559 in Forbes' 'Global 2000' list of the world's biggest public companies. (Forbes) It is listed on the Toronto and New York stock exchanges and at year-end 2010 the company's enterprise value was more than $25 billion.
Company Report Highlights According to Talisman's 2010 Annual Report, net income for the year was up by 48% on 2009 figures to $648 million, which was attributed to higher commodity prices and improved operating performance. Production averaged 417,000 boe/day, significantly above initial targets and, excluding asset sales, year-on-year production increased by 7%. In 2010 Talisman replaced 164% of production with proved reserves. The company also sold over $2 billion of non-core assets, predominantly in North American natural gas properties. However the company acquired assets in two liquid areas, establishing a position in the Eagle Ford shale play in Texas, as well as producing assets in Colombia. In 2011 Talisman was planning to spend US $700 million in international exploration, with a number of key wells in Colombia and Peru, as well as activity in the North Sea, Papua New Guinea, Indonesia, the Kurdistan region of northern Iraq and the first shale wells in Poland.595
CSR Activities According to the official Talisman CR Report for 2010, the following are the company's highlights in corporate social responsibility: • The company carried out a comprehensive review of their global drilling operations in the aftermath of the BP plc Deepwater Horizon incident and used the findings to apply additional rigour to the design, procedures and safety processes in preparation for the first deepwater well.
593Talisman Energy Inc" Yahoo Finance, retrieved 19 December 2011. 594About Our Company" Talisman Energy, retrieved 19 December 2011. 5952010 Annual Report" Talisman Energy, retrieved 19 December 2011. 184
• Combined employee and contractor lost-time injury frequency improved by 18% from 2009. • The number of spills greater than a half-barrel was reduced by 31% to 109 from 157 in 2009. • Roll-out of 10 Golden Rules for Safe Operations – compliance with these rules is a condition of working at any Talisman site. • Development of a new global community relations policy (GCRP) to create a consistent, best-practice approach to interacting with, and gaining the support of, local stakeholders. • The company invested $8.5 million worldwide in community initiatives. 596
Transparency EITI Supporter Status Talisman Energy became an EITI supporting company in 2005.597
UN Global Compact Talisman Energy has been a participant in the UN Global Compact since 2004.598
Talisman Energy Operations in Iraq History Contracts signed in 2008 mark the beginning of Talisman's operations in Iraq.
5962010 CR Report" Talisman Energy, retrieved 19 December 2011. 597Transparency" Talisman Energy, retrieved 19 December 2011. 598Talisman Energy Inc." UN Global Compact, retrieved 19 December 2011. 185
Involvement with KRG As of November 2011 Talisman held contracts in three oil fields in Kurdistan,599. The company acquired a 40% non-operated interest in Block K44, in partnership with Calgary-based Western Zagros (40%) and the KRG (20%)600. In June 2008 they also acquired a 60% operating interest in Block K39 and signed a Production Sharing Contract (PSC) for a 55% working interest in Block K9 in June 2009.601 In June 2008 Talisman announced that they would spend CAD $300 million to explore in the region. A company spokesman said that the company had performed a security assessment and thought that the region "stacks up with other areas in the world where it operates, such as Southeast Asia."602
Total S.A. Type
Public Limited Company
Founded
1924
Headquarters
Courbevoie, France
Key people
Christophe De Margerie (CEO), Thierry Desmarest (Chairman), Patrick de la Chevardiere (CFO) JeanFrancoise Lassalle (VP for Public Affairs – France and NGOs).
Products
Oil and natural gas exploration, production, refining and marketing, electricity generation, oil and gas engineering and construction.
Revenue
€159.27 billion (approx. US $220 billion), 2010.603
599" Bickering Over Oil and Gas Law Hurts Foreign Investment", Rudaw 22 November 2011. 600" Iraq Kurdistan K44 oil reserves doubled to 2.2 billion barrels: audit", Platts 20 July 2011. 601" The Role of the Private Sector in Peace and Development - Delivering for Results, Beyond Economics", Talisman Energy Report 12 May 2011. 602" Talisman heads into Iraq with $300-million stake", Calgary Herald 24 June 2008. 603 "Registration Document", Total retrieved 4 October 2011. 186
Operating income
€10.62 billion (approx. US $14.67 billion), 2010.
Net income
€10.81 billion (approx. US $14.93 billion), 2010.
Total assets
€143.72 billion (approx. US $198.46 billion), end 2010.
Total equity
€61.27 billion approx. US $84.6 billion), end 2010.
Employees
92,855 (end 2010)
Website
www.total.com
Global Snapshot Current Global Profile Together with its subsidiaries and affiliates, in 2009 Total was the fifth largest publicly-traded integrated international oil and gas company in the world604 and as of 2011 was operating in over 130 countries. Total engages in Upstream, LNG and Downstream operations, and also produces base chemicals.605 In 2010, Total was placed under formal investigation after an eight year investigation into bribery charges related to oil deliveries from Iraq under Saddam Hussein’s rule. The case was based on claims that politicians received vouchers for oil in exchange for lobbying for sanctions to be loosened on Hussein’s regime, and that employees of Total purchased the oil. Three years after CEO Christophe de Margerie was placed under investigation, the prosecutor’s office recommended dismissing the case against employees. This included De Margerie, who occupied the post of Head of Middle East Operations in the 1990s, the period during which the Oil For Food program was set up. This program allowed Iraq to sell a certain amount of crude oil under the understanding that they use the proceeds for humanitarian goods.606
604“ Our Businesses”. Total,retrieved 04 October 2011. 605“ Total S.A.”. Financial Times Market Data, retrieved 04 October 2011. 606“ Total under investigation over Iraq oil-for-food”. Bloomberg Business Week, 06 April 2010. 187
Company Report Highlights Total’s Registration Document 2010 reveals that adjusted net income for 2010 was €10.3 billion, up 32% compared to 2009. This was claimed to reflect the 2010 oil market environment, which was marked by a 29% increase in average Brent price to $79.5/barrel. Production in the upstream segment grew more than 4% compared to 2009 and Total has continued to add to its acreage with new exploration focused on pre-salt projects and unconventional gas. In 2010 Total’s production in Libya amounted to 55,000 barrels of oil equivalent (boe) per day, accounting for 2.3% of total production, down from 2.6% in 2009 and 3.2% in 2008. This fall was primarily due to OPEC quotas and new contractual provisions.
CSR Activities Total's 2010 Society and Environment Report, 607 In Other Words, which aimed to continue the dialogue with stakeholders initiated in the previous issue, outlined the three action plans the company had set itself to meet the challenge of partnering civil society and achieving environmental sustainability: 1. Meeting energy needs while responding to Climate Change and Natural Resource Challenges (minimizing energy use; 15% target by 2015 for reduction of greenhouse gas emissions; Total Ecosolutions program; providing affordable, sustainable energy for low-income communities. 2. Reducing Impact of Operations on People and the Environment (in accordance with their Health, Safety, Environment and Quality Charter; assessing environmental and health risks in advance; protecting biodiversity) 3. Helping to Spur Local Social and Economic Development: Transparency of financial contributions in compliance with local legislation; education and training; socioeconomic programs.
Transparency 607“ In Other Words: Ten Questions You Asked Us”. Total, retrieved 06 October 2011. 188
EITI Supporter Status Total joined the EITI on its creation in 2002, was elected to the EITI Board as an alternate member in September 2007 and later elected a permanent member in February 2009 in recognition of their commitment to the initiative. Their representative on the 20-member Board in 2011 was JeanFrançois Lassalle. As part of their commitment, Total publish detailed reports on a number of host countries, accounting for 59% of production in 2010.608
UN Global Compact As of December 2011, Total was a member of the UN Global Compact, having joined in 2002.
Total Operations in Iraq History Total S.A. began its work in Iraq in the 1920s when it discovered the Kirkuk field, followed by further developments at the Buzurgan and Abu Ghirab fields in the 1970s.609. Under Saddam Hussein’s regime in the 1990s, Total signed agreements to develop the Majnoon and Nahr Bin Omar fields in the case of the country being freed from sanctions. However after Hussein’s fall in 2003, the new administration announced that they would not recognise deals signed under the dictator.610. In 2007, it was reported that Total signed an agreement together with Chevron that would lead to the two companies exploring and developing hydrocarbons from the Majnoon field once the country had put an oil law into place.
608“ The Extractive Industries Transparency Inititative”. Total, retrieved 06 October 2011. 609" | Total and partners Petrochina and Petronas to develop the Halfaya oil field ", Total, 28 January 2010 610" Total sign Iraq oil contract for Majnoon Field ", The Bush Agenda, 8 August 2007 189
Activities and Contracts In 2009 Total was part of the consortium that won the contract to develop the Halfaya oil field, with Total holding an 18.75% stake in the project, CNPC 37.5%, Petronas 18.75 % and the Iraqi state-run South Oil Company holding the remaining 25% stake. 611 The contract included a remuneration fee of $1.40 per barrel and the payment of a non-recoverable signature bonus of $150 million612 The consortium has pledged to boost output at Halfaya to 535,000 barrels per day (bpd) from the 2010 level of 3,100 bpd613
TPAO (Türkiye Petrolleri Anonim Ortaklığı) Type
State-owned
Founded
1954
Headquarters
Ankara (Turkey)
Key People
Mehmet Uysal (CEO)
Products
Petroleum products, petrochemicals.
Revenue
US $2.85 billion (2010)614
Net Income
US $1.35 billion (2010)
Total Assets
US $7 billion (end 2010)
Shareholder Equity
US $5.34 billion
Employees
5000
Website
www.tpao.gov.tr
Global Snapshot 611 Iraq : CNPC's Halfaya project in Iraq to start operation in H2 , The Free Library, 9 March 2010 612 " Iraq inks CNPC, Total, Petronas Halfaya deal" AME Info, 26 January 2010. 613" | CNPC says Iran, Iraq oil projects proceed well " Reuters, 21 April 2010 614 "2010 Annual Report" TPAO, retrieved 15 December 2011. 190
Current Global Profile TPAO was established in 1954, when it took over from Turkey's State Minerals Exploration Institute (MTA)615, and until 1983 it was engaged in all the activity fields of oil industry including exploration, production, refinery, marketing and transportation. Since then, it has focused more consistently on upstream activities: exploration, drilling and production. 616/. In 2004, TPAO announced its objective to meet Turkey's increasing oil and natural gas demand through domestic and international exploration and production projects and since then TPAO significantly increased its domestic investments by extending its activities to unexplored basins of Turkey.617 TPAO has approximately 5000 employees throughout Turkey and at its branch offices abroad. According to official company literature, in a bid to improve regional energy security, TPAO conducts its international activities in the Caspian region, North Africa and the Middle East. As of 2011, exploration and production activities were being actively carried out in Azerbaijan, Kazakhstan, Libya and Iraq, and was searching for business opportunities in countries including Syria, Turkmenistan, Iran, Russia, Colombia, Sudan and Venezuela.
Company Report Highlights According to TPAO's 2010 Annual Report, profits for the year saw an impressive 247% increase on 2009 figures, reaching $1.35 billion for the year. Domestic production activities increased only slightly on 2009 from 14 million barrels of oil to 14.2 million, with international production rising from 11 million barrels to 11.1 million. However, offshore drilling activity saw a sharp increase from 3,900 square metres to 14,000 square metres in 2009. Globally, through 2010 3 deep water drilling rigs were built in the Black Sea, oil was discovere in 7 out of 11 wells drilled in Libya and the company signed technical service contracts for the Missan and Badra oil fields in Iraq. Production activities were also initiated at the Akçakoca platform in the Black Sea. 615" | TURKEY - TPAO & Its Fields ", All Business, April 24 2000 616" | TPAO News HISTORY OF TPAO ", TPAO official website 617"Agreement Signed with Turkish National Oil Company ]", Business Wire, Nov 19 2008 191
The company's President commented that the main target is to decrease energy import expenses by responding to the oil and gas demand of the country.
CSR Activities According to TPAO's 2010 Annual Report, the following were highlights on the corporate responsibility front over the year: • Suitable and standard Personal Protective Equipment (PPE) was supplied to staff and fire protectin training and drills were conducted to eliminate fire risks. Additionally, primary health service facilities were provided at the Corporation Health Centre. • The following Environmental Protection Procedures, among others, were established in order to protect against environmental risks: emergency intervention planning, drilling waste water management, recycling of waste oil, management studies of waste water resulting from off-shore gas production.
Transparency EITI Supporter Status As of December 2011, TPAO was not one of the supporting companies of EITI.
UN Global Compact As of December 2011, TPAO was not a member of the UN Global Compact.
192
TPAO Operations in Iraq History TPAO began work in Iraq in 1994.618
Activities and Service Contracts 2009 Service Contracts In 2009, TPAO was in a consortium that included Kogas, Petronas, and Gazprom which won a contract to develop the Badra oilfield. The consortium, in which TPAO forms a 10% stake, Gazprom 40%, KOGAS 30% and Petronas 20%619 originally requested US$6 per barrel of oil extracted from the field but later accepted the Oil Ministry's offer of US$5.50. 620 The consortium will invest a total of $3.52 billion to pump 170,000 barrels of oil per day, with Gazprom Neft's deputy chief executive for exploration and production Boris Zilbermints saying in December 2009 they they expected to pump the first crude from the field within three years. Zilbermints has also said that it plans to reach full production of 170,000 barrels per day within six to seven years of signing the contract. Iraqi Oil Minister Husayn al-Shahristani said in 2009 that he was pleased that TPAO won the tender for Badra oilfield, adding that Iraqi authorities have been exerting efforts to boost political, economic and social relations with Turkey. The head of department of international projects of TPAO, Mehmet Ali Kaya also added in 2009 that they regarded the tender as a first step for Iraq and that TPAO were eager to participate in other projects in Iraq.621
618" | Eastern Promise ", O&G Next Generation 619 "Iraq signs deal with Gazprom group for Badrah", Reuters, 28 Jan2010 620 " Russian energy giant Gazprom wins contract for Iraq's Badra oil field", Taiwan News, 13 Dec 2009 621" | Iraqi Oil Minister Glad TPAO Wins Oil Tender in Iraq ", Turkish Weekly, 13 Dec 2009 193
In 2010, TPAO signed a second deal with Iraq together with CNOOC to develop the Maysan oilfield complex. The original deal was between CNOOC and China's Sinochem, who asked for $21.4 per barrel when the field was auctioned to foreign firms last June, which was rejected by the Iraqi government622. Sinochem pulled out after CNOOC accepted the government's proposed fee of $2.30 for every additional barrel of oil produced and TPAO stepped in.623. In the deal, CNOOC will hold a 63.75 percent stake while TPAO holds 11.25 percent and the Iraqi government will have a 25% stake in the overall project. They have set an output target of 450,000 barrels per day (bpd) after six years. President of the Executive Board and Director General of TPAO Mehmet Uysal said that "by winning two tenders, the TPAO plans to produce 100,000 barrels of oil per day in the next three years in Iraq". He added that the project in Misan involves opening around 350 oil wells.624
2011 Service Contracts When Iraq launched its third licensing round in 2010, three gas fields were tendered for development: Akkas, Mansuriya, and Siba. 625 Turkey's TPAO, Kuwait Energy Company and Kogas finalised deals in June 2011 to jointly develop the Mansuriya field in eastern Iraq,626 which pays $7 per boe extracted627 and has a plateau production target of 9.06 mcm. Kuwait Energy (60% operating stake) and TPAO (40%) won the bid to jointly develop the Siba field in the south and signed a deal that will pay them $7.50 per boe extracted628 and has a plateau production target of 2.1 mcm.
622" | Iraq signs deal with Chinese, Turkish oil firms ", The Peninsula, 18 May 2010 623" | Iraq in deal with CNOOC, TPAO for Maysan oilfields ", Reuters, May 17, 2010 624" | Turkey's TPAO awarded second Iraq oil deal ", World Bulletin, 18 May 2010 625 " Gas Fields Bid Round In Iraq: Success With Risk", Middle East Economic Survey 27 December 2010. 626 " Iraq inks final gas deal with SKorea's KOGAS Yahoo News, 13 October 2011. 627" Mansuriyah Contract Area - Bidding Results", Petroleum Contracts and Licensing Directorate 20 October 2011. 628" Siba Contract Area - Bidding Results", Petroleum Contracts and Licensing Directorate 20 October 2011. 194
The gas produced will be used domestically mainly for power plants and the petrochemical industry, according to Iraqi officials, and the surplus will be exported. All three deals will run for 20 years. The development of the Mansuriya and Siba fields will require significant foreign investment. TPAO and its partners expect to invest approximately $2.5 billion in the Mansuriya field and $1 billion in Siba. The regional and geographical proximity of the above firms, specifically TPAO and Kuwait Energy, played a role in their winning of the contracts, according to the Cyprus-based energy newsletter Middle East Economic Survey (MEES). With its stake in the Siba and Mansuriya fields, TPAO strengthened its foothold in the Iraqi upstream sector since it already has minority stakes in Badra (with Russia’s Gazprom as the operator) and in the Misan group of oilfields with China’s CNOOC.
195
Iraqi Entities State Oil Marketing Organization Iraq's State Oil Marketing Organization (SOMO) is one of the most important companies in the Iraqi oil sector, deemed by the federal government to be the sole body invested with the authority to organise the sale and export of Iraqi oil. The proceeds of oil exported and marketed by SOMO go to the central government in Baghdad.629 SOMO's director as of late 2011 was Falah Al-Amri,630 who at that time also served as Iraq's Governor of (representative to) OPEC.631
Activities SOMO specialises in marketing Iraqi crude oils through export terminals such as Basra, Khor Al-Amaya and Ceyhan.632 Iraq's oil exports rose to 2.145 million barrels per day (bpd) in December 2011, a 10,000 bpd increase from November of the same year. Overall in 2011, Iraq's oil exports increased by 273,000 bpd from 2010, a 14.4% increase.633 SOMO is also responsible for covering local consumption needs by purchasing and importing oil products such as gasoline, gasoil, kerosene and liquid petroleum gas. In January 2012, SOMO signed a deal to buy nearly 1.5 million tonnes of gasoil and petrol for delivery over the first half of the year. This included a combined 1.1 million tonnes from independent oil traders Gunvor, Trafigura and Vitol, and 200,000 tonnes from French oil company Total.634 629SOMO is sole marketer of Iraq oil - ministry Zawya 10 May 2009 630Iraq Increases December Oil Exports by 1.9% From Month Earlier Bloomberg, 18 December 2011. 631Iraq facts and figures Organization of Petroleum Exporting Countries - Iraq, Retrieved 12 January 2012. 632About Us, SOMO website, Retrieved 11 January 2012. 633Iraq's oil exports reach 2.145 million b/d in December: SOMO Platts, Retrieved 3 January 2012. 634Somo Signs Deal to Buy 1.5m Tonnes of Fuel, Gulf Oil and Gas, 4 January 2012. 196
History After the nationalisation of Iraqi petroleum resources in June 1972, the Iraqi government formed the General Directorate for Oil Marketing (GDOM) to manage and run all marketing operations related to crude oil and its refined products. The transformation of the petroleum sector led to the merger of Iraq's Oil Tankers Company with the GDOM, after which the Directorate became known as the State Oil Marketing Organization (SOMO). In 1998, SOMO became a public company registered at the Ministry of Trade under the name Oil Marketing Company. Despite its name change, the abbreviation 'SOMO' was preserved. SOMO's new identity as a publicly registered company gave it more flexibility and liberty to market Iraqi crude oil and refined products in surplus of Iraq's domestic needs, according to Iraq Energy Expo. Since the 2003 US-led invasion of Iraq, increase in domestic demand for some oil products led SOMO to gain authorisation to import oil products for domestic consumption.635
External Links Official Website: www.somooil.gov.iq
Petroleum Contracts and Licensing Directorate The Petroleum Contracts and Licensing Directorate (PCLD) is a department of Iraqi Ministry of Oil.636 The PLCD is responsible for: the announcement and pre-qualification processes of licensing rounds; the preparation of initial drafts of contracts and specific technical information of exploration blocks; the reception of qualification documents of international oil companies (IOC); closing the qualification process and declaring the results; the initial drafts of the contract and the initial tender protocol (ITP) and providing technical data; receiving and answering the IOCs inquiries; issuing the definitive model contract and final tender protocol (FTP); and, the bidding 635Oil Marketing Company (SOMO), Iraq Energy Expo, Retrieved 11 January 2012. 636" Iraq to Uphold Accord With Exxon Mobil ‘For Now,’ Al-Ameedi Says" Bloomberg Businessweek 14 December 2011. 197
process itself.637 The Director General of the PCLD is Abdul Mahdi al-Ameedi. 638 The head of the legal section of the PCLD is Sabah Abdul-Kadhim.639
Recent Activities and Contract Disputes On 13 November 2011, the Kurdistan Regional Government (KRG) indicated that the Exxon Mobil Corporation was the first supermajor to contravene the Iraqi federal goverment's blacklist policy on any contracts which give IOCs a proprietary interest in Iraqi oil 640 with its announcement that the KRG had awarded ExxonMobil, the world's largest oil company by market value, with six exploration and production licenses641 Abdul Madhi al-Ameedi, as Director General of the PLCD, attempted to assure the final authority of the Ministry of Oil's licensing body on matters related to contracts with IOCs when he stated, towards the end of November 2011, that unless ExxonMobil reneged the deals it had signed with the KRG - which the Iraqi federal government considered a clear violation of Iraqi law - the oil supermajor would be excluded from bidding on the upcoming fourth round of auctions for oil development programs in Iraq and that its contracts in the south of Iraq could easily be replaced by Royal Dutch Shell.642 However, in December 2011, al-Ameedi seemed to back away from his previous decision when he stated that the Iraqi federal government would uphold agreements with ExxonMobil, despite the fact that it was "considering measures" in response to the oil company's contracts with the KRG. At the time, the Director General also declined to specifiy what measures would be 637" 4th Licensing Round Schedule" Iraqi Ministry of Oil website Retrieved 18 December 2011. 638" Iraq to Unveil Model Exploration Contracts 11th Sept" Iraq Business News 17 August 2011. 639" 4th Energy Auction to be Delayed" Iraq Business News 10 October 2011. 640" Report: Exxon to be banned from Iraq 4th round" Arabian Oil and Gas 27 November 2011. 641" Giant Exxon Mobil enters Kurdistan oil market" Kurdish Globe 19 November 2011. 642" ExxonMobil Contracts in Southern Iraq Could Be Replaced in Light of Kurdistan Deal, Warns Baghdad" International Business Times 21 November 2011. 198
taken or to rule out that punitive steps could be decided upon at a later date.
External Links Official Website: www.pcld-iraq.com
Prime Minister's Office The Iraqi Prime Minister is the direct executive authority responsible for the general policy of the State and the commander-in-chief of the Iraqi armed forces. He directs the Council of Ministers, presides over its meetings, and has the right to dismiss the Minster with the consent of the Council of Representatives.643 After nomination and endorsement as Prime Minister, the Prime Minister has 30 days to form a government. The Iraqi parliament must then approve each member of the proposed cabinet by a majority vote.644 While the Prime Minister’s Office is not directly involved in the day-to-day management of the oil industry, it is tasked with monitoring developments and raising issues for discussion at meetings of the Council of Ministers. Major oil contracts with international companies also require the approval of the Council of Ministers.645 The Prime Minister’s Office is often directly involved in negotiations between political blocs with regards to proposed legislation related to the oil industry.646 The Prime Minister’s Advisory Board (PMAB), headed by former Oil Minister, Thamir Ghadban, is tasked with formulating Iraq’s long-term strategic oil policy.647648 The PMAB’s energy advisor, Dr. Ali Al-Mashat, is responsible for liaising with international organizations including the World Bank.
643" Iraqi Constitution" United Nations Assistance Mission for Iraq Retrieved 18 December 2011. 644" Maliki endorsed as new Iraqi PM" BBC 22 April 2006. 645" Oil and gas contracts in Iraq Who's Who Legal website July 2010. 646" Analysis: Oil law dissent shows cracks in Maliki's government" Iraq Oil Report 8 September 2011. 647" Q&A:Thamir Abbas Ghadhban" Society of Petroleum Engineers Retrieved 18 December 2011. 648" Iraq Outlines Oil Production Strategy To 2030" Energia 20 October 2011. 199
Prime Minister in 2011 In April 2006, Jalal Talabani - re-elected Iraqi President by the Iraqi Parliament at the time - nominated Nouri al-Maliki 649 to replace interim Iraqi Prime Minister Ibrahim al-Jaafari, after months of political deadlock and in hopes that it could end sectarian divisions within the country. In November 2010, after eight months of political deadlock which followed inconclusive elections in March of the same year, once again newly re-elected Iraqi President Jalal Talabani reappointed al-Maliki as Prime Minister. 650 In February 2011, al-Maliki's decision not to run for a third 2014 was broadcast on state television and confirmed by the Prime Minister's media advisor, Ali al-Moussawi. al-Moussawi also indicated that al-Maliki wanted to ensure constitutional amendments, before he left office, that would limit future prime ministers to two terms. 651
Influence over Iraqi Oil Throughout the year 2010, al-Maliki created various deputy positions that do not exist as such in the 2005 Iraqi Constitution. One of them is that of Deputy Prime Minister for Energy. Hussain al-Shahristani, former Oil Minister, was placed in the position, with many ministers - which includes those that are in charge of the countries oil and electricity - functionally subordinate to al-Shahristani.652 Starting in February 2011, a "visa blackout" that affected a variety of international oil companies employees, from laborers to prospective investors, managers to technicians with specialized skills, was reported in March of the same year by Iraq Oil Report journalists, based on two anonymous sources, as the result of a decision by the Prime Minister's Office that applications for visas should go through the Prime Minister's office and not the Iraqi Ministry of Interior.653 649" Iraq parliament elects new leaders" CNN 22 April 2006. 650" Nouri Maliki reappointed Iraqi prime minister" BBC 12 November 2010. 651" Iraqi PM Says He Will Not Seek 3rd Term" Huffington Post 5 February 2011. 652" Iraq's Nouri al-Maliki: The Man Who Would be King (p. 6)" Foreign Policy 13 June 2011. 653" Iraq Entry Visa Quagmire Blamed on al-Maliki" Iraq Business New 23 March 2011. 200
Similarly, in the controversial situation that broke out in November 2011 when the Kurdistan Regional Government announced it had awarded Exxon Mobil Corporation a series of contracts, the Prime Minister's Office added the weight of their opinion to that of the Iraqi Ministry of Oil's opinion that contracts with IOCs will not be recognized unless they are approved by the Iraqi federal government.654 The Iraqi Prime Minister is known, at times, to receive delegations from international oil companies (IOC) and discuss new and continued operations with them.655
External links Prime Minister's Office Official Website
Maysan Oil Company Maysan Oil Company was spun off from South Oil Company in 2008 to deal with plans for expanded production in Maysan governorate.656
History The Maysan Oil Company was created as part of a plan for each Iraqi province producing at least 100,000 barrels per day (bpd) to have its own state-run oil company to focus on developing oilfields there. Total oil output from Maysan province was between 100,000 and 110,000 bpd when the company was created, and planned to increase output to 120,000 bpd by the end of 2011.657 The start-up capital of the company was $8 million, a government statement said.
