logologo #CWCBasra July 2021

IEHS – World Environment Day Report

A statement from the Environment and Health Society – UK on the World Environment Day on the 5th of June 2018, on working together to invest in water resources and enhance food security in Iraq.

Basra Governorate’s Petroleum Cluster (Part B)

Alessandro Bacci

London, U.K. –  October 2017 

 

Basra Governorate’s Petroleum Cluster (Part B)

WHAT IS A CLUSTER?

“Clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition. They include, for example, suppliers of specialized inputs such as components, machinery, and services, and providers of specialized infrastructure. Clusters also often extend downstream to channels and customers and laterally to manufacturers of complementary products and to companies in industries related by skills, technologies, or common inputs. Finally, many clusters include governmental and other institutions—such as universities, standards-setting agencies, think tanks, vocational training providers, and trade associations—that provide specialized training, education, information research, and technical support.” Porter, M., “Clusters and the New Economics of Competition,” 1998.      

Clusters may emerge at the national, regional, state (provincial), and metropolitan level. And, the more advanced an economy is, the more possibilities there are of developing clusters also at the metropolitan level. In addition, when considering clusters linked to commodities, the geographic element could assume additional relevance because the geographic location of where extraction takes place is the starting point of the commodities value chain (oil and gas have an upstream, midstream, and downstream phases). But, be it clear that this is not the rule because there are examples of commodities clusters developed at a different stage of the product’s value chain. Think of the Antwerp diamond cluster, which has developed in a city where diamonds aren’t mined but, instead, are cut (less so today, because part of cutting activities has moved to low-wage centers) and commercialized (still today 85 percent of the world’s rough diamonds, 50 percent of the polished diamonds and 40 percent of industrial diamonds pass through the diamond district of Antwerp). 

Indeed, poor countries don’t have sophisticated clusters. In general, poor countries compete in the world market through the utilization of a cheap labor force and the export of unprocessed natural resources. And when poor countries try to promote the development of economic clusters, they face huge obstacles because they lack the general pillars supporting the emergence of a cluster, i.e., good educational institutions, a skilled labor force, technological expertise, access to capital markets, and good public institutions. These elements are the basic pillars. Then, over time, the embryonic cluster will automatically help the emergence of assets more in line with the specific field of the cluster.

Developing a cluster is a step-by-step approach. As Professor Porter of Harvard University Business School explains, in the early stages of economic development, countries must expand their internal trade, which is the trade among the cities and the constituent states (a.k.a. provinces or governorates), and their trade with neighboring countries. These two initial steps, i.e., trading domestically and with neighboring countries, are the cornerstone on which it’s possible later on to build a real cluster. Of course, the goods that poor countries will initially trade will be primarily raw commodities and products produced thanks to the utilization of a cheap labor force.

In developing countries, a consistent part of the economic activity is often located around the capital city primarily because of the presence of several factors such as infrastructure, institutions, and suppliers. So, quite often a new cluster might develop around the capital center of a country. At the beginning, this phenomenon might speed up the process because of the presence of the above-mentioned factors. But, on a long-term horizon, and a cluster will always develop over a long-term horizon, the closeness to the capital city might cause many problems such as an intrusive role by the central government, which brings about many dysfunctional outcomes, and higher production costs (think of congestion, bottlenecks, red tape, etc.).

 

 

Norwegian Oil and Gas Cluster Map — Source: O. Leskinen, P. Klouman Bekken, H. Razafinjatovo, and M. García “Norway Oil and Gas Cluster,” May 2012

 

 

IS THERE ALREADY A PETROLEUM CLUSTER IN BASRA GOVERNORATE?

Is it possible to define the petroleum-sector operations in Basra Governorate a petroleum cluster? The best answer is that in Basra Governorate there is a very embryonic form of what, if properly developed, could become a real oil and gas cluster. But, for several reasons, Iraq’s petroleum industry has never been capable of overpassing this embryonic stage—actually the most advanced developments have always been in Basra Governorate thanks to its giant oil fields (Zubair was discovered in 1949, Rumaila in 1953, West Qurna in 1973, and Majnoon in 1975) and the presence of the only Iraqi coastline from which oil is exported.   

Between 1929 to 1961, Iraq’s oil industry was under the virtual monopoly of the Iraq Petroleum Company (I.P.C., previously known from 1912 as Turkish Petroleum Company, T.C.P.), which had complete control on oil exploration and production. In 1928, it was decided the final shareholder composition of what the following year would be renamed the I.P.C. The shareholders were the Anglo-Persian Oil Company (today’s BP) with a 23.75 percent share, Shell with a 23.75 percent, Compagnie française des pétroles (today’s Total) with a 23.75 percent share, the Near East Development Corporation (representing the interest of five U.S. companies—among them there were Standard Oil Company of New York (today’s Mobil), Standard Oil Company of New Jersey (today’s Exxon) and Gulf Oil (today part of Chevron) with a 23.75 percent share, and Mr. Calouste Gulbenkian, an Armenian businessman, with a nonvoting 5 percent share. Indeed, this company extracted oil in Iraq, but the only goal was to deliver profit to the shareholders coupled with scarce interest in helping the development of a local industrial sector. This was part of the reasons concerning the very tense relationships between the Iraqi government and the I.P.C. between 1961 and 1972, the year of the nationalization of the I.P.C. operations.     

But, also after the nationalization, despite some initial hope, there has never been the possibility of transforming Basra Governorate into a full-fledged petroleum cluster. In fact, in the last four decades, the Basra region has been a battleground during the Iran-Iraq War and during the two Gulf Wars. International sanctions such as the United Nations (U.N.) embargo after the invasion of Kuwait didn’t help the economic prosperity of the governorate. Moreover, after the 2003 invasion, the governorate one more time became a center exposed to violence with militia conflicts and resistance acts against the Multinational Force and the new Iraqi government. At that time, both simple criminality and sectarian violence increased. Only after 2008, was it possible to recreate a sort of peaceful environment in the governorate. All these wars have damaged the economic infrastructure and have left, scattered throughout the region, a host of mines and unexploded ordnance, which, as a result, necessarily slow the economic development of the region.   

 

THE LOGIC BEHIND THE IDEA OF WHY IRAQIS SHOULD DEVELOP A REAL PETROLEUM CLUSTER IN BASRA GOVERNORATE

Basra Governorate is and will continue to be in the coming years the pillar around which will revolve Iraq’s petroleum industry. Presently, the two main problems partially slowing the process of developing Basra Governorate’s petroleum cluster are Iraq’s present technical service contracts (T.S.C.s) and the on-the-ground security risks throughout Iraq.  

The T.S.C.s, which are established by the federal government in Baghdad, create for the federal government some economic difficulties under low oil prices. In fact, their structure obliges the federal government to repay more or less the same fee to the international oil companies (I.O.C.s) no matter what the oil prices are. And, of course, when oil prices are low, the federal government sees an important reduction in its oil revenue. Iraq has recently declared that it wants to review the structure of the T.S.C.s in order to align them in a better way with the interests of both the government and the I.O.C.s.

With reference to on-the-ground security risks throughout Iraq, it’s important to underline that Basra Governorate, despite having been the theater of some terrorist attacks, has been saved from direct and recurrent ISIS attacks, which, instead, have occurred for instance in Dhi Qar Governorate, another Iraqi southern governorate. If anything, because the armed forces left Basra Governorate in order to fight elsewhere ISIS, there has been an increase in non-terrorist criminal acts in the governorate.  

But, Basra Governorate’s three main advantages are:

Let’s now examine these three advantages one by one.