654" Iraq Deputy PM: No Need For Adjustment To OPEC Production" Dow Jones Deutschland 22 November 2011. 655" Iraq's PM discusses increase of southern Iraq oil field's production with Italian Company" Middle East North Africa Financial Network 27 September 2011. 656" New Iraq oil firm aims to triple production in Maysan" Reuters, 28 June 2008. 657" Iraq Aims to Join OPEC Quota System in 2014" Bloomberg, 26 October 2011. 201
Areas of operation As of December 2011, Maysan's oil fields included six producing - Bazergan, Abu-Gharb, Fakka and Halfaya, as well as Majnoon, which it operates in partnership with the South Oil Company. Maysan also holds five discovered but unproducing fields, including the Huweiza, al-Rafi’e, East Rafidan, Dujeila and Kumait.658 The company announced in February 2010 it had awarded a drilling contract to a UK company called Mesopotamia Petroleum to work on the Halfaya field. The same notice also stated that the US company Weatherford had been awarded a contract worth $224 million to work on the other oil fields in Maysan province.659 The Aswat al-Iraq news agency reported in December 2011 that a number of American, Malaysian, French and Japanese companies were interested in working with Maysan Oil Company, with a company official stating that over 100 companies have offered to work in the company’s oil, excavation, supplies and other oil services.
Personnel Maysan Oil Company's Managing Director was engineer Ali Muarij until he was removed from the post in June 2011 after being charged with bad administration and failure to achieve higher oil production results during his assignment. Muarij's replacement has not yet been named. 660 The company's headquarters are in Maysan province's capital, Amara, and the company website lists several phone numbers and email contact addresses.
External links Official Website: www.moc.oil.gov.iq
658" Foreign Companies Keen to Work for Missan Oil" Iraq Business News, 1 December 2011. 659" Maysan Oil Company Awards Drilling Contracts", Investors Iraq, retrieved July 20, 2010 660" South Iraq Missan’s Council sacks Missan Oil Company’s DG from his post " Aswat Al-Iraq, 9 June 2011. 202
North Oil Company (Iraq) The North Oil Company is a state company within the Iraqi Ministry of Oil, managing production in Iraq's northern fields, 661 notably the supergiant Kirkuk field.662
History The North Oil Company was created through the dissolution of Iraq's National Oil Company in 1987.663
Areas of operation The North Oil Company's operation areas span the governorates of Kirkuk, Nineveh, Erbil, Baghdad, Diyala and part of Hilla and Kut. Its jurisdiction extends from the Turkish borders in the north to latitude 32.5 degrees in the south, and from Iranian borders in the east to Syrian and Jordanian borders in the west.664 Operating in some of Iraq's least secure territory, the company has been subject to repeated attacks by insurgents and organised crime since 2003. In July 2006, a director, Adel Qazzaz, was kidnapped in Baghdad, and at least eight other employees have been killed over the last few years 665. In addition to its numerous oil wells, the company contains more than fifty installations comprising pump stations, processing units, oil tank fields, degassing stations, gas compressor stations, water treatments plants, electric generation stations and many oil wells connected with a network of flow lines and pipelines dispersed throughout the company’s area of operation. The North Oil Company supplies crude oil of different types to Iraqi refineries and associated gas to North Gas Company units and to electric generation stations, as well as for export through a network of pipelines to Tur661" North Oil Company Profile" Ministry of Oil website Retrieved 30 December 2011. 662" Iraq names North Oil Company head" Trade Arabia 4 January 2010. 663" Case Study on Iraq’s Oil Industry" Rice University March 2007. 664 "North Oil Company Profile", Ministry of Oil website, retrieved 30 December 2010 665" Attacks on Iraqi pipelines, oil installations, and oil personnel", Institute for the Analysis of Global Security, retrieved July 20, 2010 203
key and Syria.
Personnel On January 4, 2010, veteran oil executive Hameed al-Saedi replaced Manaa Abdullah al-Ubaidi as head of the North Oil Company. Then-Oil Minister Hussein Shahristani also ordered the replacement of three other top managers at the same time.666. The appointment was controversial as Saedi comes from the southern province of Maysan, despite having worked in the North Oil Company for many years. Ubaidi, the company's outgoing chief, lauded Saedi's experience but said his appointment was "not suitable for the special status of Kirkuk", and a local oil workers union sent a letter protesting the appointment to the city authorities in Kirkuk.667. The company had over 9,300 employees on its books in 2007. It provides housing for many of its employees, maintains a 200-bed hospital in Kirkuk as well as 11 clinics across its field of operations, a private telephone nework and a station and pipeline network to pump drinking water from the River Zab to installations on the Kirkuk field.668
External Links Official Website: www.noc.gov.iq
South Oil Company (Iraq) The South Oil Company is Iraq's largest,669 formed in the 1970s to manage production of the country's southern fields in the newly nationalised framework of the Iraq National Oil Company.670
666" Iraq names new head of North Oil Company", Reuters, 4 January 2010 667" Iraq names Shi'ite to head North Oil Company", Reuters, 4 January 2010. 668" Main Installations", North Oil Company website, Retrieved 200 July 2010. 669" Iraq hopes for a national oil company by year end", Al Arabiya News, 14 July 2011. 670" About the Company", South Oil Company website, Retrieved 6 January 2012. 204
History Based in Basra,671 the company grew throughout the 1970s as Iraq's oil industry expanded, reaching peak production levels of 2.75 million barrels per day (bpd) of oil. The company's operations were badly damaged in the war of 1991 and again in the war of 2003. But by early 2004, SOC had managed to restore production of over two million bpd. In 2008, as plans for expansion of the Iraqi oil industry proceeded, the Maysan Oil Company was spun off from South Oil Company.672 The then director of the company, Fayad al-Nema, was removed from his post in July 2009 in what the government said was "restructuring"; however it was widely believed, according to the website Arabian Oil and Gas that Nema was sacked because he opposed the auctions of service contracts in Iraqi fields to international oil companies.673
Areas of Operation The South Oil Company has operatorship of Iraq's southern fields, including the Rumaila field, with 17 billion barrels of reserves.
Personnel Dhia Jaffar was the South Oil Company's director general as of late 2011. 674
External Links Official Website: www.soc-basrah.com
671" Marooned on Sea of Iraqi Oil, but Unable to Tap Its Wealth", New York Times, 7 November 2009. 672 " New Iraq oil firm aims to triple production in Maysan" Reuters, 28 June 2008. 673" Iraq Oil Ministry fires South Oil Company chief", Arabian Oil and Gas, 30 July 2009. 674" Oil export expansion on track, Iraq Oil Report, 13 October 2011. 205
Iraq Drilling Company The Iraq Drilling Company (IDC) is a state-owned company that is part of the Iraqi Ministry of Oil, responsible for drilling, completion and work-over of oil and gas wells, in addition to the repair and maintenance of drilling rigs and their related equipment.675 The IDC is divided in two departments: the Northern Operations Department and the Southern Operations Departments.676 The IDC was formed as such in 1987, when the Iraq National Oil Company was disbanded.677
Joint Ventures and Recent Activity The first joint venture in the post-Saddam Iraqi oil industry occurred with a deal was finalized in 2009 between the IDC and Mesopotamia Petroleum Company, from the United Kingdom.678 The IDC also signed a memorandum of understanding (MoU) about joint drilling and training opportunities with KCA DEUTAG, a British oil and gas service company, in 2010. 679 Although the jointed venture with Mesopotamia Petroleum Company eventually failed, in 2011 the IDC won a contract to drill in the Rumalia oil field together with Schlumberger Limited- the world's largest oilfield services provider.680 In 2011, the IDC stated that it had drilled 189 oil wells in 2010 and planned to drill and rehabilitate 140 other wells in the course of the year. 681 Similarly, it stated that the Iraqi Ministry of Oil launched a series of investments in the IDC which acquired 22 complete drilling rigs. 682 Director Idris 675" Iraq Drilling Company (IDC)" Iraq Updates website 2 April 2004. 676" Iraq Drilling Company (IDC)" Iraq Energy Expo website Retrieved 30 November 2011. 677" Iraq National Oil Company, An Historical And Political Perspective" Ruba Husari 21 September 2009. 678" Iraq finalizes oil drilling joint venture with Mesopotamia Petroleum" Iraq Oil Report website 26 February 2009. 679" KCA DEUTAG establishes presence in Iraq" KCA DEUTAG website 14 October 2010. 680" IDC's Success Story" Iraq Oil Forum website 22 July 2011. 681" Iraqi Drilling Company - 140 Wells in 2011" Iraq Business News 18 January 2011. 682" DRILLMEC S.P.A, THE ITALIAN "PIONEER" IN THE MESOPOTAMIAN LAND" DRILLMEC website 14 June 2011. 206
Muhsin al-Yassery stated that besides these, "two rehabilitation devices, along with three other towers ['are'] to be bought later, due to the Company's plans to dig more oil wells in the near future." In the same year, the IDC started to drill and repair wells in the Hamrin mountains for the first time in 21 years. The mountains, located to the north of Baghdad, had been a haven for insurgents, including al-Qaeda, after the 2003 occupation of the country.683
Other Iraqi Entities The Iraqi Ministry of Oil runs various state-owned companies. Many of the more important companies are described in some detail in their respective sections below.
North Gas Company The state-owned North Gas Company (NGC) is responsible for the utilization of all associated gases available in the fields of Iraq to produce: dry gas used in electricity generation stations, fuel gas used in other industrial factories, and raw materials used in the petrochemical industry in order to manufacture fertilizers; liquefied petroleum gas (LPG); natural gasoline; and, sulphur.684 In June 2011, the NGC invited companies to bid for supplying lab chemicals.685 Various tenders were announced between July and September 2011, mostly concerning supplies, spare parts and machinery.686
683" Iraq Starts Drilling for Oil in Hamrin Mountains" Iraq Business News 5 June 2011. 684" North Gas Company (NGC)" Iraq Energy Expo Retrieved 25 December 2011. 685" Quotation For The Supply Of Lab Chemicals" Iraq Business News 29 June 2011. 686" Tag Archive: North Gas Company" Iraq Business News Retrieved 25 December 2011. 207
South Gas Company The state-owned South Gas Company (SGC) is responsible for the processing of associated gas from the Iraqi southern fields to produce dry gas, liquid gas and natural gasoline, in addition to the industrial management of liquefied gas storage tanks and export terminals.687 In November 2011, Reuters reported that a $17 billion deal was approved with Royal Dutch Shell and Mitsubishi to capture gas that is flared off in the oilfields around the southern oil hub of Basra. The deal established a new company called the Basra Gas Company, a joint venture of the SGC and the Shell/Mitsubishi consortium, which could eventually lead to the export of liquefied gas. The Iraqi federal government will hold 51% of the joint venture, while Shell will hold 44% and Mitsubishi 5%.688
North Refineries Company The state-owned North Refineries Company (NRC) is the largest of the Iraqi Ministry of Oil refining companies. The NRC's total refining capabilities, as of October 2011, were estimated to be 402,000 barrels per stream day (bpsd). The NRC produces various refinery products, which include: unleaded gasoline; kerosene; aviation turbine kerosene (ATK); diesel and gasoline; lubricant oil products; spindle oil; transformer oil; asphalt; sulfur; liquefied refinery gases (LRG - i.e., ethane, propanes, butane, and such); and others. The NRC operates the North, Salahudin, Sininya, Qayara, Kasak, Kirkuk and Hadeetha refineries.689 The Director General of the NRC is Abdul Ghafoor Abdul Jabbar.690
Midland Refineries Company The state-owned Midland Refineries Company (MRC) is responsible for industrial management and operation of oil refineries in the midland region of Iraq: for example, the Daura refinery. The MRC produces a wide range of 687" South Gas Company" Iraq Energy Expo website Retrieved 25 December 2011. 688" Iraq Approves $17bn Gas-Capture Contract With Shell, Mitsubishi" Iraq Business News 16 November 2011. 689" North Refineries Company North Refineries Company website Retrieved 25 December 2011. 690" Delegations" Iraqi Ministry of Oil website Retrieved 25 December 2011. 208
refinery products, which include: liquefied petroleum gas (LPG); lubricant oils; greases; wax; and asphalt.691 In July 2011, the MRC announced a series of tenders, which included motors, turbine spares and spare parts, among others.692 The Director General of the MRC was as of late 2011 Dathar al-Khasbab.
South Refineries Company The state-owned South Refineries Company (SRC) provides a variety of refined oil products, which include: premium petrol; kerosene; gas oil; diesel oil; fuel oil; marine fuel oil; liquid gas; and others. 693 The SRC operates the Basra, Dhi Qar and Maysan refineries.694 In July 2011, the SRC awarded Grimley Smith Associates (GSA), a British process engineers consultancy, a two-year project to upgrade facilities at the Basra oil refinery for £31 million. 695 In December 2011, Shaw Group Incorporated, a US engineering, procurement and construction company - specialized in piping, energy, chemical, fossil and nuclear power - was awarded a contract by the SRC to provide a feasibility study for the rehabilitation of the Basra oil refinery. The study was funded by the United States Trade and Development Agency (USTDA) through a grant to the SRC. This was the first grant that the USTDA provided directly to an Iraqi grantee. At the time of the announcement, the value of the contract remained undisclosed. 696 Abdul Ghafoor Abdul Jabbar, Director General of the NRC, is also Director General of the SRC.697
691" Midland Refineries Company (MRC)" Iraq Energy Expo website Retrieved 25 December 2011. 692" MRC announces New Tenders" Iraq Business News 14 July 2011. 693" South Refinery Company" South Refineries Company website Retrieved 25 December 2011. 694" Department" South Refineries Company website Retrieved 25 December 2011. 695" Consultants Win £31m Iraqi Oil Refinery Deal" Iraq Business News 20 July 2011. 696" Shaw Wins Feasibility Study on Basra Refinery" Iraq Business News 15 December 2011. 697" US Approves Grant for Basra Refinery Feasibility Study" Iraq Business News 25 July 2011. 209
External Links North Gas Company website South Gas Company website (Arabic) North Refineries Company website South Refineries Company website
Secondary Iraqi Entities Iraq has numerous oil industry entities in additin to the major producing copanies, including the: Oil Projects Company, Oil Exploration Company, Oil Pipelines Company, Iraqi Oil Tankers Company, Petroleum Research & Development Centre, Gas Filling Company, Baghdad Oil Training Institute, Basra Oil Training Institute, Kirkuk Oil Training Institute, and the Baiji Oil Training Institute.
Oil Projects Company The state-owned Oil Projects Company (SCOP) is responsible for design and execution of oil projects: refineries, oil depots, pipelines, storage tanks, and exporting crude oil terminals.698 In June and September 2011, SCOP announced a series of tenders, mostly concerning various kinds of supplies, but also for machinery and their spare parts.699 In late 2011, Flah al-Khawaja was the Director General of the SCOP.
Oil Exploration Company The state-owned Oil Exploration Company (OEC-Iraq) is responsible for all oil and gas exploration activities in Iraq and, as such, deals with: seismic data acquisition, processing and interpretation; location of exploration and 698" Oil Projects Company" Iraq Energy Expo website Retrieved 25 December 2011. 699" Tag Archive: Oil Projects Company" Iraq Business News Retrieved 25 December 2011. 210
delineation wells; geological and geophysical studies leading to the final delineation stage of discovered oil and gas fields. It is important to note that once these delineated discoveries are ready for development, the responsibilities of the OEC finish and those of the various state-owned oil companies commence.700 As of late 2011, Husam Jaber Hasan was Director General of the OEC.
Oil Pipelines Company The state-owned Oil Pipelines Company is responsible for management and operation of oil products depots, pumping stations, and oil product and gas pipelines that lead to distribution depots and industrial consumers.701 In March and April 2011, the Oil Pipelines Company announced tenders for the supply of pipes of various sizes.702 In late 2011, Hashim Abdulgafor Shakir was Director General of the Oil Pipelines Company.
Iraqi Oil Tankers Company The state-owned Iraqi Oil Tankers Company (IOTC) is responsible for seaborne transportation of oil in the Iraqi oil industry. 703 However, the IOTC's fleet was almost destroyed in the second Gulf War. Hence, in 2007, the IOTC announced a tender to build two new tankers made in accordance to international classification society requirements. In November 2007, the first received vessel in the plan of fleet renewal was officially inaugurated.
700" Oil Exploration Company (OEC)" Iraq Energy Expo website Retrieved 25 December 2011. 701" Pipe Line Company" Iraq Energy Expo website Retrieved on 25 December 2011. 702" Tag Archive: Oil Pipelines Company" Iraq Business News Retrieved 25 December 2011. 703" Iraqi Oil Tankers Company" Iraq Expo Online website Retrieved 25 December 2011. 211
Petroleum Research & Development Center The state-owned Petroleum Research & Development Center (PRDC) is a scientific research institute established with the purpose of developing methods of scientific, pilot and experimental research for the oil industry. In this sense, the PRDC: solves technical problems related to petroleum; develops oil operation techniques in refineries in order to find new products or improve petroleum products that already exist; provides scientific support and information services to the Iraqi oil industry; follows the latest scientific and technological research on oil industry development and reduction of environmental pollution; and sustains bilateral cooperation efforts with Iraqi universities, their post-graduate students and professors.704
Gas Filling Company The state-owned Gas Filling Company is responsible for industrial management and operation of gas filling complexes. The Gas Filling Company receives gas that is produced by the North Gas Company and South Gas Company in order to treat it by means of a series of technical operations so as to fill and refill bottles for multiple marketing usage.705
Baghdad, Basra, Kirkuk and Baiji Oil Training Institutes The Iraqi Ministry of Oil runs four state-owned oil training institutes throughout the country, specifically, in Baghdad, Basra, Kirkuk and Baiji.706707 Established in 1951, the Institute in Kirkuk is the oldest petroleum technical institute in the Middle East. After the second Gulf War, the institute as a whole was transferred to Baiji, but in 2005 the institutes were separated and 704" About the center" Petroleum Research & Development Center website Retrieved 25 December 2011. 705" Gas Filling Company" Iraq Energy Expo website Retrieved 25 December 2011. 706" Baghdad Oil Training Institute" Baghdad Oil Training Institute website Retrieved 25 December 2011. 707" About us>"[http://www.kirkukoti.net/en/aboutus.htm About us" Kirkuk Oil Training Institute website Retrieved 25 December 2011. 212
became independent. The Institute in Baghdad is considered one of the largest Arab petroleum technical institutes. The Institute in Basra is the second largest of those that are run in Iraq. All four institutes educate their students in a variety of technical education courses related to the oil industry and send their students, later on in their studies, to petroleum industry worksites for further training and acclimation to the industry's work environment.
External Links Iraqi Oil Exploration Company: www.iraqioec.com/ Petroleum Research & Development Center: www.prdc.gov.iq Baghdad Oil Training Institute: www.boti.gov.iq Kirkuk Oil Training Institute: http://kirkukoti.net
KRG Institutions The Kurdistan Regional Government (KRG) is the official and democratically elected executive body of the Kurdistan Region, also known as Iraqi Kurdistan. An autonomous region of Iraq since 1992, Iraqi Kurdistan reconstituted itself as a federal region upon the ratification of the new 2005 Iraqi constitution.708 The most recent elections, held in 2009, lead by the Kurdistan List, a coali tion list of the Kurdistan Democratic Party of Iraq (KDP) and the Patriotic Union of Kurdistan (PUK), to win the largest share of seats and be tasked to form the next government 709. Barham Salih, from the PUK, was selected to be prime minister.710 Incumbent president at the time, Massoud Barzani, from the KDP, was reelected as president of Iraqi Kurdistan, this time not by the parliament, but by direct elections.711 708" About the Kurdistan Regional Government" KRG website Retrieved 18 November 2011. 709” Profile of Prime Minister Barham Salih” KRG website Retrieved 21 November 2011. 710” Profile of Prime Minister Barham Salih” KRG website Retrieved 21 November 2011. 711 ” Masoud Barzani” KRG website Retrieved 21 November 2011. 213
Government Structure The KRG cabinet is constituted by members of the majority party or list of the Iraqi Kurdistan Parliament, the democratically elected 111-member unicameral legislature body.712 The head of the cabinet and chief of state, the president, who delegates executive powers to the cabinet, is directly elected by the electorate of the Region.713 The cabinet selects the head of the legislature, the prime minister. 714 The parliament creates and passes laws by a majority vote, but the president has the power to veto any bill.715 The president is also the commander-in-chief of the Peshmerga Armed Forces.716 The Iraqi Kurdistan Parliament examines proposals for new laws, scrutinizes government policy and administration, and debates major issues that concern the region. Although the regional Parliament shares legislative power with the Iraqi federal government, priority is given to regional laws in matters that relate to customs, electric energy and its distribution, general planning, and internal water resources. The regional Parliament has also passed laws that deal with subjects such as open investments and hydrocarbons. Elections are held at least every four years, open to citizens over the age of 25. The legal minimum quota of women Members of Parliament is 30% of the legislature.717 There are 19 ministers appointed to the regional government, which include the Ministry of Natural Resources that is lead by Abdullah Abdulrahman Abdullah, and four other senior official with ministerial rank, which include the Head of the Department of Foreign Relations, Mohammad Qaradaghi, and the Chairman of the Investment Board, Herish Muharam.718
712” The Kurdistan Parliament” KRG website Retrieved 18 November 2011. 713" Kurdisan Region Presidency" KRG website Retrieved 23 November 2011. 714" Prime Minister Salih pledges renewal as cabinet is sworn in" KRG website 29 October 2009. 715" Child abuse law approved in Kurdistan" The Kurdish Globe 6 August 2011. 716" Peshmerga to Lose 130,000 Soldiers" Rudaw 17 January 2011. 717" The Kurdistan Parliament" KRG website Retrieved 30 November 2006. 718" Kurdistan Regional Government ministers" KRG website 28 October 2009. 214
The Iraqi constitution stipulates that regional governments will handle their own domestic affairs, while the federal government, based in Baghdad, will handle international affairs719.The constitutional ambiguity over which government, federal or regional, has final say about contracts with international oil companies (IOC) is a matter of contention, however, between the Iraqi federal government and the Iraqi Kurdistan regional government.
External Links KRG Official Website: www.krg.org/?lngnr=12
Iraqi Federation of Oil Unions Members of the Iraqi Federation of Oil Unions (IFOU) made international headlines when they exercised their legitimate right to strike in 2007, protesting low wages, poor health and safety standards, the use of temporary workers, and the future path of Iraq's oil industry. 720 In February 2005, the British newspaper The Guardian published a letter by Hassan Juma'a Awad, president of the IFOU. Juma'a Awad explained that eleven days after the fall of Badhdad, oil workers at the Southern Oil Company founded a union by the same name - Southern Oil Company Union despite the fact that the occupation authorities maintained many repressive laws from the Saddam Hussein era, which included the 1987 order that stripped workers of their basic union rights and their right to strike. Although the trade union lacked official recognition, its numbers continued to increase; within a few years, it would grow to count with more than 23000 members, spread across 10 oil and gas companies.721
719” Interview with Head of KRG Dept of Foreign Relations” Iraq Business News 22 July 2011. 720" Iraq" American Center for International Labor Solidarity website Retrieved 30 November 2011. 721" Leave our country now" The Guardian 18 February 2005. 215
The Southern Oil Company Union, as its numbers swelled, became the General Union of Oil Employees (GUOE). 722Eventually, the GUOE would rename itself the Iraqi Federation of Oil Unions.723
Iraqi Federation of Oil Unions Activities, Strikes and Demands During the early occupation, the Southern Oil Company Union faced KBR Incorporated, a United States' engineering, construction and private military contracting company that - at the time - was a subsidiary of Halliburton, when the company tried to take over the workers' workplace with the protection of occupation forces. The company's Kuwaiti subcontractor, Al Khourafi, eventually replaced 1000 of the 1200 employees it had brought with Iraqi workers. Similarly, the union also confronted wage schedules that stipulated that Iraqi public sector workers should earn only 69000 Iraqi dinars (US$ 35) per month. Strikes in August 2003 shut down all oil production for three days and lead to a raise in wages - to a minimum of 150000 Iraqi dinars. In December 2006, Juma'a Awad, as president of the Iraqi Federation of Oil Workers (IFOW) condemned the draft oil law prepared by the Iraqi cabinet committee since, he claimed, it could give up to two-thirds of the country's national resources to international oil companies (IOC) under contracts that could also last upward to 20 years. Another objection was to the fact that it was prepared without consulting either Iraqi oil experts or civil society or trade unions.724 In March 2007, Juma'a Awad stated that the Iraqi Federation of Oil Unions (IFOU), which represented over 26000 members at the time and had already carried out three previous strikes, would strike again due to the new oil laws drafted by the Iraqi government. He stated that all other Iraqi trade unions, a number of political parties, and a group of over 60 senior Iraqi oil experts, also opposed the laws. Union members extended their demands to include 722" General Union of Oil Employees in Basra: GUOE Fact-Sheet" 'General Union of Oil Employees in Basra website 18 October 2005. 723" Support Iraqi Oil Workers" Iraqi Occupation Focus website Retrieved 30 November 2011. 724" Iraqi Unions Condemn Move to Give Oil Production to Foreign Multinationals" American Federation of Labor and Congress of Industrial Organizations News website 19 December 2006. 216
an improved salary structure and distribution of land for building homes. 725 In June 2007, the Iraqi federal government threatened to arrest union leaders after strikes carried out by oil pipeline operators occurred earlier in that month. Arrest warrants were issued for Hassan Juma'a Awad, president of the IFOU and three other seniors, stated Naftana - a London-based group linked to the IFOU. Other sources stated that the government had only threatened to use the arrest warrants.726 The strikes were carried out as an objection to the country's proposed hydrocarbon law, which unions claimed would amount to privatization of the oil industry. The unions made 16 demands in relation to the oil law, which included protection of pay and measures to safeguard health and safety and working conditions. On the third day of the oil strike, the Iraqi military surrounded the oil workers and arrest warrants were issued for the union leaders, which Naftana - a London-based group that supports the IFOU - stated were accused of "sabotaging the economy."727 In September 2009, in a meeting with the International Trade Union Confederation (ICUT), the International Monetary Fund (IMF), the World Bank and trade unions, the worker unions consulted international financial institutions (IFI) on the possible role of Iraqi workers, inasmuch Iraqi citizens, in the strengthening of the oil industry. Juma'a Awad was present in his role as president of the IFOW and the IFOU.728 The unions explained to the IFIs that in 2006 they had opposed the oil laws in order to protect the country's national resources and that they were wary about international oil companies (IOC) due the tendency of these to not hire local workers. The IMF agreed that oil laws were an issue that needed to be solved. 725"Iraqi Oil Workers Stop Production Over Privatization Law" Aotearoa Independent Media Centre 11 May 2007. 726' Iraqi government threatens arrest for leaders of striking oil workers" The Guardian 10 June 2007. 727" Iraqi Troops Face Off Against Striking Oil Workers" AlterNet website 7 June 2007. 728" Report on meeting between Iraqi trade union leaders, IMF and World Bank, under the auspices of the ITUC" General Union of Oil Employees in Basra website 15 September 2009. 217
Because the World Bank's work in Iraq is mostly directed to technical assistance on public financial management and prioritization of expenditures, the trade unions also indicated their concern that IFIs' advice to rationalize government expenditures would further weaken social safety nets. From the unions' standpoint, the Iraqi government should spend more, and not less, on poverty alleviation. In July 2010, the Iraqi government yet again issued arrest warrants for Hussan Juma'a Awad and the general secretary of the IFOU, Faleh Abood Umara, for urging strikes and speaking to the national and international media about oil workers' wages.729
729" Iraq Oil Union Leaders Face Arrest, Threat" Labor Notes website 16 July 2010. 218
Key Infrastructure Baiji Refinery Baiji, built in 1982730 and located about 180 kilometers north of Baghdad, is Iraq's largest refinery731 and supplies 11 Iraqi provinces with refined petroleum products.732 The refinery is part of a complex that includes a thermal power plant, also the largest in the country, that is a major contributor to Baghdad's electricity supply. 733
Capacity As of mid-2011, the Baiji refinery was functioning at about 70% of its 310,000 barrel per day (bpd) nameplate capacity due to a lack of crude oil feedstock, frequent power cuts and the general infrastructure problems. 734 The refinery produces 11 million liters of gasoline, 7 million liters of benzene and 4.5 million liters of kerosene a day.