1 — HUGE OIL RESERVES — Iraq has huge oil reserves and ranks fifth in relation to proven oil reserves at the world level. At the beginning of 2017, Iraq’s Ministry of Oil declared that the country’s proven reserves had increased to 153 billion barrels from a previous estimate of 143 billion barrels. The increased estimate is the result of appraisals and exploration carried out at seven oil fields in central and southern Iraq. At least 60 percent of Iraq’s proven oil reserves are located in Basra Governorate thanks to its five giant oil fields. The whole Iraq has more than 70 oil fields, but only 30 percent of these are developed or partially developed.

In this regard, last July, the Ministry of Oil in implementation of its plans announced the launch of a new project to explore for, develop, and produce a number of borderline onshore and offshore exploration blocks and oilfields in south and middle Iraq. In practice, of the nine blocks included in this project, five are in Basra Governorate. They are: the three blocks Khudher Al-Mai, Jebel Sanam (Jabal Sanam) and Al Fao on the Kuwaiti border, the Sindibad block (including the Sindibad oilfield, which is jointly owned by Iraq and Iran, and which could have 3 billion barrels of recoverable oil) along the Iraqi-Iranian borderline, and the Arabian Gulf block in the Arabian Gulf.

2 — LOW FINAL PRODUCTION COST — It’s correct to affirm that there are different qualities of crude oil according primarily to the A.P.I. degrees and the sulfur content (A.P.I. degrees and sulfur content are the main factors establishing the price of a specific barrel in relation to a selected benchmark), but, in the end, oil is a commodity, and as such it’s fungible, which means that the market will treat the produced commodity batches as equivalent or almost equivalent disregarding the location from where the commodity was sourced. In addition, with commodities, producers are price takers, which means that the market price will be the cost required to cover the production cost of the highest-cost producer necessary to satisfy the last barrel of oil required by world demand. In practice, under a price-taker logic, the best place to extract crude oil will always be the oil-producing countries with the lowest final production costs, i.e., Kuwait, Saudi Arabia, Iraq, and Iran. Also, Russia would have, at least until now, a quite competitive pure production cost, but, then, when taxes kick in, the final production cost almost doubles.

 

 

3 — PROXIMITY TO FINAL BUYERS — With reference to trade, distance still matters. Some years ago, Professor Pankaj Ghemawat of Stern Business School developed “The CAGE Distance Framework,” a tool that pictures distance between two trading countries according to four basic dimensions: cultural, administrative, geographic, and economic. These dimensions form the acronym CAGE, and each type of distance influences the different businesses in different ways. When dealing with commodities, some features of the four dimensions are toned down. For instance, one thing is to sell to a country an item that could infringe or touch negatively on the social norms of the purchasing country, another thing is to sell a commodity, like crude oil, which is universally accepted throughout the world.

In general, the farther a country is from another country, the harder it will be to do business with that country. Other elements are for instance “the physical size of the country, average within-country distances to borders, access to waterways and the ocean, and topography.” It’s self-evident that geographic distance has a relevant impact when considering communications and the cost of transportation. So, geographic distance could be an important obstacle to trading heavy or bulky products, or products requiring a high degree of coordination between the involved trading partners. Indeed, crude oil has a very much higher value-to-weight (bulk ratio) than for example cement, but still crude oil operations require a lot of coordination and a specific infrastructure.

In relation to Iraq’s oil exports, a look at the map well clarifies how Iraq, and this is true of all the Persian Gulf oil producers, may well serve the Asian and the European markets. As the pie chart below shows, in 2015, Asia, collecting a 56 percent share, was the main regional destination for Iraq’s crude oil. In specific, India and China both received a 19 percent share, while South Korea received a 12 percent share. The second-most-important market for Iraq’s crude oil was Europe, which received a 26 percent share. In Europe, the two most important buyers were Greece and Italy, both receiving a 5 percent share.  

 

In other words, the three mentioned advantages guarantee that Basra Governorate will be of one of the world’s main centers of oil production also in the coming years. And, in light of geopolitical considerations, Basra Governorate will retain this position no matter what Iraq’s future institutional framework will look like. The only real problem, which is common to all the Persian Gulf countries, is a blockade of the Strait of Hormuz. In reality, the possibility of this problem, although remote, has always been present since at least the Iranian Revolution in 1979, but it never refrained national oil companies (N.O.C.s) and international oil companies (I.O.C.s) from working in the Persian Gulf. So, investors should be reassured that investing in Basra Governorate is a viable option.

Once it’s understood that Basra Governorate has abundant and cheap oil reserves close to its relevant markets in Asia (and in Europe as well), it is quite normal that the next step should be to develop what today is a sort of embryonic petroleum cluster into a more defined petroleum cluster, which could serve in a better way the interests of Iraq’s petroleum sector for the coming years.     

 

BASRA GOVERNORATE’S EMBRYONIC PETROLEUM CLUSTER

OIL & GAS REGULATORY FRAMEWORK — One first point to understand when talking about the development of a petroleum cluster in Basra Governorate is that we are examining a regional cluster whose main business activity is petroleum production, which is instead granted and regulated at the federal level. In fact, the legal framework regulating petroleum activities in Iraq is based on some very general provisions in the Iraqi Constitution of 2005 (in specific, on Article 109).

 

Since the nationalization of the hydrocarbon sector in 1972, the central government has been in control of the hydrocarbon sector. Sadly, the regulatory framework of the hydrocarbon sector in Iraq is quite uncertain as a consequence of several different laws and regulations resulting from the changes over the years in the political system of the country. On top of this, in Iraq there is no federal oil and gas law yet. This law, which is required by Art. 120 of the Constitution, has been under review since 2007. Political infighting has impeded the possibility of passing this law. In sum, in addition to the Constitution, petroleum activities are regulated directly or indirectly by some other laws with the result of regulatory uncertainty. Among the most important laws there are:

The Oil Ministry has the control and oversight over oil and gas exploration and production in Iraq. Since 2009, the ministry has held four licensing rounds, which have resulted in the signature of a number of T.S.C.s with several I.O.C.s. The signed T.S.C.s have formed unincorporated joint ventures each including I.O.C.s and one of the Iraqi state-run petroleum companies. Presently, there is no royalty, although the idea is that a 12.5 percent royalty will be introduced by the Federal Oil and Gas Law, once this is approved. Corporate income tax (C.I.T.) is capped at 35 percent.

Petroleum companies operating in Iraq are subject to Law No. 11 of 2010 for the protection of local products (limits to the import of goods if these are manufactured in Iraq as well) and, according to Law No. 13 of 2006 (Investment Law) have to give priority in recruiting and employment to Iraqi workers. Moreover, companies operating in Iraq need to open a branch in the country. With reference to transportation of crude oil and associated products, the Oil Pipelines Company, which is a state entity under the Ministry of Oil, owns and maintains the pipelines, marine vessels, and tanker trucks used for these operations. All internal and external sales are conducted by Iraq’s State Organization for Marketing of Oil (SOMO).

The governorates don’t have authority over the oil revenue and depend on the federal government’s revenue transfers. It’s the State Budget Law that determines the amount of revenue shared. Specifically, funds are transferred on the basis of the Regional Development Program transfers, the petrodollar allocation, and for the Kurdistan Regional Government (K.R.G.) some specific transfers. The first ones are linked to the governorates’ population. The second ones consist in a monetary compensation for every barrel of oil produced, for every barrel of oil refined, and for each 150 cubic meters of natural gas produced by every governorate—the K.R.G. is excluded from the petrodollar allocation as well as Diyala Governorate and Karbala Governorate, which don’t produce oil.

DETERMINANTS OF BASRA GOVERNORATE’S DIAMOND ADVANTAGE — As Professor Porter pointed out in his paper “The Competitive Advantage of Nations” (1990),

national prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists. A nation competitiveness depends on the capacity of its industry to innovate and upgrade.