Development The refinery was heavily damaged during bombing in 1991 Gulf War; in the years following the 2003 US-led invasion of Iraq, Baiji's supply chain, especially a pipeline carrying crude oil from the supergiant Kirkuk field, was the subject of repeated attacks by insurgents and organised crime syndicates. The refinery itself was also targeted, and production was interrupted on numerous occasions.735
730" Iraq's Baiji refinery 'back to normal'", France 24 4 March 2011. 731" All units at Iraq’s Baiji oil refinery re-started", ArabNews.com 25 June 2011. 732" UPDATE 2-Iraq Baiji refinery says restarts partial operation", Reuters 28 February 2011. 733" Bayji [Beiji]", GlobalSecurity.org Retrieved 14 December 2011. 734" The biggest 25 refineries in the Middle East", ArabianOilandGas.com Retrieved 14 December 2011. 735" Iraq Pipeline Watch" Institute for the Analysis of Global Security 27 March 2008. 219
Baiji was shut down again in late February 2011 when insurgents detonated several bombs, killing two people and damaging the hydrogen unit that feeds the refinery's hydrocracker as well as its distillation unit. Production levels returned to normal in early March 2011. On 22 November 2011, the Japanese Prime Minister Yoshihiko Noda announced a loan of $35 million for Iraq to upgrade engineering services to modernise the Baiji refinery, and on 28 November US-based firm Honeywell announced it had obtained a contract to upgrade the refinery's control and process system.736 Baiji is operated by the the North Refineries Company.
Basra Refinery The refinery at Basra, Iraq's third largest city, is located in the far south of the country about 545 kilometers from Baghdad and 55 kilometers from the Persian Gulf. Basra is Iraq's primary terminal point for oil pipelines, and also is the site of Iraq's chief export terminal. 737 The refinery began production in 1974738 and was heavily damaged in the 1980-1988 Iran-Iraq war. It was also put out of operation in 1998 by the US-led 739 Operation Desert Fox.
Capacity The Basra refinery has a nameplate capacity of about 160,000 barrels per day740 and was operating at about 140,000 bpd as of mid-2011. Its refined petroleum products include gasoline, kerosene, gas oil, diesel oil, fuel oil, marine fuel oil and liquid petroleum gas.
736" Honeywell Has $360 Mln Of Contracts In Iraq - Executive", Wall Street Journal 28 February 2011. 737" Basrah", GlobalSecurity.org Retrieved 5 January 2012. 738" South Refineries Company", SRC.org Retrieved 5 January 2012. 739" Operation Desert Fox", Defense.gov Retrieved 5 January 2012. 740" Iraq signs contracts with Czech companies to renew Basra refinery", Iraq Directory 18 March 2009. 220
Development The refinery is owned and operated by Iraq's South Refineries Company. 741 In July 2011, the US Trade and Development Agency signed an agreement with the South Refineries Company for a grant of $502,798 to conduct a feasibility study for the upgrade and rehabilitation of the refinery. The study, which is expected to take approximately one year to complete, outlines the necessary engineering, equipment supply and construction efforts required to substantially modernize the refinery’s operation. The refinery's modernization is intended to support the Iraqi Ministry of Oil’s goal to reach a capacity of 12 million barrels per day in production by 2020. 742 The goal of the project, whose budget is approximately $1 billion, 743 is to raise production capacity by about 70 thousand bpd and to make more gasoline available for private-sector users. The main contractors involved in the refinery's upgrade are Technip KTI and Shell Global Solutions.
Daura Refinery The Daura refinery, which was built in 1953 and began operations in 1955,744 is located 20 kilometers southwest of Baghdad. Operated by Iraq's Midland Refineries Company, 745 the Daura refinery is Iraq's secondlargest.746
Capacity Daura's refining capacity has undergone major fluctuations. It was expanded in 1996 to nearly 130,000 barrels per day (bpd), but its capacity had fallen to 110,000 bpd by 2005.747 Between 2009 and 2011, the refinery's capacity 741" Basrah Refinery", A Barrel Full Retrieved 5 January 2011. 742" UNITED STATES APPROVES GRANT FOR BASRAH REFINERY FEASIBILITY STUDY", US Embassy Baghdad 21 July 2011. 743" Basrah Refinery Upgrading Project", A Barrel Full Retrieved 5 January 2011. 744" Daura Refinery Expansion On Schedule", Business Monitor International 26 October 2009. 745" IRAQ - The Daura Refinery", APS Review Downstream Trends 11 May 2011. 746" Bombs in Daura refinery intensify security scare", Iraq Oil Report 17 June 2011. 747" IRAQ - The Daura Refinery", APS Review Downstream Trends 9 May 2005. 221
was raised to 210,000 bpd, and remained at this level as of mid-2011.
Development The refinery suffered missile damage during the 1990-1991 Gulf War, and as a result of looting and gradual decline, was producing only 90,000 barrels per day by 2003. The refinery itself and pipelines supplying it with crude oil were attacked numerous times by insurgents between 2003 and 2008.748 In 2005 the refinery signed a deal with Czech firm Prokop Engineering to build the first of two 70,000 bpd crude distillation units, which was installed in January 2009 at a cost of $43 million. Although this temporarily brought the capacity to 160,000b/d, capacity was subsequently reduced by the transfer of two 10,000b/d units to other refineries. The deal for the second unit was signed with Prokop in 2007 and was completed in 2010, raising capacity to 210,000 bpd. South Korean firm SK Engineering & Construction signed in March 2011 a $1 million contract to provide the basic engineering for flare reduction and waste-water systems at the refinery, with design period expected to take eight months. SK also agreed to provide operations and maintenance services to the refinery for the same period. This service was to be provided "free of charge", as part of South Korea's efforts at cooperating with the Ministry of Oil in the rehabilitation of Iraq's petroleum sector.
Samawa Refinery The Samawa refinery is located in a city of the same name located about 370 kilometers southeast of Baghdad.749 Samawa has a refining capacity of 30,000 barrels per day (bpd) as of February 2011.750
Development Samawa came on stream in 1977 but suffered major damage during the 1991 Gulf War, and the facility was used for storage until 2001, when the Ministry of Oil partially restored it. The refinery was then looted in the 748" Iraq Pipeline Watch" Institute for the Analysis of Global Security 27 March 2008. 749" Iraq to upgrade Samawah oil refinery" International Herald Tribune 7 August 2008. 750" Iraq's largest oil refinery shut by bombing" Reuters 26 February 2011. 222
chaos that followed the 2003 US-led invasion of Iraq and was left idle until 2005, when a 10,000 bpd unit was rehabilitated. A second unit with a similar capacity was repaired and began production in 2006, while the third unit opened in August 2009 to bring the refinery back to full capacity. 751 In August 2008, the Iraqi government approved $81 million contract for two US companies - Colorado Industrial Construction Services Co. and Veco Co., an affiliate of CH2M Hill - to upgrade the refinery. The contract stipulated the installation of a refinery unit that would produce 1,200 cubic meters of gasoline per day, according to Iraqi government officials. 752
Khor al-Amaya Terminal Snapshot Built in 1961753 the Khor al-Amaya terminal (KAAT), along with Iraq's Basra Oil Terminal, is used to export 'Basra blend' crude and has an effecitve capacity of 300,000 barrels per day (bpd).754 Both ports lie south-east of the Al-Faw peninsual in the Arabian Gulf.755 In a 2009 US leaked diplomatic cable, it was reported that an Iranian letter claiming that the KAAT was located in Iranian territorial waters had alarmed Iraqi officials.
Development The KAAT remained unrepaired after it was destroyed during the Iraq-Iran war in the 1980s. The terminal lay unused during the 1990s as exports under the Oil For Food program were only authorized by the UN Security Council through Ceyhan in Turkey.756 In May 2006 an explosion at the terminal res751" Minister of Oil opened a new Unit in AL Samawa Oil Refinery and met with Director General of AL Muthanna Investment commission" Almuthanna Investment Commission 1 August 2009. 752" Iraq approves $81m oil refinery upgrade" Gulf Daily News 8 August 2008. 753" Oil Minister Complacent About Upstream Production Plans", Wikileaks, 9 April 2009. 754" Iraqi Oil Industry", IAS Group, March 2011. 755" Al Basrah Oil Terminal", Digital Farm, 22 December 2009. 756" Iraq’s Oil Export Outlets", Middle East Economic Survey, 30 November 2009. 223
ulted in a fire, destroying 70% of the facilities. At the time, the port was handling around 5% of all of Iraq's oil exports.757 However in January 2007 the Iraqi press reported that exports from the Basra Oil Terminal (BOT) and Khor Al Amaya averaged 1.8 million bpd through the month, up from 1.5 million bpd in December.758 According to the UK Ministry of Defence, since 2003 UK, US and Australian naval forces had been committed to almost round-the-clock patrols of the waters around Khor Al Amaya, until responsibility was handed over to Iraqi forces.759
Basra Oil Terminal The Basra Oil Terminal, formerly known as Mina al-Bakr, had an effective export capacity of about 1.5 million barrels per day (bpd) of oil as of mid2011, handling about 80% of Iraq's exports.760 Built in 1975 by the Iraq National Oil Company it lies some 50 kilometers off the Iraqi coast.761 Major expansion work started on the terminal when Iraq announced in 1979 that it would raise its production to 5.5 million bpd. But these were stalled by the outbreak of the Iran-Iraq War in September 1980. The terminal was heavily damaged in the fighting and exports did not resume until the war ended in 1988-9.762 The Basra terminal suffered further serious damage during the second Gulf War in January 1991 and exports were halted completely. Using improvised methods and cannibalization, Iraq managed to start repairs at BOT in the 1990s, but it was only possible to export around 400,000 b/d through the terminal. Around 2003, its capacity reached the some 1.3 million bpd.
757" Energy Profile of Iraq", Encyclopedia of Earth, 3 July 2007. 758" Energy Profile of Iraq", Iraq Business News, 25 January 2011. 759" Last Iraq oil terminal patrol for Royal Navy", Ministry of Defence, 25 January 2011. 760" Iraqi Oil Industry, IAS Group, March 2011. 761" Al Basrah Oil Terminal, Special Inspector General for Iraq Reconstruction, 26 April 2007. 762" Iraq’s Oil Export Outlets, Middle East Economic Survey, 30 November 2009. 224
The terminal was captured by US Navy Seals in a night-time amphibious attack in the war of 2003.763 The terminal's infrastructure has been decimated by years of war and instability,764 and in September 2010 Iraq’s cabinet approved a $733 million deal to build a new oil export terminal, with a capacity of 1.8 million bpd, at the site. The work is to be carried out by Australia's Leighton Offshore Private Ltd., which was selected from four international companies invited to tender for the project.765 The new floating terminal, which includes both onshore and offshore facilities, will boost Iraq’s oil export capacity by 2.7 million barrels per day. The added capacity will give Iraq increased access to global markets as it expands production from its southern oil fields. The project is expected to be completed in 2013766 and began work in 2010.
Kirkuk-Banias Pipeline The 880-kilometre Kirkuk-Banias pipeline was first brought online in 1952 and transported oil from Kirkuk in central-northern Iraq to the port of Banias in Syria. According to Pipelines International, the building of the pipeline marked a significant moment in the development of Iraq's petroleum industry.767 The pipeline stopped operating in 2003 during the US-led invasion of Iraq and was still closed as of late 2011.768
763" Task Forces Bolster OIF, OEF Maritime Security, WhisprWave, 16 February 2006. 764" Aging Oil Terminal Vital To Iraq's Economy", NPR, June 20, 2009 765" $733m Contract Awarded for Basra Oil Terminal", Iraq Business News, 28 September 2010. 766" Emerson Awarded Basra Oil Monitoring Contract", Iraq Business News, 15 January 2011. 767" The Kirkuk – Banias Pipeline", Pipelines International March 2011. 768" Syria Oil Gas Profile", A Barrel Full retrieved 6 January 2011. 225
Capacity The Kirkuk-Banias pipeline had a capacity of 300,000 barrels per day (bpd) prior to 2003. However its original capacity when built in the 1950s was 1.4 million bpd.769
Development In 1950 the Iraq Petroleum Company contracted Bechtel to construct the 30-32 inch pipeline, which waslaid by British, American, Syrian and Iraqi workers. Construction was completed in 1952. The pipeline was damaged by the Syrian army in response to the Anglo-French seizure of the Suez Canal zone in 1956, but was later repaired. In 1972 Iraq nationalised the IPC, which led to nationalisation of the IPC's assets in Syria, including the Syrian section of the Kirkuk-Banias pipeline.770 The pipeline was closed for much of the 1970s and 1980s, but in the 1990s it was reopened so that Iraq could bypass the UN oil embargo. At the time, reports put Iraq's exports through the line at about 150,000-200,000 bpd. The pipeline was bombed by US forces during the invasion that removed Saddam Hussein in 2003. stopping the flow of oil. In 2007 it was reported that Syria and Iraq were discussing plans to revive the pipeline, however ongoing security issues stalled the deal according to Oil Minister at the time Shahristani. 771 Reports suggested that Russian firm Stroytransgaz had secured a contract for repairs, however Christopher Blanchard reported that in 2007 the Syrian government was seeking alternative foreign firms. In April 2009 Syria and Iraq again announced that the two sides had reached an agreement to repair the line, however the deal was not followed through.772
769" NOC lets contract for Kirkuk-Banias oil line repair", Pipelines International 4 July 2008. 770" The Kirkuk – Banias Pipeline", Pipelines International March 2011. 771" Iraq says oil flows through Syria depend on security", Reuters 20 August 2007. 772Blanchard, Christopher " Iraq: Regional Perspectives and US Policy", Congressional Research Service, p26, 6 October 2009. 226
In April 2011, Stroytransgaz reported that Iraq was finalizing the terms of engagement for a contract to construct two crude export pipelines and a gas pipeline through Syria to the Banias port, to be offered to investors. Capacity for the two pipelines was expected to reach 2.75 million bpd. The first pipeline would transport heavy crude from the northern Baiji area, potentially including oil from Majnoon, Halfaya, Badra, Ahdab and East Baghdad fields, as well as Najmah and Qayara. The second would follow the route of the existing damaged pipeline, with a capacity of 1.25 million bpd. As of late 2011 the project had not been confirmed.773
Iraq Pipeline Through Saudi Arabia (IPSA) Snapshot The Iraq Pipeline through Saudi Arabia (known as IPSA) travels through Saudi Arabia to the Red Sea Port of Mu'ajiz, just north of Yanbu. IPSA has a design capacity of 1.65 million barrels per day (bpd) but has suffered several closure as a result of wars and other political events.774
Development Iraq started building the IPSA pipeline in the 1980s during the country's war with Iran, obviating the need to ship crude through the Persian Gulf and the Straits of Hormuz. The IPSA project cost over $2 billion and was fully financed by Iraq. Usage of the pipeline was suspended after Iraq invaded Kuwait in 1990 and it lay unused throughout the 1990s. In June 2001 Saudi Arabia decided to expropriate the IPSA pipeline since, given Iraq's threats and acts of aggression, they had little desire to maintain the pipeline on their behalf. The year before in 2000, the Iraqi government had contacted the United Nations to demand that Saudi Arabia be held liable for any damage done to the
773" Iraq Finalises Tender Terms for Syria Export Pipelines", Stroytransgaz 21 April 2011. 774" Energy Profile of Iraq", Encyclopedia of Earth, 3 July 2007. 227
pipeline infrastructure.775 According to former Iraqi Oil Minister Issam al-Chalabi, no attempts were made to recover the pipeline system following the 2003 invasion, and political relations between Iraq and Saudi Arabia remained sour. In September 2003, unnamed official sources stated that Saudi Arabia had decided to reopen the IPSA pipeline to allow Iraqi oil to be exported from the country's southern oilfields to the port of Yanbu.776 However, by October of the same year, a Saudi Aramco official stated that Iraqis "don't know what they are talking about... The pipeline is not in a usable form because of its long-term and sudden closure." In December 2011, after Iranian authorities threatened to close the Persian Gulf to international oil trade, consideration of alternative export routes to the Strait of Hormuz has led to renewed discussion about the various oil pipelines that run across Saudi Arabia. The IPSA pipeline and the Trans-Arabian Pipeline (also known as Tapline) could carry the equivalent of up to 2 million bpd to ports on the Red Sea and Mediterranean coasts. 777 Nonetheless Iraq's security concerns, which include protection of threatened oil infrastructure and reserves, would also need to be considered before any decision to reopen the IPSA pipeline could be suggested as a viable option.778
Kirkuk-Ceyhan Oil Pipeline Transporting oil from fields near Kirkuk in Iraq's north to the Turkish Mediterranean port of Ceyhan, the Kirkuk-Ceyhan pipeline spans 941 kilometers. It comprises two parallel pipelines, the first of which was commissioned in 1977 and the second in 1987.779 The pipeline carries a quarter of Iraq's crude exports780 and as of late 2011 was the only export route for Iraq's northern 775" Iraq-Saudi oil pipelin is unusable" Gas And Oil website 20 October 2003. 776" Saudi to reopen Iraq pipeline" AMEinfo 11 September 2003. 777" Circumventing the Strait of Hormuz' Bottleneck" Atlantic Sentinel 20 December 2011. 778" FEATURE-Iraq oil security tested as U.S. forces withdraw" Reuters 16 December 2011. 779" Pipeline projects in the Middle East", Pipelines International March 2010. 780" UPDATE 1-Blast shut down Iraq Kirkuk-Ceyhan pipeline-sources", Reuters 9 March 2011. 228
oil production.781
Capacity The pipeline has a capacity of 1.6 million barrels per day (bpd) but typically pumps around 500,000 bpd. The two component pipelines have diameters of 46 inches (1,170 mm) and 40 inches (1,020 mm), respectively, and the project includes four pump stations and three storage tank farms on the Iraqi side, with a metering station at the Turkish border.782
Development The pipeline was made operational in the 1980s in part to make possible the export of crude oil while avoiding the risk of passing through the Persian Gulf during the Iran-Iraq war from 1980 to 1988. It has been under attack and subject to prolonged closures for much of its existence, contributing to its below-capacity operation. The pipeline was a primary target of insurgent attacks and sabotage in the years following the US-led invasion of Iraq, 783 and was offline more than online between 2003 and 2007. Since then it has been shut down on several occasions, sometimes due to attacks - for instance, a bomb shut down operations for several days in March 2011 - other times due to old, deteriorating infrastructure - as in September 2011, when exports were halted because of a leak. The pipeline is operated by the Iraqi oil ministry's North Oil Company. 784 Since it rests directly within the sphere of influence of the Kurdistan Regional Government (KRG), some Kurdish observers, such as the newsletter Kurdish Aspect, have argued that the pipeline should be automatically incorporated into KRG geography pursuant to Article 140 of Iraq's 2005 constitution.785 781" Iraq Shuts Kirkuk-Ceyhan Crude Export Pipeline Following Leak", Downstream Today 29 September 2011. 782" THE MAIN INSTALLATIONS", NOC Retrieved 14 December 2011. 783" Iraq Pipeline Watch" Institute for the Analysis of Global Security 27 March 2008. 784" False Reports of Suspension of Oil Exports from Kurdistan", Iraq Business News 12 September 2011. 785" Kirkuk-Ceyhan pipeline belongs to Kurdistan", Kurdish Aspect 22 September 2010. 229
In September 2010, Iraq and Turkey signed an agreement to extend their joint operation of the pipeline for 15 years and to upgrade its capacity by about 1 million bpd, though the Iraqi oil ministry provided no timetable for the upgrade's completion. The extension also included amendments that raised the transit fees payable to Turkey as well as an official guarantee by the Turkish government giving it the authority to dismiss orders by Turkish courts to seize Iraqi oil.786 As of December 2011, the Turkish-backed company Genel had plans to build a $400 million oil pipeline to link the southern Taq Taq field with the Kirkuk-Ceyhan pipeline. Genel hoped to start construction on the new 400,000 bpd pipeline in the spring of 2012.787
South Gas Utilisation Project Overview In September 2008, Shell signed a Heads of Agreement (HOA) with the Iraqi Oil Ministry to capture some of the surplus gas produced during oil extraction at Basra in the south, for a project which later came to be known as the South Gas Utilisation Project. The surplus gas was previously burnt off in a process known as 'flaring', which is estimated to cost $5 million a day in lost fuel. Shell CEO Peter Voser described the deal as heralding 'a new chapter in the gas industry in Iraq'. 788 However, the agreement was criticised by former Iraqi oil executive Ahmed Mousa Jiyad initially for its alleged infringement on Iraq's national sovereignty and for the absence of references to a good governance system to ensure transparency and accountability. 789 The final documents for the project and the resultant creation of the Basra Gas Company (BGC) to manage the Joint Venture between the state-run South Gas Company (SGC), Shell and Mitsubishi Corporation were approved by the energy committee at the Council of Ministers in September 786" Iraq, Turkey sign renewed oil pipeline accord", Reuters 12 September 2010. 787" Former BP chief explores the final oil frontier", Financial Times 7 December 2011. 788" Shell signs £11bn deal to fuel Iraq's power stations with gas Guardian, 27 November 2011 789" Iraq-Shell Gas Deal: Who occupy the driver’s seat? 230
2011, and ratified by the Cabinet on the 15 November 2011. Under the agreement, gas was to be supplied from the southern oil fields of Rumaila, Zubair and West Qurna-1 and the lifetime investment was estimated at more than $17 billion.790 The SGC was to hold a 51% stake, Shell 44% and Mistubishi 5%.791 However when reacting to leaked diplomatic cables in 2011, the Iraq Oil Report suggests that in contrast to the transparent and competitive bidding rounds of 2009 and 2010 for oil and gas contracts, the Shell gas deal was brokered behind closed doors and may have put Shell's prerogatives ahead of Iraq's interests. Operations are to be overseen by a management committee consisting of five representatives from the ministry, four from Shell and one from Mitsubishi. As majority shareholder, the SGC must approve any committee decision.
Project goals Oil Minister Abdul Karim Luaibi has highlighted the important role the BGC was intended to play in Iraq's strategy to boost the country's "chronically underperforming electricity sector", and the Electricity Ministry signed a series of contracts to build gas power stations that could produce up to 10,000 megawatts and close the gap between Iraq's power demand and supply. A further goal of the project is to diminish the environmental and public health impact of gas flaring. The vaporized chemicals produced as a result of flaring have caused widespread health problems for local residents and according to the Global Gas Flaring Reduction project, Iraq's yearly flaring pollution is roughly equivalent to the emissions of 15 million cars.
Obstacles Despite the deal finally being brought to a conclusion in 2011, the project still faces opposition from key local stakeholders. The Basra provincial council has threatened to file a lawsuit against the deal, claiming that local officials were not involved in the negotiations and did not have the opportunity to secure guarantees of social investment. This is a claim denied by 790" Iraq’s Challenges On Its Path Toward A World Class Gas Industry MEES, 21 November 2011 791" Shell gets its gas deal Iraq Oil Report, 27 November 2011. 231
Shell management, however Iraq Oil Report suggests that the validity of the Council's objections was acknowledged by one of PM Nouri al-Maliki's top oil advisors. As of December 2011, the issue of the relationship between the BCG and the operators of the fields in question (including BP, ExxonMobil and Eni) still needed to be resolved. There was some disagreement on who has first rights to the associated gas produced at the fields.
Environmental Impacts Gas Flaring 'Flaring' is the release of gas hydrocarbons as a byproduct when crude oil is brought to the surface during extraction, a practice which is known to harm the environment by adding significantly to greenhouse gas emissions 792 and which moreover is estimated to cost Iraq $5 million a day in lost fuel. The only countries to flare more gas than Iraq are Russia, Iran and Nigeria. World Bank expert Robert Lesnick comments that under current law and regulation (2011), flaring is a permitted practice in Iraq and that oil field operators are not compensated in any way for gas produced in association with crude oil. However, operators are encouraged to produce as much crude oil as possible, and thus are perversely 'incentivized' to increase flaring. 793 However, Iraq now participates in the Global Gas Flaring Reduction PublicPrivate Partnership, a World Bank-led initiative launched in 2002 which supports the efforts of oil producing countries and companies to increase the use of associated natural gas and thus reduce flaring and venting, which wastes valuable resources and damages the environment.794 Furthermore, in November 2011, international oil company Shell signed a breakthrough contract to exploit $17 billion of such gas produced from oilfields in southern Iraq over the next 25 years. This would utilize gas cur792“ Public Policy for the Private Sector: Gas Flaring and Venting”. World Bank Public Policy Journal, October 2004. 793“ My encounter with gas flares in Iraq”. World Bank Blogs, 18 July 2011. 794“ Global Gas Flaring Reduction Partnership”. World Bank, retrieved 7 December 2011. 232
rently burnt off by 'flaring', with the aim of helping Iraq meets its increasing energy needs.