It’s evident that industries strongly dependent on the extraction and export of natural resources have a reduced necessity to innovate and upgrade than have for example the communications or the pharmaceutical industry. But, it’s also true that an improved competitiveness always advances positively the economic results of industrial sectors based on natural resources as well. Norway is a good case in point. Today, it has developed a competitive oil and gas cluster, and its companies have internationalized and compete at the world level. Statoil, Norway’s multinational oil and gas company has now operations in 36 countries.      

 

An analysis of the Diamond of National Competitiveness, in our case, an analysis of the Diamond of Basra Governorate Advantage, with its four attributes—1) Factor Conditions, 2) Demand Conditions, 3) Related and Supporting Industries, and 4) Firm Strategy, Structure and Rivalry—well explains where the competitive advantage is for Basra Governorate.

 

 

 

 

With reference to FACTOR CONDITIONS, it’s possible to notice how here lies the real competitive advantage of Basra Governorate—although when there is an important supply of raw materials, governments and companies could rest on these and do business as usual. Iraq ranks fifth in relation to proven crude oil reserves with 153 billion barrels, of which around 60 percent are in Basra Governorate. Similarly, Iraq ranks 11th in relation to proven natural gas reserves with 3,7 trillion cubic meters of natural gas, of which around 70 percent are in Basra Governorate. These crude oil reserves are also very cheap to extract. The presence of a natural access to the sea is then of paramount importance for the export of products from Basra Governorate. The ports of the governorate (in specific, the two oil terminals) are perfectly positioned to serve Asia’s petroleum buyers.

 

Basra Governorate’s climate conditions are harsh because the governorate has a hot desert climate. In the summer, Basra Governorate is one of the hottest areas on the planet with temperature regularly exceeding 50 degrees Celsius. In addition, the frequency of dust storms has increased drastically in the last decade. Dust storms have a very harsh impact on both human’s health and economic activities. Dust storms, if severe, might disrupt the operations of crude oil loading at the Basra oil terminals.  

 

The conditions of the general infrastructure are not good. Houses, roads, and hos­pitals need all consistent improvement because of the violent acts and the poor maintenance of the last forty years. Access to clean water, electricity, roads, and sewages remains limited. For instance, the city of Basra has a complex network of canals and streams, which historically were used to transport goods and people throughout the city, but pollution and a reduction in the water level have rendered navigation impossible.    

According to the World Bank’s Ease of Doing Business, a report tracking changes in regulations affecting 11 areas in the life cycle of a business, Iraq (and this is true for Basra Governorate) is ranked 165 out of 190 countries. In specific, Iraq needs to speed up the procedure to start a business, to get credit, to trade across borders, and to resolve insolvency. Skilled labor is scarce because of the deterioration of Iraq’s public education institutions (schools and universities) sapped over the last thirty years of the proper financing amid tough sanctions, the 2003 invasion, and the sectarian fights. Instead, before 1991, Iraq had one of the best educational systems in the Middle East.

 

 

With reference to DEMAND CONDITIONS, crude oil extraction is primarily carried out to export it to foreign destinations, but at the same time, Basra Governorate’s associated natural gas—two thirds of this gas is still flared—will assume always a more preponderant role in generating electricity in Iraq. There is an already important demand for natural gas as feedstock to some power plants, which technically should run on natural gas, but, because natural gas is not available yet, they run on fuel oil. Current power generation in Iraq, now at 13 gigawatts, makes up only a quarter of the demand (around 42 gigawatts)—the oil and gas industry is the largest consumer of electricity. 

So, there is an important potential demand for natural gas, which until now hasn’t been satisfied because of many infrastructural and policy gaps. In practice, the low natural gas price and the bad (or in some cases non-existing) infrastructure to transport it make investments in the gas sector not very interesting to the private sector considering the low profits. It would be necessary to increase the price of gas and/or to privatize the distribution of electricity because in this way it would be possible to incentivize natural gas investments, but this decision has been postponed until now for fear of popular protests against these unpopular moves.