Water and Marshlands The process of oil extraction requires vast quantities of water, often more than the volume of oil produced. In the past, oil companies in the south of Iraq have primarily relied on the Tigris river for water supply, however it is predicted that southern Iraq will face a major water crisis in 15-20 years if things continue as they are.795 The NGO Coordination Committee for Iraq also reports concerns around the ultimate destination of the large quantities of water used after oil extraction. This water is often contaminated during extraction with toxic byproducts and released into the ground, from where acids, carcinogens and other toxins can enter the ecosystem and major health risks such as cancer. Those working in the oil industry and exposed to these toxins are at particular risk.796 A 2007 Report by the United National Environment Programme states that 'oil industry sites.... are undoubtedly a major source of contamination and hazardous waste.'797 The same UNEP report addresses the alluvial plains in the South-East corner of the country, which constitute approximately 30% of Iraqi territory and are formed by the combined deltas of the Tigris and Euphrates rivers. The region begins north of Baghdad and extends to the Persian Gulf. This region, known as the Mesopotamian marshlands, is home to local tribes who live above some of the richest oil reserves in Iraq. During Saddam Hussein's rule over the country, the marshes were dammed and drained when Hussein accused the Marsh Arabs of treason during the 1980-88 war with Iran.798 The ecosystem forms part of the Tigris and Euphrates river basin, which feed Iraq, Turkey, Syria and Iran. However the heart of the wetlands lies in southern Iraq, along the border with Iran and near big cities 795“ Iraq may suffer clean water crisis in 15-20 years”. Reuters, 21 September 2011. 796“ Iraqis and NGOs Consider Future Engagement with International Oil Companies”. NGO Coordination Committee for Iraq, retrieved 7 December 2011. 797“ UNEP in Iraq: Post-conflict Assessment, Clean-up and Reconstruction”. UNEP, December 2007. 798“ Iraqi Tribal Disputes Pose New Challenge to Oil Firms”. Iraq Energy News, 31 May 2011. 233
like Basra.799 According to a 2011 UN White Paper, The future of the marshlands "depends on how successfully Iraq is able to strike a balance between national development, including the development of the oil industry infrastructure in the Marshlands area, and environmental conservation." The central government initiated planning for the long term development of the marshlands between 2005 and 2006, however the influence of the oil industry is cited by the United Nations Integrated Water Task Force for Iraq as being one of the challenges in developing a single strategic plan for the area.800
Oil Transportation and Spills The transportation of oil may also entail environmental risks, with leaks or major oil spills endangering parts of the Gulf, part of a fragile ecosystem. In the south where the water table is just a few feet below the ground, oil from damaged pipelines also seeps into water supplies used for agriculture and drink.801 Iraq's oil infrastructure has also come under attack frequently since 2003. The Institute for the Analysis of Global Security think-tank counts at least 469 significant attacks on Iraqi oil infrastructure between when exports resumed in June 2003 and March 2008.802 According to the BBC, the vast majority of attacks on the oil industry were blamed on insurgents bent on destabilising Iraq.803 Violence in Iraq has since eased, however the country's oil infrastructure is still targeted by attacks, such as the June 2011 bombing of the Zubair 1 storage facility.804 Aside from sabotage, some ruptures have been linked to maintenance issues along pipelines. In particular, in late October 2011 a pipeline which runs south from West Qurna past the Rumaila oil field to the Fao port suffered an oil spill, following a rupture in a pipe scheduled to be replaced by Chinese CNPC. The spill was termed a "disaster" by deputy environment minister 799“ Eden in the Line of Fire”. Tierra America, retrieved 7 December 2011. 800“ Managing Change in the Marshlands:Iraq’s Critical Challenge”. United Nations, 2011. 801“ Oil attacks target Iraq recovery”. BBC News, 16 June 2004. 802“ Iraq Pipeline Watch ”. IAGS, retrieved 8 December 2011. 803“ Oil attacks target Iraq recovery”. BBC News, 16 June 2004. 804“ Bombs hit Iraq oil tanks in rare southern attack”. Reuters, 5 June 2011. 234
Kamal Latif, as it endangered Basra's only source of fresh water and contaminated a 22 kilometre stretch of the Bada's channel, which feeds the only water purification facility serving the city of Basra. According to Iraq Oil Report, the incident was seen as an accident rather than an act of sabotage and an official from the Oil Police admitted that poor maintenance was to blame for the pipeline rupture in North Rumalia. 805 The rupture had a negative impact on Iraqi production levels. Export levels dropped from 1.63 million barrels per day (bpd) on the 27 October, to just 648,000 bpd on the 28 October, before rebounding to 1.6 million bpd by the 1 November. Officials involved in the clean up operation claimed that the operation had been concluded by the 6 November, and that only the residents of Um Qasr in Southern Basra had felt the direct effects of the spill.806
Iraqi Environmental Regulation Following the 2003 invasion of Iraq and subsequent upheaval, the operations of environmental authorities in Iraq were severely curtailed, with many laboratories in Baghdad looted following the conflict. According to a UNEP Report, the need to rebuild Iraq's environmental monitoring capacity was urgent.
2005 Constitution The 2005 Constitution of the Republic of Iraq demands shared responsibility for environmental regulation between the federal authorities and the producing administrative regions in management of oil and gas. However, the federal government remains the decision maker on certain matters, including generating policies relating to water sources from outside Iraq. 807
Environmental Laws of 1997 and 2008 Law No. 3 of 1997 covered soil, air quality and water resources and formed the framework for the protection of the environment in Iraq until being subsumed into the 2008 and 2009 Environmental laws. The goal of the 1997 805“ Oil pipeline leak threatening Basra water supply”. Iraq Oil Report, 3 November 2011. 806“ Basra water, exports recover after pipeline spill”. Iraq Oil Report, 9 November 2011. 807“ Analysis: Iraqi legal regime protects environment”. Iraq Oil Report, 31 January 2011. 235
Law is to "protect the environment and to make it better including the territorial waters, from pollution and to extenuate its effects on health, environment and natural resources.” The subsequent Law No. 37 of 2008 strengthens the 1997 Environmental Law, and created a formal Ministry of Environment. This Ministry executes formal ministerial instructions and orders, creates environmental policy and initiates compliance and deterrence mechanisms.
Environmental Law under Bid Rounds The technical service contracts (TSCs) signed in the first bid rounds in 2009 required contractors and operators to conduct petroleum operations with due regard to the protection of the environment and to the conservation of natural resource, adopting 'best international petroleum industry practices'. However, the definition of 'best practices' is somewhat ambiguous. According to Iraq Oil Report, an international oil company (IOC) may well already apply the highest standards, as a result of its own corporate policies or those of its financiers, however the TSCs would seemingly allow lower standards generally accepted as 'good practice'.
2009 Environmental Law The 2009 Environmental Law expanded the jurisdiction and enforcement powers of the Ministry of Environment and introduced the concept of environmental impact assessments (EIAs), which should be submitted to the Ministry and approved before work may begin. The assessment should include the following elements: • positive and negative impacts of the project on the environment. • means to prevent and address the causes of pollution in order to comply with regulations. • contingencies for pollution emergencies and precautions. • possible alternative to the use of technology less harmful to the environment. • provisions to reduce waste.
236
The 2009 Law also establishes penalties for non-compliance and environmental pollution, such as closure of operations for defined periods and fines of up to $850 a month until the non-compliant factor is removed. If not remedied, the authorities can resort to imprisonment and further fines.
International Treaty Obligations Aside from internal regulation, Iraq has also signed up to a number of environmental conventions and agreements, including; the Basel Convention (2009); the Convention on Desertification (2007); the Climate Change Convention and Kyoto Protocol (2008); the UNESCO Convention (2008); and Convention for Biological Diversity (2008). However according to corporate attorney Thomas Donovan, Iraq has traditionally lagged behind international standards and has only recently signed up to many conventions, the provisions of which had not yet been implemented into Iraqi law as of 2011.
237
Oil and Gas Fields Ahdab (Field) Oil Reserves
1 billion barrels808
Oil Production
110,000 bpd (forecast)809
Estimated Gas in Place
750 bscf810
Discovered
1979
First Produced
2011
Location
Wasit Province, East.
Principal Partners
CNPC (75%)811
Secondary Partners
North Oil Company (25%)
Background A deal for exploitation of the al-Ahdab field was first signed in 1996 between the CNPC and Saddam Hussein's government. However, the deal was postponed after the UN imposed sanctions and the US-led invasion in 2003. A new deal was struck in 2009, detailed below.
Contracts Negotiated Chinese state-owned CNPC secured rights to the al-Ahdba field under a technical services contract signed with the Iraqi government in November 2008. Under the contract, the company has development rights for 23 years and is to invest $3 billion. Analysts told the New York Times in 2011 that 808" China Opens Oil Field in Iraq, New York Times, 28 June 2011 809" China kick starts al-Ahdab oil field project in Iraq, Peoplle's Daily, 14 March 2009 810" Iraq's Ahdab oil field development limits contractor profitability, Oil and Gas Journal, 8 January 2011 811 " CNPC starts production Al-Ahdab oil field in Iraq, Penn Energy, 29 June 2011 238
the Ahdab operation is CNPC's largest in the Middle East. A Chinese oil executive also claimed in 2009 that the company would make a profit of less than 1% but that the contract was a way to 'get a foot in the door' of the Ir aqi industry. According to a 2008 US diplomatic cable, the CNPC estimates that output could be as high as 110,000 barrels per day (bpd) and the CNPC will be paid 'something like' $6 barrels under the terms of the deal. Chinese Trade Counselor Zhue Yuesheng commented that the Chinese side was concerned about Iraqi security guarantees, which had to be resolved before work could begin at the site.812 The deal over the oilfield has drawn criticism from residents and officials in Wasit Province. Some people demanded that Wasit be granted a royalty of $1 per barrel to improve access to clean water, health services, schools, roads and other public needs in the province, which is among Iraq’s poorest. However, the Iraqi government rejected the demands. The residents complained in 2009 that Chinese development of the field would hold no benefits for them, other than providing local employment for less than $600/month. Fears were also raised over security for workers and fears of kidnapping.
Geological and Geographical Features Ahdab oil field is in a 303 square kilometre block in Iraq's Wasit province, 180 km south-east of Baghdad. The field was originally explored using 1970s vintage 2D seismic data. The proved oil resources are in the Khasib Mishrif and Zubair formations. The Zubair reservoir contains light 34° API gravity oil, whereas the Khasib formation contains moderately heavy 23° gravity oil, and the Mishrif formation contains a heavy 14° gravity oil. At the Mishrif formation, reservoir depth is around 3,500m. Because these formation produce different crudes, Muhammed Abed Mazeel of the Oil and Gas Journal believes it will be necessary to develop technical scenarios for single and 'commingled' production.
812" Chinese Embassy On Wasit Oil Deal And Business In Iraq, WikiLeaks, 9 September 2008 239
The field also holds 750 bscf of associated gas reserves, however as of 2011 no plans had been announced for their commercial development, in which case the gas likely will be flared or reinjected.
Badra (Field) Oil Reserves
3 billion barrels813
Oil Production
60,000 bpd (forecast 2013)814
Discovered
1979
First Produced
2013 (forecast)815
Location
Wasit Province, East.
Principal Partners
Gazprom (30%)
Secondary Partners
Kogas (22.5%), Petronas (15%), TPAO (7.5%)
Background Badra lies near the Iranian border and its oil field is connected geologically to the Iranian field of Azar816. The area was also the site of repeated fierce fighting between the two countries in the Iran-Iraq war of the 1980s. The Badra discovery well was drilled in 1979. A second appraisal well, drilled in late-1980s, was abandoned due to the impact of war.817
813" Gazprom begins drilling at Iraq's Badra field", Arabian Oil and Gas, 27 November 2011 814" FIRST WELL IN BADRA OIL FIELD DRILLED, GOVERNOR", Iraq Daily Journal, 28 November 2011 815" Gazprom Neft Starts Drilling In The Badra Field In Iraq", OilVoice, 28 November 2011 816" Iranian officials say Oil Industry Bullish Despite Lukoil Exit" IWPR, 24 April 2010 817“ Badra”. Iraq Energy, retrieved 12 December 2011. 240
Contracts Negotiated Only one consortium, led by Gazprom, bid for the contract area in the second licensing round of 2009. The Oil Ministry announced in December 2009 that it had accepted a revised bid form the consortium, which comprised of Gazprom (30%), Korean Gas Company (22.5%), Petronas (15%) and TPAO (7.5%). The 25% Iraqi state partner was the Oil Exploration Company.818 The contract specified the consortium would pay a $100 million signature bonus. The remuneration fee would be $5.50 per barrel. The official press release announcing the contract said the consortium had originally offered $6 a barrel but ultimately accepted the lower figure. The release specified that the state partner also born the costs of development of the field. As well as crude oil, the contract stipulates that the fee is also payable on liquified petroleum gas (LPG) and natural gas handed over to the state partner from a gas processing plant. The fee was to kick in when production reaches 15,000 barrels per day (bpd). Gazprom was also reported to be in negotiations to develop the connected field of Azar in Iran, following the pull-out of several international firms, including Statoil and Lukoil from the field under the pressure of US sanctions on Iran. However in October 2011, the Iranian Oil Ministry expelled Gazprom from the Azar field, citing a failure to comply with commitments on the part of Gazprom.819
Production Activities In November 2011, the governor of Wasit announced that the first oil well had been drilled at Badra field, one of 17 wells to be drilled at the site. The governor expected that the field would reach peak production of 170,000 barrels per day (bpd) by 2016, making the Wasit province one of the main oil producing provinces in the country. The depth of the appraisal well reached 4,900 metres and drilling was expected to be completed in April 2012. 818" Iraq’s Second Petroleum Licensing Round Badra Contract Area – Bidding Results", Iraqi Ministry of Oil 819“ Iran boots out Gazprom from Azar field”. Arabian Oil and Gas, 10 October 2011. 241
Geological and Geographical Features The Badra oil field is situated in Wasit governorate, 160 km southeast of Baghdad city, and extends across the border with Iran. The field is approximately 16km long and 6km wide.820 Gazprom describes the Basra deposit as being located in an area with a 'challenging profile', with a significant part of the surface requiring clearance of mines. In preparation for a 2011 3D seismic survey of the deposit, work was carried out to remove weapons over an area of approximately 12,000 square metres. Gazprom hoped that the survey would allow the operator to better understand the structure of the deposit.821
Kirkuk (Field) Oil Reserves
8.7 billion barrels822
Oil Production
1 million bpd (2011)823
Discovered
1927
First Produced
1934
Location
Kirkuk, North.
Background Kirkuk is an oil field at Baba Gurgur ("St. Blaze" in Kurdish) located in the governorate Kirkuk in northern Iraq. It was discovered in 1927 and brought into use by the Iraq Petroleum Company (IPC) in 1934. It was considered the largest oil field in the world for around 20 years until Saudi Arabia's Ghawar field came online in the 1950s824, and forms the basis of northern Iraqi oil production with nearly 9 billion barrels of proven remaining oil reserves as of 2006. 820“ Badra”. Iraq Energy, retrieved 12 December 2011. 821" Gazprom Neft completes seismic survey in Iraq", Gazprom Neft, 17 May 2011 822" Iraq Oil Production Kirkuk Oil Field", Oil and Gas Articles, 21 March 2006 823" Kirkuk Oil Field- A History of Conflict", Commodities Universe, 28 October 2011 824" the Kurdish battle for Kirkuk International Resource Journal 2009 242
Kirkuk also boasts a streamlined system of exportation. Once the oil is extracted from the ground, it is sent via the Kirkuk-Ceyhan Oil Pipeline to the Turkish port city of Ceyhan, from where it is shipped around the world. In 1991, production at Kirkuk was estimated at 900,000 barrels per day (bpd). In December 1999, Russian energy company Zarubezhneft said that it was drilling multiple wells in the Kirkuk field and that this did not violate UN sanctions in force. Zarubezhneft hoped to boost Kirkuk production capacity from 900,000 bpd to around 1.1 million bpd.825 Following the invasion and occupation in Iraq, Kirkuk was among the eight fields on offer in Iraq's first post-war licensing round in 2009 (details below).826
Dispute over ownership The Kirkuk field lies near the city of Kirkuk, a city long disputed between the central government in Baghdad and the Kurdish Regional Government (KRG) based in Erbil. Historically, this area of Iraq was populated by Shiite Kurds, who originally occupied a large part of the Ottoman Empire. However at the end of World War I the Ottoman Empire dissolved and while the area that the Iraqi Kurds live is often referred to as Kurdistan, they do not have their own government or constitution. Since the fall of Saddam Hussein, many Kurds feel that Kirkuk should be returned to them. While the nearby city of Kirkuk may have originally been part of the Kurds’ territory, however, the Kirkuk oil field was not discovered until well after the fall of the Ottoman Empire. In June 2008 there was a brief armed stand-off between the forces of the KRG and Iraq's central government over one of the areas of Kirkuk field, the Khurmala Dome. Oil Minister Hussein Shahristani said the Baghdad government secured the area after Kurdish peshmerga briefly stopped the Oil Ministry from producing out of the field, at the time yielding about 30,000 barrels a day827.
825" Kirkuk, Global Security retrieved 12 December 2011 826" Shell Renegotiates with Iraq for Kirkuk Field Rights, Rigzone 16 October 2009 827" Future of Kirkuk Field Unknown", Energy Daily, June 17, 2008 243
KRG officials claimed their right to manage the Khurmala Dome on the grounds that it falls within Erbil governorate, which is an undisputed part of the KRG. Iraq's central government bases its own claim on the fact that the 2005 Constitution grants the right to manage fields which are already in production to the federal level of government.
Contracts Negotiated 2009 contracts Kirkuk was put out to bid in the first round of service contracts announced by Iraq's Oil Ministry in June 2009. The government set a production plateau of 600,000 bpd. A consortium led by Shell offered a production plateau of 825,000 bpd, however their offer was declined because the Oil Ministry considered the suggested remuneration fee of $7.89 per barrel to be too high, compared to their own maximum fee of $2 per barrel. A senior Iraqi official reported in October 2009 that the Ministry would meet Shell to discuss terms further. 828 No deal is known to have resulted from these further contacts.
Potential re-bid Abdul-Mahdy al-Ameedi, director of the Oil Ministry’s Petroleum Contracts and Licensing Directorate, said in early 2010 that there were no talks now with any foreign oil companies to develop the fields. “We have offers from many companies, they want to develop them but really we don’t,” alAmeedi told Reuters in an interview.829 Two weeks later oil minister Hussein Shahristani said another bidding round could be held if there was enough preliminary interest from international companies. "We will talk to companies and if we find the desire to develop these fields, then we could announce another bidding round for the qualified companies to develop those fields," he said in an interview, citing oilfields such as Kirkuk, East Baghdad and Bai Hassan.830
828" Iraq readies to meet Shell over Kirkuk", Zawya, 18 October 2009 829" No move to auction more oilfields, says Iraq", Gulf Times, May 10, 2010 830" Iraq may hold third oilfield auction", Calgary Herald, May 28, 2010 244
Production Activities Prior to the 2003 invasion, Kirkuk fields produced 680,000 bpd, but that level had declined to 200,000 bpd following the war. Additionally, exporting oil from Kirkuk has become difficult because of attacks by Sunni militias on the Kirkuk-Ceyhan Oil Pipeline.831 As of 2011, Kirkuk was producing an average of 1 million bpd.
Geological and Geographical Features The Kirkuk oil field is a 100-km long and 12-km wide. With an estimated 8.7 billion barrels of remaining reserves, Kirkuk normally produces 35o API, 1.97% sulphur crude, although the API Gravity and sulphur content both reportedly deteriorated sharply in the months just preceding the war in 2003. Kirkuk's gravity, for instance, had declined to around 32o-33o API, while sulphur content had risen above 2%. Some analysts believe that poor reservoir management practices during the Saddam Hussein years (including reinjection of excess fuel oil, refinery residue and gas-stripped oil) may have seriously, even permanently, damaged Kirkuk. Among other problems, fuel oil reinjection has increased oil viscosity at Kirkuk, making it more difficult and expensive to get oil out of the ground.
Majnoon (Field) Oil Reserves
13 billion barrels832
Oil Production
75,000 bpd (Sept 2011)833
Discovered
1975
Location
Al-Basrah, South-East.
Principal Partners
Shell (45%)
831" Iraq: The North, Centre & South Economic Divide", Sicuroln Information, 31 July 2011 832" Iraq oil development rights contracts awarded", BBC News, 11 December 2009 833" Iraq's Majnoon producing 75,000 bpd", Reuters, 27 September 2011 245
Secondary Partners
Petronas (30%), Missan Oil Company (25%)
Background The super-giant Majnoon oil field is situated in Al-Basrah governorate in south-east Iraq, extending northerly toward Missan governorate.834 The field was discovered by Brazilian Braspetro in 1975, however development came to a halt in 1980 during the engineering phase of the project, due to the Iran-Iraq War. At the time, Braspetro had finished drilling of 20 wells and 14 drilling rigs were in service. Over the course of the war, Iran occupied and sabotaged the area. Following the war, Iraq's South Oil Company restarted the production. In the 1990's, French Total negotiated a development contract with Saddam Hussein but was ultimately unable to sign the deal due to UN sanctions imposed on Iraq. The deal was eventually annulled by Hussein in 2002. In 2007, Total and Chevron signed an agreement with Iraqi government to explore the Majnoon field.835
Contracts Negotiated As a result of Iraq's second post-war licensing round in 2009, the Iraqi government signed a 20-year service contract with international oil companies Shell and Petronas to develop the Majnoon oil field. Iraqi state-owned South Oil Company and Missan Oil Company also formed part of the group, which intended to boost production to 1.8 million barrels per day (bpd) from 45,000 bpd (2010). Shell is the lead operator in the consortium with a 45% stake, Petronas holds 30% and the Iraqi state holds 25%.836 The bid from Shell and Petronas beat a rival bid from France's Total and China's CNPC. The consortium pledged to increase output to 1.8 million bpd. Under the terms of the deal their venture, which includes a 20-year service contract, would receive a remuneration fee of $1.39 per barrel.837
834" Majnoon", Iraq Energy, retrieved 12 December 2011 835" Under Tight Security, Iraq Sells Rights to Develop 2 Oil Fields", New York Times 11 December 2009 836" Iraq Signs Majnoon Oilfield Agreement With Shell, Petronas", Bloomberg 17 January 2010 837" Iraq oil development rights contracts awarded", BBC News 11 December 2009 246
Production Activities The eventual output target for the field is 1.8 million bpd. In July 2011 output was at 65,000 bpd, however in September 2011, Shell Vice Presidnet Hans Nijkamp announced that production was at a level of approximately 75,000 bpd. In a 2011 interview Nijkamp commented that the facilities at Majoon would build upon existing infrastructure and install a further 15 production wells (the first by July 2011), install additional pipelines and upgrade two degassing stations.838
Geological and Geographical Features The field was named Majnoon (meaning 'crazy') due to an excessive presence of oil in a limited areas on the east of the Tigris River in Basrah governorate. The field is around 60 km long and 15 km wide and is located 60 km northwest of Basrah city. The field area lies mostly under man-made islands in the Hawizah marshes, close to the Iranian border. The pressure at the Upper Cretaceous reservoir at Majnoon was so high that the rig used in the discovery was destroyed.839
Rumaila (Field) Oil Reserves
17.7 billion barrels (2011)840
Oil Production
1.3 million bpd (2011)841
Discovered
1953
Location
al-Basrah, South.
838"Hans Nijkamp talks about the Majnoon Oilfield and the South Gas Utilisation Project", Iraq Energy, 15 June 2011 839"Majnoon Field, Iraq", Offshore Technology, retrieved 12 December 2011 840"Highs and Lows for Iraq's Rumaila Oil Field", Commodities Universe, 27 October 2011 841"Iraq Aims to Up Rumaila Oilfield Output by 10 Pct", Iraq Energy, 18 November 2011 247
Principal Partners
BP (38%), CNPC (37%)842
Secondary Partners
SOMO (25%)
Background Rumaila, together with the northern 'supergiant' field of Kirkuk have to date made up most of Iraq's oil production.843 Historically, Rumaila was seen as two fields, or contract areas, Rumaila North and Rumaila South, but in the 2009 bidding rounds they were bundled together into one asset.844 The Rumaila field is located in the Basrah region of southern Iraq, about 20 miles from the Kuwaiti border. Discovered in 1953 by an expedition from British Petroleum, it was nationalized by Saddam Hussein and has since become Iraq's chief source of revenue. Rumaila is estimated to contain approximately 15% of all Iraqi oil reserves and. As of 2011 the field accounted for 40% of the country's oil production and was outputting more than 1 million barrels per day (bpd). It is the fourth largest field in the world and is half as big as all of the UK's North Sea oil fields.845
Contracts Negotiated 2009 Contracts Terms Two consortia bid for the Rumaila development in the first licensing round in 2009, one led by ExxonMobil and the other by BP. The Ministry of Oil announced that the ExxonMobil group had originally scored more points in the evaluation than the BP group, but that both groups were above the maximum remuneration fee of $2 a barrel set by the Ministry. Exxon declined the offer to meet the maximum fee but BP accepted and thus won the contract. The consortium was due to make a signature payment of $500 million, 842" BP and CNPC to Develop Iraq's Super-Giant Rumaila Field", BP, 3 November 2009 843"Iraq’s First Petroleum Licensing Round Rumaila Contract Area Bidding Results" PCLD, 30 June 2009 844" | BP, CNPC to drill wells to boost Rumaila output ", Bloomberg News, April 25, 2010 845" Iraq: The North, Centre & South Economic Divide", Sicurolnformation, 31 July 2011 248
which was intended to be a 'soft loan' repayable over five years, with interest payments beginning in 2011. Change in Ownership Structure of Consortium The CNPC percentage of ownership in the consortium appears to have significantly increased between the mid-2009 bid and signature in November. A June 2009 press release announced that BP held a 66.67% stake and CNPC 33.33% of the international component of the bid. Once the 25% involvement of the South Oil Company was included this would have worked out at a total of 50% to BP and 25% each to CNPC and South Oil Company. However official announcements that followed indicated that the split was 38% for BP, 37% for CNPC and 25% to the Iraqi state. Remuneration Fee The remuneration fee stipulated was $2 per barrel, the maximum specified by the Iraqi Ministry of Oil. The official press release announcing the contract said BP had originally offered $3.99 a barrel, compared to the $4.80 offered by the ExxonMobil group. Production Plateau The BP-led consortium offered to take production to 2.85 million barrels per day (bpd). This compares to a higher plateau of 3.1 million bpd offered by the ExxonMobil-led consortium. The government had specified 2.75 million bpd as the minimum acceptable plateau.
Production Activities According to a BP press release, the Rumaila Field Operating Organisation (ROO) will manage the rehabilitation and expansion project at the field. ROO is to be staffed mainly by employees from the South Oil Company and contain a small number of technical experts and managers from BP and CNPC.846 The general manager of the ROO stated at a conference in 2011 that the consortium was planning to increase production by around 10%, or 130,000 barrels per day (bpd), at Rumalia in 2012. This would boost output to 846" BP and CNPC to Develop Iraq's Super-Giant Rumaila Field", BP, 3 November 2009 249
around 1.43 million bpd.847 In late 2011, Reuters reported that production from the Rumaila field fluctuated widely in early 2011 due to pressure problems. However, BP commented that it still hoped Rumaila would reach its production target of 2.85 million bpd by 2017.848 Through 2011, production at the field suffered a number of setbacks. In September 2011 an explosion ocurred, injuring at least 15 people and resulted in a temporary drop in production which was promptly resumed after repairs. A further explosion hit Rumaila in October, said to be a bombing targeting pipeline networks. Three days later another explosion ocurred when a pile of mines exploded prematurely while being disposed of, killing two army officers and four deminers.
Geological and Geographical Features Rumaila's 17.7 billion barrels of proven reserves are said to be sitting less than 8000 feet below the surface of the earth, making them an easy target for drilling. The oil at the site is sweet and around 34°API.
Since signing the Services Agreement with the Ministry of Oil in 2005, BP has been working with Iraq on Rumaila for an “Integrated Rumaila Oil Field Study.” This involves building a modern database for the field and doing an initial, integrated reservoir analysis. This work was intended to allow the oil major to build on their historic knowledge of the area dating back to 1953.849
East Baghdad (Field) Oil Reserves
8 billion barrels (2010)850
847" Iraq Aims to Up Rumaila Oilfield Output by 10 Pct", Iraq Energy, 18 November 2011 848" BP trying to raise Iraq oil output, not in contract talks", Reuters, 18 September 2011 849" BP in Rumaila", Commodities Universe, 16 February 2010 850" The World's Biggest Oil Reserves", Forbes, 21 January 2010 250
Discovered
1976
First Produced
1980851
Location
East Baghdad.
Principal Partners
state-managed
Background The 'super-giant' East Baghdad oil field is situated in the Baghdad and Salah ad-Din governorates, 10 km east of Baghdad city. Despite proved reserves of 8 billion barrels, during the 2009 licensing rounds in Iraq there were not bids by the international consortia to exploit the deposit. Following this, Oil Minister Shahristani said the Iraqi Oil Ministry would develop the East Baghdad field on its own.852
Contracts Negotiated The contract area was put up for bidding in 2009 second licensing round in Iraq, but the government announced in December of that year that no bids had been received. Forbes magazine suggests that this may because much of the deposit lies under residential areas. Earlier in the year, Japex had entered negotiations with Iraqi authorities and was said to have set its sights on the East Baghdad fields. However, there was no resulting bid from the discussions.
Potential future bids The East Baghdad fields are currently closed to international exploitation. However, in May 2010 Oil Minister Shahristani said another bidding round could be held if there was enough preliminary interest from international companies. "We will talk to companies and if we find the desire to develop these fields, then we could announce another bidding round for the qualified companies to develop those fields," he said in an interview, citing oilfields
851" East Baghdad", Iraq Energy, retrieved 12 December 2011 852" Iraq Oil Field Goes to Royal Dutch Shell and Petronas", New York Times, 11 December 2009 251
such as Kirkuk, East Baghdad and Bai Hassan.853
Geological and Geographical Features The contract area for the East Baghdad fields is around 65km long and 11km wide and covers only the section of the field north-west of the Diyala river.
Nahr Umr (Field) Oil Reserves
6.5 billion barrels854
Oil Production
50,000 barrels of oil per day (2009)
Estimated Gas in Place 12 billion cubic feet855 Discovered
1948
Location
Basra Province, South.
Background The Nahr Umr (also known as Nahr Bin Umar) field is located in southern Iraq, 15 kilometers (km) to the north of Basra.856 Total S. A., the French supermajor oil company, agreed to survey the field in 2008. They estimated that it held 6.6 billion barrels of crude and 12 billion cubic feet of gas. Mohammad al-Gailani, of the London-based GeoDesign oil exploration consultancy group, had stated some years earlier that the reserves in place for Nahr Umr were estimated at 20.7 billion barrels of oil and 19,419,906.7 x 109 cubic feet of gas.
853" Iraq may hold third oilfield auction", Calgary Herald, May 28, 2010 854" Three IOCs in bilateral negotiations as Iraq attempts to improve licensing round terms AMEinfo 24 March 2009. 855" Total Seeks Iraqi Oil Fields in Return to Roots" Gulf Oil & Gas 12 February 2009. 856" The Development Plans of Nahr Umr Field for the New Millenium" Mohammad Al-Gailani Retrieved 14 December 2011. 252
Al-Gailani has also explained that in the early eighties, a 15-year plan was designed to develop the field to produce a total of 437,883 barrels per day of oil from the Yamama, Zubair and Mishrif reservoirs accompanied by some 1122.31 million cubic feet per day of gas. However, by 1999, when alGailani talked about the development plan, it was not yet implemented.
Contract Negotiations In 2002, Zarubeshneft and Rosneft, two oil companies from the Russian Federation, stated that they were prepared to develop the Nahr Umr field, which they estimated was worth about US 570 billion dollars in total revenues.857 In March 2009, Total S. A., StatoilHydro, Chevron and a possible fourth Iraqi state-owned oil company were reported to be holding negotiations with the Iraqi Ministry of Oil over the Nahr Umr field. Due to the fact that the field had never been properly developed, it was calculated to be producing about 50000 barrels of oil per day at the time. In September 2010, Iraqi state-owned South Oil Company decided to increase the field's production, by the last quarter of 2011, to 70000 bpd.858 In April 2011, the United Arab Emirates' newspaper The National speculated that in an upcoming Iraqi tender, Iran's Azadegan and Yadavaran fields could be linked with Iraq's Majnoon and Nahr Umr, which would make the complex one of the world's three largest conventional fields.859
Geological and Geographic Features The deposit has an extension of over 40 km long by 25 km wide, its geological anticlinal dome (where the oldest rock beds are near the core) structure proving optimal for extraction of oil or gas. It was first drilled in 1948, after various gravity and seismic surveys earlier in the decade of the 1940s.
857" NONAV: Iraq: Oil Market Size" Business Intelligence Middle East 22 January 2006. 858" New Quaterly Production Targets for Basra's Oilfields Iraq Business News 7 September 2010. 859" Neighbors should not bicker over a few barrels of oil" The National 2 August 2011. 253
Najmah (Field) Oil Reserves
807 million barrels860
Oil Production
110,000 bpd (target)
Discovered
1934
Location
Nineveh governorate, North.
Principal Partners
Sonangol
Background The Najmah oil field was discovered in 1934 and is situated in Nineveh governorate, 50 km south of Mosul city.861
Contract Negotiations Angolan oil company Sonangol was the only company to bid for the Najmah contract area in the second licensing round of 2009. The Oil Ministry announced on 12 December 2009 that the company had been awarded the contract area. The contract specified the consortium would pay a $100 million signature bonus. Sonangol originally offered to accept a remuneration fee of $8.50 per barrel, but later accepted the maximum figure of $6 per barrel allowed by the Ministry of Oil. The deal specified that the state partner, the Iraq Drilling Company, also bore the costs of development of the field.
Production Activities Under the contract, the company committed under the agreement to reaching a production plateau of 110,000 barrels a day, and holding it for nine years. In March 2011 Sonangol started work at the Najmah field and was due to start to dig wells in April 2011, according to a report from Aswat al860" Sonangol takes Najmah,Iraq Oil Report, 12 December 2009. 861" Iraq’s Second Petroleum Licensing RoundNajmah Contract Area – Bidding Results" Ministry of Oil Petroleum and Licensing Directorate, 12 December 2009 254
Iraq.862
Geological and Geographical Features The field is 11km long and 4.5km wide and hold significant accumulations of heavy oil (15 to 20°API).863 Report from the BBC suggest that the high fees paid for the contract area to Sonangol reflect the operational risks at the site and relatively low quality of oil.864
West Qurna Phase 1 (Field) Oil Reserves
8.7 billion barrels865
Oil Production
350,000 bpd (2011)866
Discovered
1973
Location
Basrah governorate, South-east.
Principal Partners
ExxonMobil (60%)867
Secondary Partners
Shell (15%), Oil Exploration Company (25%)
Background The 'supergiant' West Qurna oil field in southern Iraq is located in Basrah Governorate. The field comprises of two separate license areas, Phase 1 and Phase 2, defined by the Euphrate river which runs west-east across the 862" Sonangol to Start Work on Ninewa Oilfields, Iraq Business News, 14 March 2011. 863" Najmah, Iraq Energy, retrieved 12 December 2011. 864" Iraq oil contract goes to Angola's Sonangol, BBC News, 30 December 2009. 865"Exxon ups oil target for Iraq's West Qurna Phase 1, Reuters, 28 November 2010. 866" New stability and prospects for Kurdish oil and gas – European Energy ReviewEuropean Centre for Energy and Resource Security, 9 December 2011. 867" Iraqi Oil Potential and Implications for Global Oil Markets and OPEC PoliticsJames Baker III Institute for Public Policy, Rice University, July 2011. 255
centre of the field.868 West Qurna Phase 1 was awarded to a consortium led by Exxon Mobil in November 2009, several months after the government had declined to award the contract area to any of the bids received during the first round of competitive bidding. It is a super giant field with an estimated 8.5 billion barrels of reserves.869
Contract Negotiations First Licensing Round 2009 In July 2009, the Petroleum Contracts and Licensing Directorate of the Ministry of Oil announced that although five bids had been received from eleven companies during Iraq's first licensing round, plus two revised bids from Exxon and CNPC consortia, the contract for West Qurna Phase 1 was not awarded. The bids specified a remuneration fee in excess of the 'maximum remuneration fee' (MRF)of $1.90 set by the Ministry of Oil. The Exxon-led consortium proposed a remuneration fee of $4, which was then revised to $3.70 as part of their additional bid. The consortia had the opportunity to match the MRF, although this was declined.870
Contract Awarded A month before Iraq held its second licensing round since the 2003 invasion in December 2009, an ExxonMobil-led consortium entered into a twentyyear venture to develop Phase 1 of the West Qurna field. Under the deal, Exxon hold a 60% stake in the field, Shell 15% and the Iraqi state 25%. Under the contract, the companies will be paid a fee of $1.90 a barrel for the oil they produce at the site. Analyst Samuel Ciszuk commented that the deal "will be a big loss for Lukoil” which did work on West Qurna when Saddam Hussein ruled Iraq and that “they have really been eyeing this field.”
868" West Qurna (Phase 2)Iraq Energy, retrieved 13 December 2010. 869" Exxon, Shell Win Iraq’s West Qurna Oilfield Contract (Update3)Bloomberg, 5 November 2009. 870 "Iraq’s First Petroleum Licensing Round Rumaila Contract Area Bidding Results" Ministry of Oil, 2 July 2009 256
The consortium signed the final contract with the Ministry of Oil on the 25 January 2010, agreeing to raise output from a baseline of 244,000 bpd to 2.825 million bpd.
Potential change in ownership structure As a result of the deals struck between ExxonMobil and the semi-autonomous Kurdistan Regional Government (KRG), the company's future as developer of the West Qurna field was in question during 2011.871 In November 2011, the press reported that Russian Lukoil was in talks to buy 37.5% of the West Qurna-1 field from ExxonMobil and that the deal could be completed by the end of the year. According to reports, AngloDutch Shell could buy the remaining 60% in the project, increasing its own stake to 37.5%. However, the Iraqi government stated in December 2011 that they would not terminate Exxon's multi-billion dollar contract. Prime Minister Nouri alMaliki told the Wall Street Journal that "we have not cancelled its contract in the south".
Production Activities A news report on the final deal in November 2009 stated that the production plateau offered by Exxon was 2.1 million bpd.872 In November 2010, an Iraqi oil official told Reuters that ExxonMobil and its partners had raised their production plateau at West Qurna 1 to 2.825 million bpd (from the original plateau target of 2.325 bpd on signing) after adding new reserves to the area covered by their original development contract. He noted that under a rehabilitation plan for the field, the consortium was planning to boost output from the field to around 750,000 bpd by 2013, from 2010 levels of 230,000-240,000 bpd. This would be achieved by drilling new wells, overhauling existing wells and implementing a series of water injection projects.
871" Iraq 'not cancelling' West Qurna contractUpstream Online, 9 December 2011. 872" Exxon-led group clinches Iraq's W.Qurna contract", al-Arabiya, November 5, 2009 257
Geological and Geographical Features The West Qurna field is located around 50 km north-west of the city of Basrah. Overlapping the northern edge of the Rumaila field, West Qurna can be regarded geologically as a structural extension of North Rumaila, but was designated a separate field for non-technical reasons. It is considered a separate asset for development. Three reservoirs of West Qurna have been produced from in the past, however only the reservoir at the 'Mishrif' formation was currently planned for future development as of 2011.
West Qurna Phase 2 (Field) Oil Reserves
13 billion barrels873
Oil Production
n/a
Discovered
1973
First Produced
2013 (forecast)
Location
Basrah governorate, Southeast.
Principal Partners
Lukoil (56.25%)
Secondary Partners
Statoil (18.75%), South Oil Company (25%)
Background The 'supergiant' West Qurna oil field in southern Iraq is located in Basrah Governorate. The field comprises of two separate license areas, Phase 1 and Phase 2, defined by the Euphrate river which runs west-east across the centre of the field.874
873" Lukoil hopes to drill ay West Qurna II before 2012Arabian Oil and Gas, 18 September 2011. 874" West Qurna (Phase 2)Iraq Energy, retrieved 13 December 2010. 258
West Qurna Phase 2 was awarded to a consortium led by Lukoil during Iraq's second post-war licensing round in December 2009.
Contract Negotiations Phase 2 of the West Qurna field was put up for bidding at Irsq's second licensing round of 2009. The field was among the first two fields offered on the second bidding day, which according to a leaked US diplomatic cable attracted 'stunningly low prices'. The remuneration fee accepted for the winning bid by a Lukoil-led consortium was $1.15 per barrel and the agreed target production plateau was 1.8 million barrels per day (bpd).875 Under the terms of the contract, Russian Lukoil would lead the consortium with a 56.25% stake, Statoil would hold a an 18.75% stake and Iraqi stateowned South Oil Company (SOC) would hold 25%. The remuneration fee would be payable on each barrel of crude, oil equivalent liquefied petroleum gas (LPG) and natural gas. It would be payable once the contract area achieves a production level of 120,000 bpd. The plateau production target must be maintained for 13 years and a signature bonus of $150 million would also be payable.876 The other consortia which bid for the field were led by Malaysian Petronas and French Total, proposing remuneration fees of $1.25 and £1.72 respectively.
Production Activities Lukoil CEO Vagit Alekperov said at a Moscow conference in November 2011 that production at the West Qurna-2 project is planned to begin in 2013. Lukoil, like other producers, faced problems obtaining government approval for contractors at its oil projects. Contractors had been chosen for crude oil processing facilities, power stations, export pipelines and storage tanks and approved by Iraq's South Oil Company but were at the time pending approval from the Oil Ministry, according to Alekperov.877 875" Oil Stampede: Iraq,s 2nd Bid Round ResultsWikiLeaks, 14 December 2009. 876" Iraq's Second Petroleum Licensing Round: West Qurna (Phase 2) Contract Area – Bidding ResultsMinistry of Oil Petroleum and Licensing Directorate, 12 December 2009. 877" Lukoil CEO: Production At Iraq's West Qurna-2 To Begin In 2013Wall Street Journal, 18 November 2011. 259
Geological and Geographical Features The West Qurna field is located around 65 km north-west of the city of Basrah, with the Rumaila fields to the south. The Phase 2 contract area lies north of the river and is approximately 24km long and 12km wide. Significant oil accumulations have been discovered in various formations, and gas condensate was recovered from a test in the 'Najmah' formation.878
878" West Qurna (Phase 2)Iraq Energy, retrieved 13 December 2010. 260
Qayara (Field) Oil Reserves
800 million barrels (2010)879
Discovered
1927
First Produced
1930s
Location
Nineveh governorate, southeast.
Principal Partners
Sonangol (75%)880
Secondary Partners
South Oil Company (25%)
API Specificity
15
Background The 800-million barrel Qayara field is located south of Nineveh province's capital Mosul, known as one of the most dangerous regions of the country.881 The field was discovered in 1927 by British Oilfield Development.882 In December 2009, the field was awarded by the Iraqi government to Angolan Sonangol in the second round of licensing bids, when it was the sole bidder for the cotnract.883 The deposit is notable for its very heavy and sour crude compared to the crudes of other Iraqi fields.884
Contract Negotiations Sonangol signed a deal with the Iraqi government on the 26 January 2010, to take a 75% stake in a venture to exploit the Qayara field. Under the terms of the deal, Sonangol is to receive a remuneration fee of $5 a barrel and 879" IRAQ: Angola's Sonangol sign Iraqi oilfield deals" ITN, 28 January 2010. 880" Duo Eye Sonangol's Iraqi Assets" Iraq Energy, 20 July 2010. 881" Iraq Cabinet Ratifies Four Major Oilfield Deals" Muslim Media Network, 9 January 2010. 882" RAQ - The Main Fields In The North" Free Library, retrieved 12 December 2011. 883" Iraq fails to award contract for Qayara oilfield" Allrroya, 12 December 2009. 884" Sonangol wins oil deals in Iraq's riskiest region" Reuters, 12 December 2009. 261
would have an output target of 120,000 barrels per day (bpd) for the Qaraya field. Sonangol said that it would invest $2 billion at the field. According to Reuters, the oil company could start recovering costs once production levels hit 30,000 bpd.885 According to Iraq Energy, the fees accepted were among the highest paid to any of the oil firms that won contracts at tender, reflecting the security risks in the region and the relatively low quality of the oil at the site. 886 Originally, the firm had rejected cutting its bid fee of $12.50 per barrel. However, it won the deal after revising estimates that excluded the cost of facilities to lighten the heavy oil, according to a senior Sonangol official.887. The consortium is committed under the agreement to reaching a production plateau of 120,000 barrels a day, and holding it for nine years.
Geological and Geographical Features The field at Qaraya is only 650 feet deep and is situated within the same structures as Najmah field. All of the surrounding fields contain large accumulations of very sour soil (11-18 API with 6.5-8% sulphur). In 1990 the oil could not yet be refined and only a limited volume was used for asphalt and other purposes. Oil at Qayara itself has an API gravity of 15, by far the lowest among the 10 fields offered at Iraq's second bidding round. Crude quality is measured in degrees of API gravity; the higher the gravity, the easier it is to refine into transport fuel.
Zubair (Field) Oil Reserves
4 billion barrels888
Oil Production
300,000 bpd (2011)889
885" FACTBOX-Oil deals between Iraq and global majors" Reuters, 26 February 2010. 886" Duo Eye Sonangol's Iraqi Assets" Iraq Energy, 20 July 2010. 887" Sonangol wins oil deals in Iraq", Reuters, 12 December, 2009 888" Three Firms Compete For Iraq Zubair Field Prize", Fox Business, 21 October 2011 262
Discovered
1949
Location
South of Basra.
Principal Partners
Eni (32.81%)
Secondary Partners
Occidental (23.44%), Kogas (18.75%),Missan Oil Company (25%).
Background Zubair is a substantial oil field in the southeast of Iraq, around 20 kilometers southwest of the city of Basrah. 890, holding around 4 billion barrels of proven reserves. In July 2009, the government put the contract area up for auction. Four consortia bid but the cabinet rejected all offers. In November 2009, a deal was initialed with the consortium led by Eni, and finalised in February 2010.891
Contract Negotiations During the 2009 licensing rounds held in 2009, an Eni-led consortium won the service contract for the Zubair field. The consortium also included the US's Occidental and Korea's Kogas..892 Under the contract, Eni holds a 32.81% stake, Occidental 23.44%, Kogas 18.75% and state-owned Missan Oil Company 25% of the venture. The consortium will earn $2 per barrel on oil produced once production has been raised by 10% from the level on signing. Eni stated that the consortium planned to invest approximately $20 billion over the 20-year life of the contract, which could potentially be extended to 25 years.893 889" Oil Production on Zubair Field to Rise to 1.0 Million Bopd", Iraq Daily Times, 4 October 2011 890"Zubair", Iraq Energy, retrieved 12 December 2011 891 "Iraq's Zubair-Eni deal effective Thursday - official", Reuters, 18 February 2010 892" Three Firms Compete For Iraq Zubair Field Prize", Fox Business, 21 October 2011 893" Eni, Occidental Petroleum and KOGAS sign the technical service contract with Iraq's South Oil Company and Missan Oil Company to redevelop Zubair field" Eni, 22 January 2010 263
According to the contract, the consortium were to pay the Iraqi Oil Ministry $300 million as a refundable five-year loan, instead of paying a signature bonus.894
Production Activities When Eni took over the Zubair field it was producing 195,000 barrels of oil per day. However according to an Eni press release, under the field's expansion programme production is expected to reach a plateau level of 1.125 million barrels of oil per day (bpd) by 2017. The project includes the drilling of more than 200 wells, the construction of treatment facilities and the required collection network, as well as the refurbishment of the existing plants.895 Drilling new wells, overhauling existing ones and installing electric submersible pumps are ways to overcome the natural decline of the field and boost production at the ageing facilities, according to an employee at the site.896
Geological and Geographical Features At the Zubair field there are three reservoirs that have been appraised and produced from, and are available for further development. These are the Mishrif Formation, and the Upper and Lower units of the Zubair Formation. The southern 'dome' of Safwan extends beyond Iraq’s border and into Kuwait, where it is known as the Abdalli field. According to Abdul-Jabbar Mohammed, Facilities Improvement and Construction Manager at Zubair, one of the main challenges at Zubair is to provide the field with the vast quantities of water required to boost pressure and output. Eni was planning to start a new water injection project in 2011 using two existing water facilities.
894" Eni S.p.A., Occidental Petroleum Corporation and Korea Gas Corporation Sign Final Deal For Zubair Oil Field-DJ " Reuters, 22 January 2010 895" Eni awarded the license for the Zubair giant field in Iraq " Eni, 13 October 2009 896 "Iraq: Eni steps up work in Zubair oil field", Energypedia, 24 May 2011 264
Nasiriya (Field) Oil Reserves
4.4 billion barrels897
Oil Production
50,000 bpd (2010 target)
First Produced
2009
Location
South of Baghdad.
Principal Partners
South Oil Company
Background The Nasiriyah field, located south of the capital Baghdad and with an estimated 4.4 billion barrels of crude reserves, was not included in either of Iraq's 2009 bidding rounds. The Iraqi government made the decision to develop the Nasiriyah oil field on its own after talks with a Japanese-led consortium broke down in 2010.
Contract Negotiations A Japanese consortium, including Nippon Oil Corporation (now JX Nippon Oil and Energy Corp.) reached an accord in principle with the Iraqi government in August 2009 for oil development rights. However, negotiations have effectively been suspended in January 2010. The Japanese consortium had submitted bids for the contract to Iraq's Oil Ministry in February 2009 along with Spain's Repsol and Italy's Eni. In January 2011, Japanese trade minister Akihiro Ohata made an unannounced visit to Baghdad and called on the Iraqi government to resume negotiations with a group of Japanese firms over the development of the Nasiriyah. “Talks with the Nippon group have reached a dead end, and we will start developing the field through national efforts,” said Dhiya Jaafar, head of the South Oil Company (SOC) told Reuters in February 2010.
897" Iraq to develop Nasiriyah oilfield alone", MEED, 1 March 2010 265
Production Activities In June 2009, the chief engineer at the field told press that production was due to start imminently and that oil from the field would be transferred to Basra via pipeline. 15 more wells were planned in addition to the 5 in place. Once they were in place, it was hoped that the field could ultimately increase production to 50,000 barrels per day (bpd). Dhiya Jaafar, head of the SOC, stated in February 2010 that Iraq stated that Iraq planned to drill 10 oil wells in Nasiriyah over the year. He commented that “We are capable of boosting production from Nasiriyah from 10,000 barrels a day to 50,000 bpd by the end of 2010."898
Bai Hassan (Field) Oil Reserves
2.4 billion barrels (2008)899
Oil Production
175,000 bpd (2009)900
Location
Tamim Province, North
Principal Partners
state-managed
Background The Bai Hassan field lies in the north of Iraq, just to the south-west of the Kirkuk field.901 As of December 2011, no contracts had been awarded to international oil firms for exploitation of the deposit.
Contract Negotiations On the 2 July 2009 the Petroleum Contracts and Licensing Directorate of the Ministry of Oil announced that, despite several bids from international oil companies (IOCs) for the Bai Hassan contract area, the country decided 898" Iraq to develop Nasiriyah oilfield alone", MEED, 1 March 2010 899" Iraq Ministry Of Oil Prepares To Invite In Foreign Oil Companies", WikiLeaks, 7 October 2008 900" Mana’a Al-Obeidi", Iraq Oil Forum, 4 September 2009 901 "Bai Hassan", Iraq Energy, retrieved 12 December 2011 266
not to award an international contract for the field.902 A bid was proposed by a consortium of ConocoPhillips, CNOOC and Sinochem, however the remuneration fee bid of $26.70 was well in excess of the minimum established by the Ministry of Oil. According to a leaked US diplomatic cable, Conoco's bid was by far the highest fee requested in the bid round and though they were the sole bidders, they refused to reduce their offer to the maximum $4 fee and walked away with no award.
Production Activities According to a 2008 US diplomatic cable, the field requires major subsurface and infrastructure rehabilitation in order to maintain and increase production. According to comments made by Manaa al-Obeidi, Director General of North Oil Company (NOC) in 2009, production at Bai Hassan had increased from 150,000 barrels per day (bpd) in mid-2008 to 175,000 bpd in 2009 following a water injection project and the drilling of three new wells.903 Production from the field is expected to rise to 240,000 bpd by 2016.
Geological and Geographical Features The Bai Hassan field is an elongated structure around 25km long and up to 4km wide. The main part of the structure is referred to as the 'Kithke dome' and the extension to the north-west as the 'Daoud dome'.
Eastern Fields (Field) Oil Production
80,000 bpd (target)
Discovered
1927, 1938, 1976, 1979
Location
Diyala governorate, North-East
Principal Partners
state-managed
902" Iraq’s First Petroleum Licensing Round: Bai Hassan Contract Area – Bidding Results", Republic of Iraq Ministry of Oil, 2 July 2009. 903" Mana’a Al-Obeidi", Iraq Oil Forum, 4 September 2009 267
Background The 'Eastern Fields' is the collective name for a group of four undeveloped fields (as of December 2011); Gilabat, Khashem AlAhmar, Nau Doman and Qumar. The fields are located in Diyala governorate in north-eastern Iraq, some 100-150km south of Kirkuk city. The fields were discovered in 1927 (Khashem Al-Ahmar), 1958 (Gilabat), 1976 (Nau Doman) and 1979 (Qumar). As of December 2009, eight wells had been drilled at the contract area, two in Khashem Al-Ahmar, three wells in Gilabat, two wells in Nau Doman and one well in Qumar.904 Al-Qaida and other insurgent groups have been active in the area around the fields, and pose an added risk to investors and workers. They are also grouped in disputed territories fought over between Iraq's Arabs and Kurds.905
Contract Negotiations Following Iraq's second postwar licensing round, the Petroleum Contracts and Licensing Directorate of the Ministry of Oil announced in December 2009 that no bids had been received for the Eastern Fields contract area. According to Iraq Oil Report, the Iraqi Oil Ministry wanted oil from the fields to be producing at 80,000 barrels per day (bpd) within seven years and then maintained for another seven years. The winning bidder would have to pay a $100 million and would be required to spend $150 million at least in project costs, which would be refundable.
Geological and Geographical Features Of the four Eastern fields, Khasem Al-Ahmar is approximately 7km by 2.5km, Gilabat 42km by 5km, Nau Doman North Dome 9km by 1.5km, Nau Doman South Dome 9.5km by 2.5km and Qumar 40km by 8km. Oil and gas discoveries have been made in multiple reservoirs in the four field, confirmed by successful well tests. 904" Iraq’s Second Petroleum Licensing Round: Eastern Fields Contract Area – Bidding Results", Ministry of Oil Petroleum and Contracts Licensing Directorate, 11 December 2009. 905 "No Bidders for Eastern Fields", Iraq Oil Report , 11 Dec 2009 268
Siba (Field) Estimated Gas in Place
1.1 tcf906
Gas in Production
n/a
Discovered
1968907
Location
Basrah governorate, South.
Principal Partners
Kuwait Energy (60%)908
Secondary Partners
TPAO (40%)
Background The Siba gas field is situated the southern Basra Governorate, some 30 kms south-east of Basra city. The deposit north-east to the Shat Al-Arab. Siba was one of the three fields on offer during Iraq's Third Licensing Round in October 2010.909
Contract Negotiations At Iraq's third post-war licensing round in 2010, the Siba contract area attracted a total of two bids from three companies. The winning bid came from a consortium of Kuwait Energy and TPAO, who proposed a remuneration fee of $7.50 per barrel of oil equivalent (boe) and a production plateau of 100 million standard cubic feet (MMscf) per day. They outbid an offer from Kazakhstan's KazMunayGas, who proposed a remuneration fee of $16 per boe.910 TPAO told press in June 2011 that the two partners expect to invest $1 billion in the field.911 906" Iraq inks final gas deal with SKorea's KOGAS Yahoo News, 13 October 2011. 907" Iran-IOM - Siba Gas Field Energy World, retrieved 12 December 2011. 908" Future Gas Exports From Iraq Fields Possible: Adviser Arab Times, retrieved 12 December 2011. 909" Iraq inks final gas deal with SKorea's KOGAS Yahoo News, 13 October 2011. 910" Iraq’s Third Petroleum Licensing RoundSiba Contract Area – Bidding Results Ministry of Oil Petroleum Contracts and Licensing Directorate, 20 October 2010. 911 " UPDATE 1-Iraq to sign Mansuriyah, Siba gas deals June 5 Reuters, 1 June 2011. 269
Under the terms of the contract, which will last for 20 years, Kuwait Energy will be the operator at Siba with a 60% share in the venture, and TPAO will hold a 40% interest. Kuwait Energy Chairman Kr Manssour Aboukhamseen referred to the deal as 'a significant milestone for Kuwait Energy' and the Arab Times described the deal as "as politically symbolic as it was a business coup."
Geological and Geographic Features The Siba field is approximately 21km long and 6-13km wide. Gas and oil accumulations have been discovered at the field and gas has been successfully tested at the Yamama formation, while oil has been confirmed at the Zubair and Yamama formations.912
Akkas (Field) Estimated Gas in Place
5.6 tcf913
Discovered
1992914
Location
Al-Anbar governorate, West.
Principal Partners
Kogas (75%)
Secondary Partners
North Oil Company (25%)
Background The Akkas gas field (also known Salah Al Dine) is situated in the western deserts of Iraq, in the Al-Anbar province. It lies 30 km south of Al Qaim city on the Syrian border.915 Anbar province was once a hotbed for insurgents but is reported, with one Iraq official referring to the area as "the same source, for al-Qaida and gas." However, security is reported to have improved more recently as Al-Qaida has been chased to neighbouring territor912" Siba Iraq Energy, retrieved 12 December 2011. 913" Iraq Signs Final Akkas Gas Deal with KOGAS Iraq Business News, 17 October 2011 914“ Iraq to Sign Contract With Korea Gas for Akkas Field Today”. Bloomberg, 13 October 2011. 915"Akkas", Iraq Energy, retrieved 13 December 2011 270
ies. An Iraqi oil official acknowledged to Iraq Oil Report the difficulty of operating in the area, though Iraqi and American security officials dismissed concerns.916 In May 2010, the government announced Akkas would be part of the Third Licensing Round, which would focus on Iraq's gas reserves.917 The original deal awarded to consortium partners Kogas and KazMunayGas was long delayed amid negotiations between different stakeholders, however the deal to develop the deposit was finally signed in October 2011 under an amended ownership structure.918 The field hold the country's largest reserves of gas, with 5.6 trillion cubic feet (tcf). Iraq has said that the priority for the gas will be domestic consumption, mainly for power generation, but has left open the possibility of allowing exports once domestic needs are satisfied.919 The issue of future exports from the Akkas field has caused some discussion in Iraq. Being located close to the Syrian border, Akkas is an attractive source to backers of the Nabucco gas pipeline, which needs a guaranteed supply of gas to compete with Russian pipelines feeding European customers. According to Iraq Oil Report, Baghdad officials have promised Iraqi gas for Nabucco, but only after local demand for refined products and electricity has been met.
Contract Negotiations Along with Kazakhstan’s KazMunayGas, Korea's Kogas won the rights to develop the Akkas field during Iraq’s third energy bidding round in October 2010. Under the terms of the bid, Kogas was the operator of the project, the plateau production target was 100 MMscf/day and the proposed remuneration fee was $7.50 per barrel of oil equivalent (boe) produced.920
916“ Anbar, central governments poised for fight over Akkas”. Iraq Oil Report, 1 June 2010. 917" Iraqi Gas From 'Akkas Field Allbusiness.com March 22, 2010 918“ Iraq Signs Final Akkas Gas Deal with Kogas”. Iraq Business News, 17 October 2011. 919“ Akkas deal finally signed”. Iraq Business News, 13 October 2011. 920“ Bidding Results Overview for Licensing Round 3”. Iraq Energy, retrieved 13 December 2011. 271
The Akkas deal faces several political obstacles on a local and national level. In particular, Anbari leaders demanded that all gas from the field stay within the province to serve existing and future local demand, rather than being exported.921 The governor of Anbar threatened to withhold security and logistical support for foreign contractors if the deal went through and warned that, as a measure of last resort, the province could assert autonomy from Baghdad. In May 2011, KazMunayGas pulled out of the venture, leaving Kogas as the sole investor and operator and forcing the company to double its share in the project.922 A new deal was then negotiated and signed in October 2011 between Kogas and the Iraqi Oil Ministry. The company committed to increasing production to 400 MMscf per day within seven years and holding that output for 13 years, earning a $5.50 remuneration fee for each boe produced.
Production Activities According to Iraq Oil Report, there is reportedly a power plant linked the the Akkas project, as well as a provision establishing a maximum number of year during which the gas produced can be sent to a processing facility in Syria before a comparable domestic facility at Akkas must be ready.
Geological and Geographical Features The Akkas structure is approximately 30km long and 12km wide. Positioned in the far West of Iraq, the field has been little affected by the tectonic activity that created the Zagros mountains, therefore is not mountainous.
Mansuriya (Field) Gas in Production
n/a
Location
Diyala governorate, East.
921“ Gas deals advance, political hurdles remain”. Iraq Oil Report, 15 November 2010. 922“ Anbar, central governments poised for fight over Akkas”. Iraq Oil Report, 1 June 2010. 272
Principal Partners
TPAO (50%)923
Secondary Partners
Kuwait Energy (30%), Kogas (20%)
Background The Mansuriya gas field is located 50km north-east of Baquba city in Diyala province, which is about 100km north-east of Baghdad. 924 According to Iraq Oil Report, in 2011 the province was still suffering from consistent insurgent violence.925 The Mansuriya contract area was offered up as part of Iraq's third licensing round in late 2010, where the contract was won by a TPAO-led consortium. The gas field deals are part of Iraq’s broader strategy to exploit its underdeveloped and under-explored gas reserves.926 Together with the other two gas field put up for bidding in 2010 (Akkas and Siba), the field hold total estimated reserves in excess of 11 trillion cubic feet of gas.927
Contract Negotiations The Mansuriya field was initially put up for bidding during the first postwar licensing round in Iraq in June 2009, however the contract area attracted no bids.928 The winning bid for the field during Iraq's third round of licensing in 2010 contract area came from an international consortium led by Turkish energy company TPAO, who hold a 50% stake. Other companies to participate in the venture were Kuwait Energy, with a 30% stake and Kogas with 20%.
923“ Gas deals advance, political hurdles remain”. Iraq Oil Report, 15 November 2010. 924"Mansuriya", Iraq Energy, retrieved 13 December 2011 925" Turkey continues energy strategy in Iraq" Iraq Oil Report 6 June 2011. 926" Gas deals make progress" Iraq Oil Report 1 June 2011. 927" Kuwait Energy wins Iraq contracts" Oil Review Middle East retrieved 13 December 2011. 928" First Iraqi Petroleum Licensing Round" Deloitte retrieved 13 December 2011. 273
In October 2010 the Petroleum Contracts and Licensing Directorate of the Ministry of Oil announced that only one bid had been received for the field. The initial remuneration fee proposed the consortium of $10 per barrel of oil equivalent (boe) was above the 'maximum remuneration fee' set by the Ministry, however the lower figure of $7 was subsequently accepted by the consortium. Under the terms of the deal, the target production plateau was 320 million standard cubic feet (MMscf)929
Geological and Geographical Features The Mansuriya structure is approximately 20km long and 3-4km wide. Following the drilling of the discovery well, three exploration wells have been drilled and tested at the fields, however as of December 2011 the field was not in production.
Middle Furat (Field) Oil Reserves
600 million barrels of oil930
Discovered
1960, 1983, 1981
Location
Karbala governorate, Centre.
Principal Partners
state-managed
Background The Middle Furat area is a cluster of three undeveloped oil fields located in Karbala governorate in central Iraq, south of Al-Razaza Lake. The fields were discovered in 1960 (Kifl), 1983 (Merjan) and 1987 (West Kifl). 931 Karbala province is home to one of the holiest cities in Shiite Islam.
929" Bidding Results Overview for Licensing Round 3" Iraq Energy retrieved 13 December 2011. 930"No bids for Middle Furat fields", Iraq Oil Report, 12 Dec 2009 931"Middle Furat", Iraq Energy, retrieved 13 December 2011 274
Contract Negotiations The contract area was put up for bidding in Iraq's second post-war licensing round. However on the 12 December 2009 Iraq's Petroleum Contracts and Licensing Directorate announced that no bids had been received for the Middle Furat contract area.932 In May 2010, oil minister Hussein Shahristani announced that the government was considering inviting foreign companies to develop the fields. 933 However in March 2011 energy company San Leon Energy announced that they had signed a Joint Participation Agreement with the Governorate Council of Karbala for the development of the Middle Furat fields, along with their Joint Venture Partner in Iraq Al Meinaa Oil Services Company. San Leon and its partners were to shortly enter into formal negotiations with the Ministry about the project area.934
Geological and Geographic Features The largest towns in the region surrounding the field are Karbala City and Hilla, to the north and east of the main oil producing area. The approximate sizes of the fields are 2.5km by 2km (Merjan), 10 km by 8 km (West Kifl) and 5 km by 1.5 km (Kifl). Six wells have been drilled in the Middle Furat Fields Contract Area, four wells in Kifl, one well in Merjan, and one well in West Kifl.
Maysan (Field) Oil Reserves
2.5 billion barrels935
Oil Production
90,000 bpd (2010)936
932" Iraq’s Second Petroleum Licensing Round: Middle Furat Contract Area – Bidding Results Ministry of Oil Petroleum and Licensing Directorate, 12 December 2009. 933"Iraq mulls inviting cos to develop Furat oilfields", Reuters, 17 May 2010 934" Joint Participation Agreement"San Leon Energy, 23 March 2011. 935" Iraq in deal with CNOOC, TPAO for Maysan oilfields", Best Growth Stock quoting Reuters, May 12, 2010 936" Iraq to Double Oil Output from Maysan Fields" BEDigest, retrieved 13 December 2011. 275
Location
Maysan governorate, South-East.
Principal Partners
CNOOC (63.75%)937
Secondary Partners
TPAO (11.25%), Iraq Drilling Company (25%)
Background The Maysan oil fields (also known as the Missan Oil Fields) are a complex of fields located around 175 km North of Basrah city and includes Abu Ghirab, Jabal Fauqi (Fakka) and Buzurgan oil fields. The Missan province shares a border with Iran and in December 2009 a group of Iranian border guards crossed the border and occupied one of the wells at the Fakka field, raising an Iranian flag. The occupation lasted for less than 48 hours, however the guards remained in the area for another month. According to Iraq Oil Report, this raised an anti-Iranian sentiment borne from war in the 1980s, complicating further the efforts to demarcate the border and thus the fields that cross it. The executive director of CNOOC, operator at the field, commented: "We have communications with both sides... think about it: both are very friendly to the Chinese, which is a factor."938
Contract Negotiations The Maysan contract area was put up for bidding in Iraq's first petroleum licensing round. However, the field only attracted one bid and no contract was awarded.939 However in May 2010 Iraq signed a final deal with China's CNOOC and Turkish state-run TPAO to develop the Maysan oilfield complex. CNOOC's original partner for developing the field Sinochem pulled out of the deal when CNOOC decided to reconsider and accept the Iraqi government's proposed remuneration fee of $2.30 per barrel of oil produced. TPAO then joined the venture to fill the gap. CNOOC and TPAO set a production plateau target for the field at 450,000 barrels per day (bpd). CNOOC holds a 937International Activities" TPAO, retrieved 13 December 2011. 938"CNOOC, TPAO finalize Missan fields contract", Iraq Oil Report, 17 May 2010. 939Iraq: Oil and Gas Legislation, Revenue Sharing, and U.S. Policy" Congressional Research Service, 3 November 2009. 276
63.75% stake in the venture, while TPAO holds 11.25% and the Iraq Drilling Company company holds a 25% stake.
Garraf (Field) Oil Reserves
1 billion barrels940
Oil Production
230,000 bpd (2012 forecast)
Location
Thi Qar Governorate, South.
Principal Partners
Petronas (45%)
Secondary Partners
Japex (30%), South Oil Company (25%)
API Specificity
24-36
Background The Garraf oil field is situated in Thi Qar Governorate in southern Iraq, some 5 km northwest of Al-Refaei city, 9 km southeast of Qal’at Suker city and 85 km north of Nasiriya. Discovered in 1984, the oil found ranges in gravity from 15 to 36 °API, in multiple reservoirs.941
Contract Negotiations A consortium led by Malaysian Petronas submitted a bid for development of the Garraf field on the first day of Iraq's second licensing round in December 2009. According to leaked US diplomatic cables, the undeveloped Garraf field was one of the first two fields offered, which received bids at 'stunningly low prices'. The international partners in the winning consortium were made up of Petronas, with a 60% interest, Japex with 40%. According to the deal, the remuneration fee offered was $1.49 and the 'plateau production target' was 150,000 barrels per day (bpd).942 940" Weatherford Wins $200m Project at Garraf Oil Field Iraq Business News, 20 October 2011. 941"Garraf", Iraq Energy, retrieved 13 December 2011 942" Oil Stampede: Iraq,s 2nd Bid Round Results Wikileaks, 14 December 2009. 277
Production Activities According to Adnan Galay, former chairman of the field's management committee, output from the field is expected to hit 50,000 barrels per day (bpd) in 2012, 60,000 bpd in 2013 and 100,000 bpd in 2014. Garraf has an eventual output target of 230,000 bpd, although the Petronas-Japex partnership may look to increase production beyond that level, according to officials. As of late 2011, three wells had been drilled and testing oil proved that gravity ranges from 24-326 degrees API. The consortium suffered a setback at the site when local tribesmen refused to cede their ancestral lands peacefully without a cash payment from Petronas. The alleged extortion drew condemnation from the Iraqi Oil Ministry however, and the tribal sheiks denied any threat of violence.
Geological and Geographical Features The Garraf field is 17.5km long and 5.5 km wide.
Halfaya (Field) Oil Reserves
4.1 billion barrels943
Oil Production
12,000 bpd (2011)944
Discovered
1976
Location
Missan governorate, South-East.
Principal Partners
CNPC (37.5%)945
Secondary Partners
Total (18.75%), Petronas (18.75%), South Oil Company (25%)
943" CNOOC, TPAO finalize Missan fields contract" Iraq Oil Report, 17 May 2010 944" CNPC, Iraq Award $174mln Halfaya Contract to China Co" Iraq Energy News, 10 June 2011 945" Iraq-CNPC/SOC - Halfaya Oil Field" Energy World, 17 September 2010 278
Background The Halfaya oil field was discovered in 1976 and is located in the Missan governorate in the south-east of Iraq 35km south-east of Amarah city. 946 As of 2010 the field was proven to hold 4.1 billion barrels of recoverable reserves, with a production potential of 200-535,000 barrels per day (bpd). The operator of the field is China's CNPC.
Contract Negotiations Following Iraq's second petroleum licensing round held in December 2009, the Halfaya contract area was awarded to an international consortium led by CNPC. The consortium split was 37.5% to CNPC, 18.75% each to Petronas and Total, and 25% to the Iraqi state partner. However in April 2010, Total CEO Christophe de Margarie said his company would like to acquire a larger stake in the field. "Iraq is a strong part of our strategy in the world and we certainly don't intend to remain a minority partner in the Halfaya field," de Margarie was quoted as telling Reuters.947 The CNPC-led group beat three consortia which submitted offers to win the field, including offers led by Norway's Statoil and Russia's Lukoil. Under the terms of the deal, the group will be paid a remuneration fee of $1.40 per barrel, lower than the $1.76 sought by a rival consortium led by Indian state-owned ONGC Videsh Ltd.948 and were to pay Iraq a non-recoverable signature bonus of $150 million.949 The contract stipulates that production should reach 535,000 bpd, which is five times higher than the local production of the field, in addition to provision of gas products to neighboring power stations.950
946"Halfaya", Iraq Energy, retrieved 13 December 2011 947" Total eyes bigger Halfaya slice" Upstream Online, 22 April 2010 948" ONGC Videsh qualifies for Iraq's oil exploration bidding" The Economic Times, 9 August 2011 949" Iraq inks CNPC, Total, Petronas Halfaya deal" AME Info, 26 January 2010. 950"Four wells drilled at Halfaya", Iraq Business News, 16 May 2011 279
Production Activities PetroChina, a subsidiary of CNPC, was due to start work to develop the Halfaya deposit in the second half of 2010 after the newly awarded contract has taken effect. As Sabah newspaper reported in October 2011 that output at the Halfaya oil field was expected to rise to 70,000 bpd in 2012, with the drilling of 48 wells. Two projects valued at a total of $187 million would be built over the year at the site, including a crude oil facility with a processing capacity of 100,000 bpd and a pumping station to increase export capacity.951 A representative of Missan Oil Company has also said that estimated reserves at the Halfaya field are expected to reach 15 billion barrels. Missan Oil Company has also stated that any liquefied petroleum gas (LPG) from Halfaya would be transferred to Iraqi state-run South Gas Company for domestic needs and power generation.
Geological and Geographic Features The Halfaya deposit is approximately 35km long and 10km wide. Seven wells drilled at the field have appraised oil accumulations in multiple reservoirs and limited production has been achieved from four wells drilled in the 'Mishrif' and 'Nahr Umr' formations.
951" Iraq’s Halfaya Oilfield Output to Rise in 2012, As Sabah Reports" Iraq Energy, 11 October 2011 280
Resource Transparency Opportunities Resource Curse The "Resource Curse" is the idea that the presence of large amounts of natural resources, relative to other sources of income for a state or a society, actually leads to negative social, political and economic effects rather than positive ones. The Resource Curse is a direct result of dependency on oil revenues. As the resource transparency movement has gained ground much research has been carried out into the weak points in the chain of oil production at which corruption and abuses can occur.
History and Current Status of the Idea The idea that natural resources resulted in poor outcomes has been in play since the 1950s, when it was hotly contested by the ideological camps of the Left and Right. Empirical data began to accumulate support the idea over time. In the 1970s, Gobind Nankani, a vice-president at the World Bank, showed that a group of mineral exporting countries grew on average by 1.5% per year during the period 1960 to 1976, about half the growth in a control group of non resource-rich countries.952 In 1988, a study commissioned by the World Bank examined the windfalls accruing to six oil-rich countries during the boom of the 1970s and concluded that those states had performed less well than other, resource-poor countries.953
952" Developmental Problems of Mineral Exporting Countries" World Bank background paper for the 1980 World Development Report Retrieved 24 October 2011. 953" Oil Windfalls, Blessing or Curse?" Alan Gelb and Associates Oxford University Press, New York, 1988. 281
Sachs Work in the 1990s Jeffrey Sachs and Andrew Warner's Natural Resource Abundance and Economic Growth at the end of the 1990s examined 97 countries over a period of 18 years, 1971 to 1989, and found that states with a high abundance of natural resource exports had abnormally slow economic growth in general, relative to other countries. The study became the basis of a growing recognition of the need to address the problems that natural resource abundance can create in developing societies.
Opponents of the Term "Resource Curse" Some economists have resisted the term "resource curse" because they say it sounds fatalistic.954 Oxford professor Paul Collier suggests that the term poses the problem the wrong way round, since he estimates there are more natural resources in developed countries than in developing ones. The dominance of natural resource industries in some developing country economies is simply, he states, due to the fact that they have had few other options for economic development, which in turn is due to a whole host of political and social factors.955 Collier argues that for the world's "Bottom Billion" - the poorest billion people on the planet - a greater problem is rather that their natural resources have not been discovered or developed enough.
954" Resource Curse, or Resource Trap?" M. Lorenzo Warby Retrieved 24 October 2011. 955" The Plundered Planet Why We Must - and How We Can - Manage Nature for Global Prosperity" Paul Collier Oxford University Press, 2009. 282
Attitudes of Major Institutions International Institutions The International Monetary Fund has published papers recently discussing how to address the resource curse in Nigeria956 and Botswana.957 The World Bank uses the term "Resource Curse"958959 while arguing that it is not inevitable and can be avoided by good governance. But some critics have challenged whether the policies the World Bank has pursued are effective, notably in the case of their support for an oil pipeline from Chad through Cameroon which was tied to poverty alleviation policies.960
Oil Companies In recent years, energy companies have started to acknowledge the challenges that natural resource revenues can present to developing countries. "The reality of the problems which have afflicted a number of different countries as a result of natural resource development is undeniable. I am convinced that there are things we can do to mitigate many of the problems but it would be quite wrong to start from a position of denial," said NJ Butler, then vice-president of British Petroleum, in a speech in 2004.961 Exxon Mobil has rejected use of the term Resource Curse but says it supports the EITI process because it acknowledges that good governance is necessary to deliver benefits from oil production, and that transparency is a part of that.962 956" Addressing the Natural Resource Curse. An Illustration from Nigeria" IMF Working Paper Retrieved 24 October 2011. 957" Escaping from the Resource Curse: Evidence from Botswana and the Rest of the World" IMF Staff Papers, 2007 pp. 54, 663–699. 958" Property Rights and the Resource Curse" Leif Wenar World Bank Research Paper, Retrieved 24 October 2011. 959" 'Contributing to development'?" Interview with Somit Varma, director of the World Bank's Oil, Gas, Mining and Chemicals Group, Critical Resource website Retrieved 24 October 2011. 960" Can policy intervention beat the resource curse? Evidence from the Chad– Cameroon pipeline project" Scott Pegg, African Affairs 105(418):1-25 (2006) 961" Escaping the Resource Curse: Managing Natural-Resource Revenues in LowIncome Countries" BP Website Retrieved 24 October 2011. 962" Transparency can promote better natural resource management" Exxon Mobil 283
Economic Causes Dutch Disease So-called Dutch disease is the effect on a country's economy when it earns a lot of revenues from exporting a natural resource. It was named after the Netherlands to explain a decline in manufacturing through the 1960s after a major natural gas field was discovered at the end of the 1950s. The theory is that oil exports earn a lot of foreign currency which tends to lead to a rise in the exchange rate of the local currency. That makes exports from other sectors uncompetitive, and so the natural resource starts to dominate all exports. At the same time, the earning power of the oil sector draws in labour and capital, and therefore also adversely affects all other sectors of the economy, whether they are export-oriented or not.
Correlation Between Oil and Debt Economists have long noted the link between oil revenues and higher fiscal spending. Venezuela curing the 1970s oil boom is a famous case, where President Carlos Andres Perez indreased public spending dramatically, leading the country into debt. The fact that all government spending, as well as liquidity in the economy as a whole, rises and falls unpredictably with the fluctuations in the price of oil and other commodities is a severe management problem. A 2005 study by the Institute for Public Policy Reform analysed data from 101 countries for the period 1991 to 2002 and concluded there was a statistical correlation between increased oil production and exports, and public debt in the producing country.963
website Retrieved 24 October 2011. 963" Drilling into Debt" Institute of Public Policy Research, UK, 2005 Retrieved 24 October 2011. 284
Political Causes Weakening of the State Many political scientists have outlined a Resource Curse which both makes rulers in a state unaccountable, and state institutions weak. They are unaccountable because resource revenues allow them not to have to raise taxes in order to provide welfare and public services (to a greater or lesser extent depending on the degree of their resource wealth). And they are weak because the institutions of the state never develop under real discipline, through meritocracy and against measured goals and results. The most notable exponent of this theory has been Professor Terry Lynn Karl, who studied Venezuela, Nigeria, Algeria and Iran.964
Conflicts Analysts of the resource curse point to many cases where natural resource wealth creates or exacerbates conflicts, either between states or within them. Notable cases include: • Southern Sudan, where the presence of oil is renewing tensions between the Khartoum government and southern separatists. • The Cabinda region of Angola, which is oil-rich. A secessionist movement has flourished in the region since the discovery of oil. • Nigeria, where the concentration of oil in the Niger Delta was a contributing factor to the Nigerian Civil War of 1966-70, and ever since has been a cause of constant unrest.
Natural Resource Charter The Natural Resource Charter is described as an international convention in the making, an attempt to spread best practice and governance issues across the energy and extractive industries worldwide. As such it is the latest de964" The Paradox of Plenty: Oil Booms and Petro States" Terry Lynn Karl University of California Press, 1997. 285
velopment in the resource transparency movement.
Foundation of Charter The charter was conceived by economist Paul Collier, as he worked on his book the Plundered Planet. Recognising the precedent set by the EITI, the charter is an attempt to extend the principles of good governance across every area of natural resource management. A draft of the charter was announced in February 2009.965 As well as Collier, the charter was sponsored by a number of distinguished academics and the Revenue Watch Institute. Collier's idea is that natural resources are key to the development of many countries, particularly in Africa. But the reason so many countries have suffered from the Resource Curse is a series of breaks in a crucial chain of decisions required to ensure effective exploitation of resources: the lack of sufficient investment in the discovery process, failure to impose adequate taxation, shortage of domestic investment of revenue, and the need to ‘invest in investments’ by building civil service capacity to manage investment portfolios.
Precepts The charter is made up of a number of precepts, or basic principles. These are thought to be universally applicable to all natural resource producing countries, in the same way as the Universal Declaration of Human Rights. Each of the principles has a detailed explanation and an accompanying document on ways to achieve it on the charter's website.966
Overarching Issues • Precept 1: The development of natural resources should be designed to secure maximum benefit the for the citizens of the host country. • Precept 2: Extractive resources are public assets and decisions around their exploitation should be transparent and subject to informed public oversight. 965" New Charter to help oil-rich poor countries - launched today" Charter website Retrieved 24 October 2011. 966" Natural Resource Charter - Precepts" Charter website Retrieved 24 October 2011. 286
Upstream Issues • Precept 3: Competition is a critical mechanism to secure value and integrity. • Precept 4: Fiscal terms must be robust to changing circumstances and ensure the country gets the full value from its resources. • Precept 5: National resource companies should be competitive and commercial operations. They should avoid conducting regulatory functions or other activities. • Precept 6: Resource projects may have serious environmental and social effects which must be accounted for and mitigated at all stages of the project cycle. • Precept 7: Resource revenues should be used primarily to promote sustained economic growth through enabling and maintaining high levels of domestic investment.
Downstream Issues • Precept 8: Effective utilization of resource revenues requires that domestic expenditure be built up gradually smoothed to take account of revenue volatility. • Precept 9: Government should use resource wealth as an opportunity to secure effective public expenditure and to increase the efficiency of public spending. • Precept 10: Government policy should facilitate private sector investments in response to new opportunities and structural changes associated with resource wealth.
Global Responsibility • Precept 11: The home governments of extractive companies and international capital centers should require and enforce best practice. • Precept 12: All extraction companies should follow best practice in contracting, operations and payments.
287
Institution The charter is at present a draft put together by a group of leading international scholars. In March 2010, the charter announced that it had an advisory board which includes former president of Mexico Ernest Zedillo, and African businessman Mo Ibrahim.
Resource Transparency Movement Many organisations work in the resource transparency area, such as Transparency International, Global Witness and the Revenue Watch Institute.
History What might be called a coherent movement for resource transparency really evolved in the 1990s on two different tracks. First, NGOs like Transparency International (TI) and Global Witness were founded.967 TI was dedicated to changing the legal and regulatory environment which governs the way business in general is done, and Global Witness was set up to investigate and expose individual cases of corruption, especially those related to mining industries and oil and gas. The issue of transparency around natural resources gained great public attention in Western countries with the exposure of the "Blood for Diamonds" scandal968 in which it became clear that wars in some African countries were being prolonged by the fact that both governments and rebel factions could finance themselves through selling precious stones onto world markets. In parallel to the projects of individual organisations, there were several large initiatives from multilateral international organisations. In 1997, the OECD approved an anti-bribery convention, which urged member states to pass laws making it illegal for companies under their jurisdiction to use bribery anywhere in the world.969 967" Global Witness History" and " TI About Us" GW and TI websites, respectively Retrieved 24 October 2011. 968" Blood Diamond" Wikipedia Retrieved 24 October 2011. 969" OECD Anti-Bribery Convention" OECD official website Retrieved 24 October 2011. 288
In 2003, the United Nations General Assembly passed the United Nations Convention Against Corruption. Since that time, over 130 countries have signed up to the convention, which obliges them to introduce a wide range of measures in their own laws to combat corruption.970 These two tracks, of civil society activism and international treaties and conventions, are mutually reinforcing.
EITI EITI, itself founded in 2002, can be considered as inbetween the two tracks, since it is an international initiative which formally and specifically engages the civil society sector.
Natural Resource Charter In 2009, a group of independent experts set up a website and loose organisation called the Natural Resource Charter which seeks to lay out guidelines for best practice right across the energy industry, embracing the EITI but extending beyond it.971 The charter is governed by an advisory board which includes the former president of Mexico, Ernesto Zedillo, and the African businessman Mo Ibrahim.972 The founder of the charter was economist Paul Collier, the leading world scholar on the link between natural resources and problems in development.973
Resource Transparency Movement in Iraq 970" Introduction to UNCAC" Anti-Corruption Resource Centre (U4) Retrieved 24 October 2011. 971" Natural Resource Charter" Natural Resource Charter official website Retrieved 24 October 2011. 972" Charter: Advisory and Monitoring Board" Natural Resource Charter official website Retrieved 24 October 2011. 973" The Plundered Planet: Why We Must - and How We Can - Manage Nature for Global Prosperity"" Paul Collier Oxford University Press, 2009. 289
Transparency International Transparency International operates a system of national chapters around the world, and often writes reports on corruption in specific countries. Nevertheless, they have neither activity in Iraq, having confined themselves simply to including Iraq in the Corruption Perception Index, which has been published globally since 1995.974 In 2011, Iraq ranked 175th out of 183 countries surveyed.975
Revenue Watch Institute The Revenue Watch Institute has been active in Iraq since shortly after the 2003 war. It founded a website specific to Iraq and has published numerous reports related to the management of Iraqi oil.976
Global Witness Global Witness has not published any dedicated report on Iraq's oil industry, either before or after 2003. But the organisation has made various related press releases, calling on the USA and UK to implement transparent management of the industry immediately after the war977.
974" Corruption Perception Index, Transparency Internatinal, Retrieved 5 January 2012. 975" 2011 Corruption Perception Index, Transparency Internatinal, Retrieved 5 January 2012. 976" Revenue Watch Iraq. 977" Transparency of Iraqi oil money vital for reconstruction", RWI website, October 2003 290
EITI EITI Compliance Countries seeking to achieve EITI Candidate status must meet five sign-up requirements, and for a country to achieve EITI Compliance, it has two and a half years to be validated as a Compliant country. Once a country is Compliant, the country must undergo Validation at least every 5 years, or upon the request from the EITI International Board.978 As of October 2011 12 countries were EITI compliant, namely: Azerbaijan, Mongolia, Central African Republic, Niger, Ghana, Nigeria, Kyrgyz Republic, Norway, Liberia, Timor-Leste, Mali and Yemen, 979 although Yemen was temporarily suspended in June 2011 due to concerns that it did not satisfy the full and active participation of civil society and other actors in implementing the EITI.980 There were 23 EITI Candidate countries, and an additional two - the United States and the Philippines - had signaled their intent to implement the EITI.981
Validation Requirements Sign-Up The EITI rules state that a country applying for Candidate status must meet the following sign-up requirements:
978" EITI Implementation" EITI website Retrieved 27 October 2011. 979" EITI Countries" EITI website Retrieved 27 October 2011. 980" EITI Yemen" EITI website Retrieved 27 October 2011. 981" EITI Countries" EITI website Retrieved 27 October 2011. 291
1. The government is required to issue an unequivocal public statement of its intention to implement the EITI. 2. The government is required to commit to work with civil society and companies on the implementation of the EITI. 3. The government is required to appoint a senior individual to lead on the implementation of the EITI. 4. The government is required to establish a multi-stakeholder group to oversee the implementation of the EITI. 5. The multi-stakeholder group, in consultation with key EITI stakeholders, should agree and publish a fully costed work plan, containing measurable targets, and a timetable for implementation and incorporating an assessment of capacity constraints.982 Preparation The government is required to: ensure the engagement of civil society in the process; engage companies; and remove legal and regulatory obstacles to the implementation of the EITI. The multi-stakeholder group is required to agree a definition of materiality and the reporting templates, which define what revenue streams are included in company and government disclosures. The organisation appointed to produce the EITI reconciliation report must be perceived as credible, trustworthy and technically competent. The government is then required to ensure that all relevant companies and government entities report and that both company and government reports are based on accounts audited to international standards.983
Disclosure Companies must comprehensively disclose all material payments in accordance with the agreed reporting templates, and government agencies must comprehensively disclose all material revenues. The multi-stakeholder group must also be content that the organisation contracted to reconcile the company and government figures did so satisfactorily, and the reconciler must ensure that that the EITI Report is comprehensive, identifies all discrepancies, where possible explains those discrepancies, and where necessary makes recommendations for remedial actions to be taken.
982" Sign Up" EITI website Retrieved 27 October 2011. 983" EITI Rules" EITI website Retrieved 27 October 2011. 292
Dissemination The government and multi-stakeholder group must ensure that the EITI Report is comprehensible and publicly accessible to encourage that its findings contribute to public debate.
Review and Validation Oil, gas and mining companies must support EITI implementation, and the government and multi-stakeholder group is encouraged to take steps to act on lessons learned, address discrepancies and ensure that EITI implementation is sustainable. Implementing countries are required to submit Validation reports in accordance with the deadlines established by the Board.
Retaining Compliant Status Compliant countries must maintain adherence to all the requirements listed above in order to retain Compliant status.
293
EITI Criteria 1. Publication: Regular publication of all material oil, gas and mining payments by companies to governments (“payments”) and all material revenues received by governments from oil, gas and mining companies (“revenues”) to a wide audience in a publicly accessible, comprehensive and comprehensible manner. 2. Audit: Where such audits do not exist, revenues are the subject of a credible, independent audit, applying international auditing standards. 3. Reconciliation: Payments and revenues are reconciled by a credible, independent administrator, applying international auditing standards and with publication of the administrator’s opinion regarding that reconciliation including discrepancies, should any be identified. 4. Scope: This is extended to all, including state-owned, companies. 5. Civil Society: Civil society is actively engaged as a participant in the design, monitoring and evaluation of this process and contributes towards public debate. 6. Work Plan: A public, financially sustainable work plan for all the above is developed by the host government, with assistance from the international financial institutions where required, including measurable targets, a timetable for implementation, and an assessment of potential capacity constraints.
External Links Official Website: www.eiti.org
294
EITI in Iraq Iraq signed up to EITI in February 2010 and issued a draft of its first reconciliation report at the start of 2012984
Declaration Iraq first announced its intent to implement the EITI in 2008 and Deputy Minister Mr Barham Salih met with EITI Chairman Peter Eigen in Baghdad in October 2008985. The Iraq EITI (IEITI) Launch Conference took place on 9-10 January 2010, when Prime Minister Nouri al-Maliki announced Iraq's formal candidacy986.
Formation of the multi-stakeholder group The first IEITI Stakeholder Council meeting was held on 22-23 September 2010. Civil society was represented by several organisations, and in 2011 formed a coalition grouping more than 40 organisations around the EITI initiative.
First Reconciliation Report: December 2011 The first reconciliation report was issued by Iraq's EITI secretariat on December 23, 2011. It tallied some $41.3 billion of receipts by the State Oil Marketing Organisation (SOMO) in sales of Iraqi oil to international buyers. It initially showed a discrepancy of 1,090 million dollars between figures reported by SOMO and those of the buying companies but these were all subsequently explained in follow-up consultations, said the report, prepared by Price Waterhouse Cooper. The report also reconciled the physical quantities of oil sent from Iraq's two main producing companies, North Oil Company and South Oil Company, to SOMO.
984" English IEITI Report" EITI website Retrieved 11 January 2012. 985" EITI Secretariat's Iraq page" EITI website Retrieved 11 January 2012. 986" Iraq Joins Global Transparency Effort" PWYP website Retrieved 11 Jan 2012. 295
The report mentioned that a one percent level of materiality set by the IEITI had not been met in the process. It also included a Ministry of Oil prediction for 2012 of production of some 3.4 million barrels a day, with two thirds of that coming from South Oil Company. The report used a disaggregated system, listing 34 companies which had bought oil from SOMO during 2009 and further breaking up the figures into regional markets. The top three buying companies were the Indian Oil and Gas company, with over four billion dollars worth, ExxonMobil with over three billion dollars, Total with just under three billion dollar, and BP with over two billion dollars. Company Name
SOMO
Buyer
INDIAN OIL CORPORATION LIMITED - INDIA
4,695,576,254 4,500,744,731
CHEVRON PRODUCTS COMPANY
3,425,398,382 3,047,447,462
EXXONMOBIL SALES AND SUPPLY LLC. U.S.A
3,177,291,327 3,157,920,626
Variance -194,831,522
-377,950,919
-19,370,701
TOTAL INTERNATIONAL LIM2,965,904,327 2,817,337,283 ITED – FRANCE
-148,567,044
CONOCOPHILLIPS INTERNA2,737,804,011 2,740,504,520 TIONAL TRADING PTE. LTD.
2,700,509
SINOCHEM INTERNATIONAL 2,392,402,310 2,175,822,577 OIL (LONDON) CO. LTD
-216,579,733
BP OIL INTERNATIONAL LIM2,300,671,969 2,300,671,969 ITED – LONDON
0
VALERO SUPPLY AND MARKETING COMPANY
1,860,376,364 1,915,077,038
54,700,674
ENI COMPANY
1,780,734,981 1,780,734,981
0 296
SHELL INTERNATIONAL EASTERN TRADING COMPANY LIMITED
1,775,848,179 1,920,093,763
SK ENERGY EUROPE LIMITED 1,448,268,927 1,300,298,708 REPSOL YPF TRADING Y TRANSPORT S.A.
1,402,819,238 1,402,819,238
KOCH SUPPLY AND TRADING 952,568,079 L.P
1,027,146,001
CHINA ZHENHUA OIL CO. LTD.
926,379,176
926,379,176
PETROLIO BRASILERIO S.A. – 812,143,771 PETROBRAS
812,143,771
TURKISH PETROLIUM REFINERIES CORP. (TUPRAS) – TURKEY
809,676,034
809,676,034
MITSUBISHI CORPORATION
714,224,287
574,119,369
COMPANIA ESPANOLA DE PETROLEOS, S.A. (CEPSA)
662,332,305
662,332,305
MOTOROIL (HELLAS)
633,929,317
633,929,317
UNIPEC ASIA CO. LTD.
606,305,113
606,305,113
SOCIETE ANONYME MAROCAINE DE L'INDUSTRIE DU RAFFINAGE (SAMIR)
582,498,450
582,498,450
HINDUSTAN PETROLEUM
525,835,196
538,947,117
144,245,584
-147,970,220
0
74,577,923
0
0
0
-140,104,919
0
0
0
0
13,111,921
297
CORPORATION LTD. – INDIA JX NIPPON OIL & ENERGY CORPORATION
523,078,003
375,129,376
CHINA NATIONAL UNITED OIL CORPORATION
469,046,369
504,679,862
APIOIL LIMITED
464853991
464,853,991
PETROVIETNAM OIL CORPORATION (PV OIL)
432,557,987
432,557,987
ERG REFFINERIES MEDITERRANEE S.P.A. - GENOA / 431,827,678 OTALY
407,768,337
LUKOIL INTERNATIONAL TRADING AND SUPPLY COM- 335,587,059 PANY
335,587,059
PETRONAS TRADING COR300,835,328 PORATION SDN BHD (PETCO)
300,835,328
IPLOM SPA ,REFFINERY IN BUSALLA - GENOA – ITALY
289,776,698
289,776,698
TOYOTA TSUSHO CORPORATION
277,730,650
277,730,650
SARAS S.P.A. – ITALY
239,062,332
239,062,332
PETROGAL S.A. LISBON – PORTUGAL
176,425,620
176,425,620
BHARAT PETROLEUM CORPORATION LTD.
119,912,746
119,912,746
-147,948,627
35,633,493
0
0
-22,059,341
0
0
0
0
0
0
0
298
The report also noted that Price Waterhouse Cooper was supposed to receive confirmation that the sums reported by SOMO were actually deposited in the Federal Reserve Bank of New York, under the arrangement put in place by the UN Security Council, but that the bank had not supplied this confirmation. The report listed some 14 separate discrepancies in reports between SOMO and the buying companies.987
External Links Official Website: www.ieiti.org.iq
Global Witness Global Witness is a non-profit organisation headquartered in London, Britain, which describes itself as exposing "the corrupt exploitation of natural resources and international trade systems, to drive campaigns that end impunity, resource-linked conflict, and human rights and environmental abuses". 988 Founded in 1993, Global Witness has been a key player in many of the ma jor international mechanisms and initiatives that have been established to address these issues; including the Kimberley Process governing production of diamonds and precious stones, and the Extractive Industries Transparency Initiative.
Investigations which have driven policy changes Global Witness' hard-hitting investigations have had direct and major impacts, such as the IMF withdrawal from Cambodia in 1996 over corruption in the logging industry, 989 the imposition of timber sanctions on Charles Taylor's Liberia in 2003,990 and the precedent-setting arrest of timber baron 987" Reconciliation of cash inflows from the petroleum industry in Iraq in 2009" IEITI Retrieved 11 January 2012. 988" Global Witness, About Us" Global Witness website Retrieved 24 October 2010. 989" Our History" Global Witness website Retrieved 24 October 2010. 990" Liberia breaches UN Sanctions - whilst its logging industry funds arms imports 299
Gus Kouwenhoven, in the Netherlands in 2005.991
Oil and Gas Global Witness started producing reports on the oil and gas industry in 2004 when its report “Time for Transparency” detailed abuse of natural resources in Kazakhstan, Congo Brazzaville, Angola, Equatorial Guinea and Nauru.992 Reports on Russia's gas trade with the countries of Eastern Europe and the EU followed.993 In September 2009, Global Witness produced a report which provided details of the lack of transparency in the way Sudan distributes oil revenues between the government in Khartoum and the autonomous government of South Sudan.994
Global Witness and conflict minerals Global Witness' work on conflict minerals focuses on the Democratic Republic of Congo (DRC) where fighting is fuelled by the trade in valuable minerals such as cassiterite, coltan, wolframite and gold.995 Global Witness was also one of the first organisations to bring the world's attention to the problems of conflict diamonds in countries such as Liberia, Sierra Leone, Angola, the DRC, and Cote d'Ivoire. The organisation is an official observer of the Kimberley Process and continues to campaign for the strengthening and effective implementation of its rules.996
External Links Official website: www.globalwitness.org and RUF rebels" Global Witness website 6 September 2001. 991" Arms dealer and timber trader Guus Kouwenhoven found guilty of breaking a UN arms embargo" Global Witness website 7 June 2006. 992" Time for Transparency" Global Witness website Retrieved 26 October 2011. 993" It's a gas - funny business in the Turkmen-Ukraine oil trade" Global Witness website Retrieved 26 October 2011. 994" Fuelling mistrust - The need for transparency in Sudan's oil industry " Global Witness website Retrieved 26 October 2011. 995" Conflict Minerals" Global Witness Retrieved 30 November 2011. 996" Conflict Diamonds" Global Witness Retrieved 30 November 2011. 300
Revenue Watch Institute First launched in 2002 as the Revenue Watch Program of the Open Society Institute, and spun off into an independent organization in June 2006, the Revenue Watch Institute is the only organization dedicated exclusively to addressing the special problems of oil, gas and mining-dependent countries —countries where poverty, conflict and corruption too often converge 997.
Activities RWI characterises its work as mainly with civil society, helping them oversee mining industries across the entire value chain, from wellhead to international markets. The organisation also makes many small grants to partner institutions in developing countries.
EITI RWI was a key founding member of the EITI in 2002 and has sat on its International Advisory Board. The institute defines its projects as supporting the EITI process in many countries around the world. Recent RWI support for EITI implementation has included visits and ongoing outreach in Ecuador, Bolivia, Peru, Trinidad and Tobago, Indonesia, Malaysia, Iraq, Yemen, Sierra Leone and South Africa, among other countries.998
Iraq The Revenue Watch Institute has been active in Iraq since shortly after the 2003 war. In April 2006, RWI held a seminar in Beirut gathering over 50 specialists and experts in the oil industry999. It founded a website specific to Iraq and published many reports and analyses of issues relating to management of Iraqi oil.1000 997" RWI About Us 998"RWI and the EITI", RWI Website 999" Managing Iraq's Petroleum", RWI report from seminar, April 2006 1000 RWI Iraq: www.revenuewatch.org/countries/middle-east-and-northafrica/iraq/overview 301
In 2011, RWI supported three projects in Iraq; two to strengthen parliamentary oversight of Iraq's oil and gas sector and one to raise EITI awareness among civil society organisations (CSOs) in Iraq's Kurdish north.100110021003 RWI sponsored a $115,958 grant in 2011 for the Arab Region Parliamentarians Against Corruption (ARPAC) to build the capacity of Iraqi parliamentarians, key ministry staff and civil society representatives to improve oil and gas revenue management. The grant involved ARPAC holding a series of three-day workshops to train participants to obtain, analyze and act on oil and gas sector-related information, including public policy issues, standard industry oversight practices, revenue management and transparency, contracting basics, analyzing oil and gas contracts and the Extractive Industries Transparency Initiative (EITI). In 2011 Revenue Watch also supported the Iraqi Institute for Economic Reform (IIER) with a $10,000 grant to build the capacity of Iraqi parliamentarians to strengthen their oversight of oil and gas revenue management practices and Extractive Industries Transparency Initiative (EITI) implementation. The IIER held trainings to build the capacity and technical knowledge of MPs in extractive industries revenue management and oversight, increase the participants’ access to training resources and expertise, and motivate parliamentarians to initiate advocacy strategies for transparent and effective use of extractive revenues. Also in 2011, the Iraqi non-profit Al-Mesalla conducted three regional workshops to familiarise CSO representatives with EITI implementation in Iraq, supported by a $5,029 grant from RWI.
External Links Official Website: www.revenuewatch.org
1001" Strengthening the Oversight Role of Iraqi Parliamentarians in the Oil and Gas Sectors", RWI website, Retrieved 6 January 2012. 1002" Enhancing Parliamentary Oversight of the Oil and Gas Sectors in Iraq", RWI website, Retrieved 6 January 2012. 1003" Raising EITI Awareness Among CSOs in Iraq’s Northern Kurdish Area", RWI website, Retrieved 6 January 2012. 302
Transparency International Transparency International (TI) is the world's largest civil society organisation working on issues of corruption and transparency. It was founded in 1993 by Peter Eigen, a former regional director in Africa from the World Bank. Eigen explained that in his 25 years at the World Bank, terrible projects often got funded because they had the support of leading officials, backed by corruption. The purpose of TI was to put the issue of corruption on the agenda of the World Bank, large donor countries, and the development process.1004
Major Programs The project for which TI is most famous is the Corruption Perceptions Index, an annual report issued since 1995. In it, business people are asked for their perceptions of the influence of corruption in their country. Iraq ranked 175th out of 183 countries surveyed in 2011.1005 As well as the index, TI also publishes a range of reports and position papers on various issues related to transparency.
Middle East Presence TI works through a series of national chapters - some 100 worldwide. In the Middle East region, there are national chapters in Palestine, Lebanon, Bahrain, Kuwait and Morocco. TI is also carried out a three-year project in four Arab countries (Egypt, Morocco, Lebanon and Palestine) called Promoting Transparency and Enhancing Integrity in the Arab region,1006 with the results of the studies on Lebanon, Morocco and Palestine being launched in late 2009 and the report on Egypt launched in March 2010.1007 1004" TI's greatest success" Wikipedia Retrieved 25 October 2011. 1005" 2011 Corruption Perception Index, Transparency Internatinal, Retrieved 5 January 2012. 1006" Promoting Transparency and Enhancing Integrity in the Arab Region" Transparency International website Retrieved 25 October 2011. 1007" Promoting Transparency and Enhancing Integrity in the Arab Region" 303
The Oil and Gas Industries In March 2011, TI issued a report about the status of transparency among global oil companies. It follows a 2008 report that was built on a 2005 study by the charity Save the Children into the same issue, but adapted the methodology.1008
External Links Official Website: www.transparency.org
Transparency of Global Oil Companies (TI Report) In March 2011, Transparency International (TI) issued a report on the transparency of information provided by 42 major oil and gas companies around the world.1009
Findings The report summarised its analysis into several main findings: • Oil and gas companies are increasingly adopting and making publicly available anti-corruption programmes, but there are many companies that still do not publish their anti-corruption codes, policies or measures. • Public disclosure of partnerships and subsidiaries, including their countries of incorporation, are key elements of organisational disclosure and the average results in this section were relatively high. Many national oil companies have a good level of disclosure. However, disclosure of equity or field partners in upstream operations remains infrequent, despite the fact that equity minority partnerships often present corruption risks. Transparency International website Retrieved 25 October 2011. 1008" Promoting Revenue Transparency: 2011 Report on Oil and Gas Companies" Transparency International website Retrieved 25 October 2011. 1009" Promoting Revenue Transparency: 2011 Report on Oil and Gas Companies" Transparency International website Retrieved 25 October 2011. 304
• Country-level disclosure on international operations has improved since the 2008 PRT report, and reporting on production levels has become a broadly accepted standard and there are examples of good disclosure for financial data and reserves. But country-level disclosure on international operations remains weak; many companies do not disclose any financial data on a disaggregated country-level. The host country environment itself cannot be exclusively blamed for poor disclosure. In the same host countries, often described as ‘difficult environments’, some companies disclose extensive information, while the others disclose little or none at all.
Key Policy Recommendations For Companies • Detailed anti-corruption programmes should be publicly available • Companies should undertake voluntary independent assurance of anti-corruption programmes • Companies should publish details of their subsidiaries and fields of operations • Oil and gas companies should increase their reporting on a country-by-country basis • Companies should join the Extractive Industries Transparency Initiative • Companies should create and maintain up-to-date corporate websites
For National Oil Companies (NOCs) • All NOCs should introduce internationally or generally accepted accounting standards, as well as publish independently audited accounts • The relationships between home governments and NOCs should be clear and publicly disclosed
For Public Bodies • The European Union should amend relevant legislation to require EU-registered companies to report on their operations on a country-by-country basis 305
• All governments that are home to oil and gas producers should require companies to report on their operations on a country-by-country basis • Stock exchanges should enforce regulations providing for country-level reporting
For the Investor Community • International rating agencies and risk analysts should include anti-corruption measures in their risk evaluation models where relevant • The International Accounting Standards Board should require companies to report key information on a country-by-country basis • Corporate responsibility indices should include reporting on anti-corruption programmes, organisational disclosure and country-level disclosure
TI Report: Grades of Companies in Iraq Companies in the Transparency International's March 2011 report 1010 were graded on three criteria: their implementation and promotion of sound anti-corruption programmes to prevent individuals from misappropriating revenues; their disclosure of the financial relationships they have with their partners and their operating subsidiaries; and their publishing of precise information about how much revenue goes to state budgets and how much is retained by companies. Aggregating the results of these criteria compiled by Transparency International, with 100% representing the highest level of transparency and 41% representing the aggregate mean, international oil companies operating in Iraq placed as follows. Above average performance transparency: • Statoil: 75% • BP: 64% 1010" Promoting Revenue Transparency: 2011 Report on Oil and Gas Companies" Transparency International website Retrieved 25 October 2011. 306
• Marathon: 63% • Eni: 62% • Shell: 58% • ExxonMobil: 54% • Talisman: 52% • Total: 47% Below average performance transparency: • Gazprom: 27% • Petronas: 23% • CNOOC: 19% • CNPC: 12% Seven companies operating in Iraq, Kogas, Kuwait Energy Company, TPAO, Hunt, Genel, DNO and Heritage, were not fully covered in the report.
Publish What You Pay Overview Publish What You Pay (PWYP) is a global network of civil society organisations calling for oil, gas and mining revenues to form the basis for development and improve the lives of ordinary citizens in resource-rich countries. From a few, mostly UK-based groups at the time of its launch, PWYP members today span nearly 60 countries, with national affiliated coalitions in 31 of these.1011 PWYP has often been seen to be the flagbearer of a strategy which says transparency efforts should be led by legal and regulatory requirement, and made obligatory on companies, in contrast to the approach adopted by the 1011About Us" Publish What You Pay retrieved 14 December 2011. 307
Extractive Industries Transparency Initiative, which is consensual.
History The call to 'publish what you pay' first appeared in a 1999 report by Global Witness on the oil and banking industries in Angola. On the back of this, in June 2002 Global Witness, along with fellow founding members CAFOD, Open Society Institute, Oxfam GB, Save the Children UK and Transparency International UK, launched the worldwide PWYP campaign. The small founding coalition of NGOs was soon joined by others such as Catholic Relief Services, Human Rights Watch, Partnership Africa Canada, Pax Christi Netherlands and Secours Catholique/CARITAS France, along with an increasing number of groups from developing countries.
Activities PWYP undertakes public campaigns and policy advocacy to achieve disclosure of information about extractive industry revenues and contracts. The organisation's call for companies to 'publish what you pay' and for governments to 'publish what you earn' formed the basis of their activities. However, the coalition now calls for transparency and accountable management and expenditure of public funds, as well as the public disclosure of extractive industry contracts and for licensing procedures to be carried out transparently and in line with best international practice. PWYP's activities consist primarily of advocacy efforts and capacity building of civil society groups. The growing desire to monitor the payments, revenues and expenditures within the extractives sector has also generated an increasing need for technical training around issues such; contracting and taxation regimes; auditing and accounting processes; EITI processes, rules and policies. PWYP collaborates with local and international actors to organize training workshops, conferences and seminars to help meet these needs.
308
Governance In 2006 a Strategic Advisory Group (SAG) was established to oversee strategic planning. The SAG is comprised of 12 representatives from a broad spectrum of PWYP members from around the world. PWYP has an International Coordinator (IC) based in London as well as one full-time regional coordinator for Africa, and coordinators for all national affiliated coalitions. These coordinators are supported and overseen by management committees. Representatives from the entire coalition meet every two years for an international strategy meeting.1012
External Links Official Website: www.publishwhatyoupay.org
1012 "How We Are Governed" Publish What You Pay retrieved 14 December 2011. 309
Directory of Contacts Below please find a list of contact details for individuals, organisations and institutions who may be contacted for further detail on the issues covered in the OpenOil Iraq Oil Guide, along with website listings for access to further resources.
Civil Society and Media Organisations EITI Website: www.eiti.org IEITI Website: www.ieiti.org.iq Eddie Rich Deputy Head and Regional Director (Southern and Eastern Africa and the Middle East) EITI International Secretariat E-mail:
[email protected] Telephone: +44 207 613 4698 Alaa Mohie El-Deen Head of Iraq EITI Secretariat E-mail:
[email protected] Telephone: +964 780 196 4606
Global Witness Website: www.globalwitness.org Brendan O'Donnell Senior Campaigner E-mail:
[email protected] 310
Telephone: +44 207 492 5898 / +447970 379 387
Iraq Oil Report Website: www.iraqoilreport.com Ben Lando Director and Iraq Bureau Chief E-mail:
[email protected] Telephone: 07903244469
Journalistic Freedoms Observatory Website: www.jfoiraq.org Ziad Khalaf al-Ajili Director E-mail:
[email protected] Bashar Al-Mandalawy Project Manager E-mail:
[email protected] Telephone: +964 514862 7901 / +964 966750 7901
Publish What You Pay Website: www.publishwhatyoupay.org
Reporters Without Borders Website: www.rsf.org Soazig Dollet North Africa & Middle-East Desk 47 rue Vivienne F - 75002 Paris Telephone: + 33 1 44 83 84 78 311
Fax : +33 1 45 23 11 51 E-mail :
[email protected] /
[email protected]
Revenue Watch Institute Website: www.revenuewatch.org Patricia Karam Middle East and North Africa Regional Coordinator E-mail:
[email protected]
Transparency International Website: www.transparency.org Stephanie Twigg Middle East and North Africa Department Alt Moabit 96 D-10559 Berlin Telephone: +49 30 343820418 Fax: +49 30 34703912 E-mail:
[email protected]
Iraqi State Entities Baghdad Oil Training Institute www.boti.gov.iq PO Box: 46038, Al-Mustansiria, Baghdad Tel: +964-1-4250363 E-mail:
[email protected]
Iraq Exploration Company www.iraqioec.com Ministry of oil Box: 5694
312
Tel.: +964 1 8177000 / +964 1 8177014 E-mail:
[email protected]
Kirkuk Oil Training Institute www.kirkukoti.net
Kurdistan Regional Government www.krg.org/krg
Maysan Oil Company www.moc.oil.gov.iq Republic of Iraq Missan Province Amarah City Tel: +96443313470 / +96443313472 E-mail:
[email protected]
North Gas Company P.Box (16) Kirkuk E-mail:
[email protected]
North Oil Company www.noc.gov.iq Kirkuk Tel: +964 50 250000 E-mail:
[email protected]
North Refineries Company www.nrc.oil.gov.iq Iraq, Baghdad, Karada, P.O box: 3267 Tel: +964 1-543-0298 313
Petroleum and Contracts Licensing Directorate www.pcld-iraq.com Ministry of Oil Port Said Street Baghdad, Iraq E-mail:
[email protected]
Petroleum Research and Development Centre www.prdc.gov.iq
South Gas Company www.sgciraq.com Basra province - Khor Al-Zubair Al-Ashar mailbox: 1201 Tel: 040/642346 / 040/642346 E-mail:
[email protected]
South Oil Company www.soc-basrah.com Basrah E-mail:
[email protected]
South Refineries Company www.src.gov.iq Tel: +964-40-617712 / +964-40-614713 E-mail:
[email protected]
State Oil Marketing Company www.somooil.gov.iq AL- Hay AL-Mou'tasim - District 724 - Street 17 AL-Muthana street , Adjacent to AL-Resafa fun fai P.O.Box 5118 E-mail:
[email protected] 314
Directory of Oil Companies in Iraq Do you want your company to be included in the next Directory? If you would like your company to appear in the next printed edition of the Iraq Oil Almanac, please email at
[email protected] to discuss advertising in these guides. In addition, if you are interested in finding out more about the guides, please do not hesitate to contact us. The following pages contain preliminary listings of oil services companies with operations in Iraq. The current edition (January 2012) will be distributed throughout Iraq in both English and Arabic, and so the directory will be seen by both Iraqis and international investors. It is foreseen that the guide will create an advertising opportunity for oil companies wanting to get more coverage around Iraq. A more comprehensive directory including more companies working in the oil sector in Iraq will be included in the next print edition, as well as online at http://iraq.wiki.openoil.net (English language) http://ar.wiki.openoil.net (Arabic language). The next print edition is planned for June 2012.
315
Oilfield Service Companies The following is a list of oilfield services companies with operations in Iraq. Please note that the list is not exhaustive. Alkhair Oil Services Iraq Office 52 Technology University St, Baghdad 10066 IRAQ. Tel.: +9647704615368 Fax.: +96265711388 E-mail:
[email protected] Website: www.alkhairoil.com Services: land and marine transportation; drilling & scouting; training. Al Qabas Group Baghdad Office Al-Mansour, 14 Rammadhan St. Building No. 4, M. 609, Z. 22, Tel: +964 1 5420954 Mobile: +964 7901906291 Fax: +964 1 5412779 Email:
[email protected] Website: www.alqabasgroup.com Services: infrastructure; waste water; irrigation; machinery and materials. Baker Hughes Regional Office P.O. Box 47513 Dhafir Tower, 4th Floor Corner of Najda / Electra Street Abu Dhabi Tel: +971.2.4109100 Fax: +971.2.4109111 Website: www.bakerhughes.com Services: reservoir development; drilling; integrated operations; evaluation; completions; production; pressure pumping; tubular services; process and pipeline services; chemicals; education services. Basrah East Company Iraq Office P.O. Box: 2141, Basrah, Iraq
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Tel: +964 40 640691 Fax: +964 40 623919 Mobile: +964 780 1390180 (Atheer) +964 790 2751871 (Iraqna) +971 50 5869337 (International) E-mail:
[email protected] Website: www.basraheast.com Services: refineries; pumping and receiving stations; gas production, liquefaction and distribution plants; pipelines; power generation plants; transmission networks. Burj Al Rumila Company Iraq Office Baghdad - Karrada - Kahramana Sq. Tel: +964-770-3739543 Services: reservoirs; pipelines. Crescent Petroleum Country Office Tel: + 964 (1) 719 4321 Fax: + 964 (1) 718 7243 E-mail:
[email protected] Website: www.crescent.ae Services: oil and gas exploration; production; transport. HiTech Fluid Systems Country Office 245/5/543 Shmony Street Ankawa, Erbil, Kurdistan, Iraq Phone: 403.547.2906 Fax:: 403.547.3129 Email: moc.diulfhcetih@ofni Website: www.hitechfluid.com Services: drilling fluid systems; workover and completions; fluid additives. Huawei Country Office House No.24, Lane NO.27, Shorish Quater 101, Sulaimaniyah, Iraq Tel: 00964-1-7744593 Fax: 00964-1-7744593 Website: www.huawei.com 317
Services: ICT Solutions. IAG International Armoured Group Regional Office P.O. Box 50060 Khor Khwair Industrial Park RAK Free Trade Zone Ras Al Khaimah, United Arab Emirates Tel: + 971 7 266 0028 Fax: + 971 7 266 8969 E-mail:
[email protected] Website: www.interarmored.com Services: security services; risk management consultancy; security training; mine action. Jawar Al Khaleej Shipping Country Office PO Box 13372 Basrah, Iraq Tel +964 780 1023988 / +964 781 2359556 E-mail:
[email protected] Website: www.jawaralkhaleej.com Services: shipping services. Mott MacDonald Regional Office P.O. Box 47094, Al Hashmi Tower, Airport Road Abu Dhabi - Al Hashmi Tel: +971 (0)2 445 7470 Fax: +971 (0)2 445 7490 Website: www.mottmac.com Services: management, engineering and development consultancy. OilServ Regional Office 15th floor, One Business Bay Building, P.O.Box 117648, Dubai Website: www.oilserv.com Services: drilling, completion and production services. Olive Group
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Country Office Tel: +971 (0)4 360 0831 E-mail:
[email protected] Website: www.olivegroup.com Services: security, risk mitigation and specialist support services. Petronasr Iraq Office Near New City, 60 M, Erbil Tel: +964 750 483 8593 / +964 770 197 4444 Satellite phone: + 88216 6660 9966 Email :
[email protected] Website: www.petronasr.com Services: power stations; refineries; pipelines; infrastructure. Schlumberger Regional Office Schlumberger Technical Services, Inc. Dubai World Trade Center, 9th Floor PO Box 9261 Dubai, UAE Telephone: +971 4 306 7777 Fax: +971 4 306 7199 Website: www.slb.com Services: seismic services; drilling; characterization; completions; production; well intervention. Shammery Iraq Office Sabah Al-Shammery & Partners Co. 50300 Al-Ma’amoon, AlMansoor Al-Ameerat St., District No. 609, St. No. 1, House No. 21 Baghdad, IRAQ Tel: +964 1 5412787 / +964 1 5413516 Fax: +964 1 1 5418155 E-Mail:
[email protected] Website: www.shammery.com Services: exploration and drilling supplies; technology and communications; medical supplies; chemicals; automobile equipment.
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SKA Baghdad Office BIAP Post Office Box 23009 Baghdad International Airport Baghdad, Iraq Tel: +964 7901 103 556 Tel: +964 7901 909 819 Email:
[email protected] Basrah Office SKA Complex Basrah International Airport Basrah, Iraq Tel: +964 7901 909 871 VoIP: +1 703 673 3977 Email:
[email protected] Erbil Office SKA Complex Erbil International Airport Erbil / Kurdistan, Iraq Tel: +964 7703 668 919 Tel: +964 750 445 6415 Tel: +971 50 9195431 Email:
[email protected] Website: www.ska-arabia.com Services: aviation Services; ground logistics; life support; fuel supply chain management; camp construction; security services. Technology Partners Country Office Al Mansoor Tel: +964 7901 946381 Tel: +964 7901 943660 Fax: +9714 390 8070 Website: www.tpfz.com Services: ICT infrastructure and services integration. TUOSSCO Iraq Office Al-Mansur, Baghdad, Iraq Tel: +964-1-5411424 Fax: +964-1-5415498 Website: www.tuossco.com Services: instrumentation and control systems; power and generation; water treatment; mechanical; engineering; safety and environment; lab equipment. Weatherford International Country Office Tigris St. Behind Amara Kindergarten Amara (Missan) Iraq 320
Tel.: +917 284 9271 Fax.: +971-4-449 520 Website: www.weatherford.com Services: drilling; evaluation; completion; production; intervention; training.
Trading and Marketing Companies The companies listed below all bought oil from state-owned SOMO in 2009.1013 BP Oil International Limited 20 Canada Square Canary Wharf London, E14 5NJ United Kingdom Telephone: +44 20 7496 4000 ConocoPhillips International Trading PTE 1 Temasek Avenue, Millenia Tower, Singapore 039192 ExxonMobil Sales and Supply LLC ExxonMobil Sales & Supply LLC One Alhambra Plaza Suite 900 Coral Gables, Florida FL33134, USA Telephone (outside USA): +1 305 459 6358 Indian Oil Corporation Limited 36, Indian Oil Centre, Bhulabhai Desai Road, Cumballa Hill, Mumbai, Maharashtra 400026, India Telephone: +91 22 2554 1679 Koch Supply and Trading L.P Fountain House, 6th Floor, 130 Fenchurch Street, London EC3M 5DJ, United Kingdom Telephone: +44 (0) 207 648 6300 Shell International Eastern Trading Company Limited (SIETCO) 1013"Reconciliation of cash inflows from the petroleum industry in Iraq in 2009" IEITI Retrieved 11 January 2012. 321
Shell House, UE Square, 83 Clemenceau Ave, 239920, Singapore Sinochem International Oil (London) Co. Ltd Westminster Tower 3 Albert Embankment London SE1 7SP SK Energy Europe Limited 3rd Floor 11-12 Hanover Street, London W1S 1YQ United Kingdom Telephone: +44-(0)20-7495-0956 Total International Limited Tour Coupole - La Défense 6 2 place Jean Millier 92078 - PARIS LA DEFENSE CEDEX France Valero Supply and Marketing Company One Valero Way San Antonio, Texas 78249 Telephone: +1210 345-2000
Regional offices of IOCs operating in Iraq BP BP Iraq NV C/o BP Group Chertsey Road Sunbury-on-Thames Middlesex TW16 7LN United Kingdom Telephone: +44 (0)1932 762 000 E-mail:
[email protected] DNO DNO Middle East Office 3902, 39th Floor Shatha Tower, P.O. Box 502503 Dubai Media City Dubai - UAE Telephone: +971-4-3642620 Fax: +971-4-3688447 Eni SAIPEM S.P.A. IRAQ (Eni subsidiary) c/o Orient Trnsport Co. W11 Shmeisani Al-Hamra Building 4th Floor AMMAN Telephone: +962 6 5664128 - 5682546 Fax: +962 6 5682541 Gazprom
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Gazprom zarubezhneftegaz 4A Novodanilovskaya Emb. 117105, Moscow Telephone: (+7 495) 544-48-93 Kogas Kogas Iraq B.V. 200 Prins Bernhardplein, AMSTERDAM, 1097JB Netherlands Kuwait Energy Company Baghdad Office Al Wahda district 902, St 10, Building 5, Apartment 12, Baghdad, Iraq Telephone: (+9641)7191861 Basrah Office Istiklal Street, near Noor Hospital Basra - Iraq Telephone: (+964) 40 622002 Mobile: (+964) 7801321010 Petronas PETRONAS Carigali Iraq Holding B.V. Office No.1, Level 4, Gate Precinct Building 2, Dubai International Financial Centre, P.O Box 506594, Dubai, UAE Telephone: +971 603 2331 5000 Shell Shell Upstream International Ltd P.O. Box 11677 Dubai UAE Telephone: +9714 4054400 E-mail:
[email protected] Total Total E&P Iraq Hay Al-Wahda Mahalat 906, Zukak 8 House N°21 P.O. Box 2301 Alwiyah Baghdad Telephone: +964 1 719 2908 TPAO 323
TPOC Iraq Office Al-Wazereyah 301 Section 5th St. No: 6 Baghdad – IRAK Telephone: + 90 312 207 20 00 – 18 58 – 18 59 E-mail:
[email protected]
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Alphabetical Index Baiji refinery.........................4, 19, 220p. Basra refinery..........................4, 75, 221 BP.....2p., 8, 14, 47, 51, 61, 66, 102, 113, 121, 125, 129, 143, 178, 182,220, 239, 254, 265, 277, 323 Central Bank of Iraq..................2, 24, 38 CNOOC.....3, 48, 55, 106pp., 195p., 268, 277p., 309 CNPC......3, 51p., 106, 110pp., 127, 191, 235, 239p., 247, 249p., 257, 280p., 309 Daura refinery........................4, 209, 222 DNO. 3, 32, 40pp., 101, 114pp., 309, 324 EITI. 5, 26, 104, 109, 112, 116, 120, 125, 130, 134, 136, 140, 144, 148, 153, 157, 161, 165, 168, 171, 175, 178, 183, 186, 190, 193, 285, 288, 291, 293pp., 301, 303p., 310, 312 Eni 3, 15, 57, 62, 64, 66, 72, 75p., 86, 88, 91, 111p., 117pp., 127, 137, 144, 149, 152, 156, 161, 168, 179, 192, 195, 215, 217p., 224, 232p., 245, 263pp., 279, 285, 287, 294, 298, 302, 309, 312, 323p. ExxonMobil. . .3, 33p., 58, 101p., 122pp., 152, 199, 233, 249p., 256pp., 298, 309, 323 Gazprom......3, 41, 51p., 55, 149, 154pp., 172, 194, 196, 241pp., 309, 324p. Genel....3, 32, 98, 101, 117, 128pp., 134, 231, 309 Heritage....................3, 101, 131pp., 309 Hunt..........................3, 101, 135pp., 309 Iran.........2, 8p., 14, 18, 40pp., 44pp., 61, 71pp., 81, 84pp., 97p., 103, 131, 134p., 139, 159, 166, 181, 192, 204, 221, 224p., 228pp., 233p., 241pp., 247p., 254, 277, 287 Iraq Drilling Company. .4, 109, 180, 207, 255, 277p. Iraq National Oil Company.2, 10, 28, 37, 60, 64p., 205, 207, 225
Iraq Petroleum Company....2, 16, 60, 62, 65, 72, 105, 125, 175, 227, 243 Japex.....3, 51p., 138pp., 172, 252, 278p. KazMunayGas.............3, 142pp., 271pp. Khor al-Amaya Terminal. .4, 61, 95, 197, 224 Kirkuk-Banias Pipeline...............4, 226p. Kirkuk-Ceyhan Pipeline......4, 61, 78, 99, 229, 231, 244, 246 Kogas....3, 51pp., 121, 143, 145pp., 158, 168, 194p., 241, 264, 272pp., 309, 325 Kurdistan Regional Government......2, 4, 28p., 31pp., 37, 39p., 58, 79pp., 84, 98, 101, 117, 127p., 130, 134p., 137, 165, 187, 199, 214pp., 230, 244p., 258, 315 Kuwait....2p., 14, 19, 25, 40, 44pp., 54p., 71, 75pp., 89, 93pp., 105, 150pp., 195p., 217, 228, 249, 265, 270p., 274p., 305, 309, 325 Kuwait Energy Company.....3, 54, 150p., 153, 195, 309, 325 Lukoil...3, 51p., 127, 158pp., 182p., 242, 258pp., 281, 300 Marathon.............3, 33, 101, 162pp., 309 Maysan Oil Company. .4, 21, 202p., 206, 315 Ministry of Finance................2, 23p., 38 Ministry of Oil. . .2, 19, 21pp., 28p., 31p., 36pp., 47, 49, 54, 57, 67, 73, 87, 105, 113, 124, 126pp., 141, 150, 180, 198p., 202, 204, 207pp., 213, 222p., 249pp., 254p., 257p., 268, 270, 275, 298, 314, 316 North Oil Company (Iraq).............4, 204 Occidental.........3, 121, 149, 166pp., 264 OPEC..........2, 8p., 56, 64, 66, 71pp., 85, 87pp., 91p., 101, 189, 197 Petroleum Contracts and Licensing Directorate..4, 21, 31, 33, 57, 126p., 198, 245, 257, 268, 270, 275p. 325
Petronas 3, 51p., 111, 113, 127, 141, 149, 158, 169pp., 176, 191, 194, 241p., 247, 260, 278pp., 300, 309, 321, 325 Oil Reserves...2, 8pp., 25p., 30, 40p., 48, 50, 56p., 69p., 72, 76, 81, 87p., 91, 93, 98p., 105, 107p., 111, 124pp., 130, 136, 139, 143, 151p., 155, 158p., 164, 167, 169, 176, 181, 185, 206, 229, 234, 239, 241, 243, 246, 248p., 251pp., 255pp., 262pp., 266p., 272p., 275pp., 280p., 307 Resource Curse..............5, 283pp., 287p. Saddam Hussein.2, 18, 32, 37, 60, 66pp., 74pp., 81, 85p., 94, 113, 121, 161, 188, 190, 207, 216, 227, 234, 239, 244, 246p., 249, 258 sanctions......2, 18, 67p., 71, 74, 77, 96p., 113, 120, 127, 161, 188, 190, 239, 242, 244, 247, 301 Saudi Arabia..2, 4, 14, 44p., 61, 71, 73p., 76, 88pp., 97, 228p., 243 shell. 3, 33, 41, 51pp., 62p., 67, 105, 111, 123, 125pp., 172pp., 199, 209, 222, 231pp., 245pp., 256pp., 299, 309, 323pp. Sonangol....3, 51p., 177pp., 255p., 262p. South Oil Company (Iraq).............4, 205 State Oil Marketing Organization...4, 21, 37, 106, 114, 197p.
Statoil 4, 41, 51p., 162, 180pp., 242, 254, 259p., 281, 308 Talisman............4, 101, 182, 184pp., 309 Total 4, 8, 13p., 35, 40, 47, 50pp., 55, 58, 63, 67, 101p., 105, 107, 110p., 113, 115, 118, 122p., 125, 133, 138pp., 144, 146, 149, 151, 156, 158p., 162p., 165pp., 169p., 173, 181, 183p., 187pp., 194, 197, 202, 209, 247, 250, 253p., 260, 271, 275, 280p., 298, 309, 324p. TPAO..4, 51p., 54p., 97, 109, 149p., 154, 158, 172, 191pp., 241p., 270p., 274p., 277p., 309, 325p. Turkey 2, 12, 18p., 32, 51p., 54p., 61, 63, 75, 97pp., 128, 150, 191p., 194p., 204, 224, 231, 234, 299 war....2, 8, 14pp., 23p., 27, 30pp., 37, 44, 46p., 49, 53, 60pp., 65, 67pp., 74pp., 81, 84pp., 93, 96p., 100p., 105p., 108, 112, 115, 119, 121, 124, 126, 128p., 131p., 136, 140p., 144, 153p., 164, 167, 174, 178, 180, 182, 199, 202p., 206, 210, 212p., 217pp., 223pp., 228, 230, 234, 241, 243p., 246p., 255, 257, 260, 262, 268, 270pp., 275pp., 280p., 284, 287, 290, 292, 296, 303p., 320
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