The government, via its state-owned South Gas Company, purchases gas from the companies at prices higher than the prices at which it then resells the gas to the final consumers. On a long-term basis this is unsustainable. According to Shell, in 2013, this wasted demand for natural gas would have generated 4.5 gigawatts capable of covering the needs of 3 million homes. Importing Iranian natural gas into Iraq, which flares its own natural gas, is indeed quite strange.     

At the same time there is a request for refined petroleum products (the downstream part of the oil and gas value chain). According to the U.S. Energy Information Administration (E.I.A.), most of Iraq’s petroleum consumption comes from the country’s internal oil refineries, but at the same time the country must import around 100,000 b/d of petroleum products. It would also be economically appealing to Iraq to enlarge its petrochemical industry, which is an industry related to the oil and gas cluster, both for the domestic consumption and for exporting petrochemical products to Asia.    

With reference to CONTEXT FOR FIRM RIVALRY AND STRATEGY, it’s important to make a distinction concerning projects under public direction in Iraq. On the one side, there are the projects in the petroleum (oil and gas) sector (upstream, midstream, and downstream) under the direction of the federal government through the Ministry of Oil, and the projects in the electricity and petrochemical sectors, which are industries related or supporting to the petroleum sector, through the Ministry of Electricity and the Ministry of Industry and Minerals. On the other side, there are projects under the direction of the Basra Provincial Council with attention given to agriculture and certain sectors of the economy that are out of the federal jurisdiction.  

As for the petroleum projects, the interested companies normally proceed through licensing rounds. And it is at the tender level that rivalry among the companies interested in developing a project is carried out. In the petroleum sector, where the government has organized four licensing rounds from 2008 until now, the consortium winning a licensing round is constituted always by I.O.C.s (but there may be also only one I.O.C. in a consortium, as it is now the case in relation to West Qurna 2 with Lukoil) and an Iraqi state-run petroleum company. So, once, a license is assigned, it’s not any longer a matter of rivalry, but it’s more a process of respecting deadlines and implementing the correct payments among the involved parties.     

Projects pertaining to the petroleum sector (oil and gas)—but this is true also for the related or supporting industries such as the electricity and the petrochemical sector—all involve relevant capital investments. This means that most of the companies involved in these projects are large and financially sound companies with a wide portfolio of investments. Moreover, because especially in the oil and gas sector, projects are carried out by consortiums, it takes a long time between the ideational phase of a project and its implementation. Summing up, on the one side, there are good financial guarantees, but on the other side, there are long-lead times and rigidity in the implementation among the involved parties.    

With reference to RELATED AND SUPPORTING INDUSTRIES, there are at least two big industrial sectors linked to the petroleum sector in Iraq. They are the electricity and the petrochemical sectors; their projects are carried out via tenders. In general terms, these two sectors are the necessary corollaries to a large petroleum sector as the one present in Basra Governorate because they permit a country to monetize in a better way on the extraction of oil and gas. The problem in Basra Governorate is that there is the need that these two related/supporting sectors are fully developed as soon as possible, but for the time being they are still in their infancy. Basra Governorate, in behalf of the whole Iraq, needs more gas-fired power plants and more petrochemical factories.

In addition, there are very few local suppliers, especially in relation to maintenance and of course all the issues involving machinery components. This is a real issue because often the contracts in the petroleum sector as well as in the two above-mentioned related sectors have strict local content requirements, such as provisions given to Iraqi workers for employment and to locally produced goods and services. Part of the problem of the lack of local suppliers is related to the difficulties that Iraqis have in securing loans from the local banks in order to finance the creation of Iraqi small and medium enterprises (S.M.E.s). Banks need collateral guarantees, but if the applicant doesn’t have them, it will be impossible for the applicant to secure a loan. Instead, larger projects can benefit from bilateral and multilateral assistance in forms of loans and grants from development financial institutions (for instance the International Finance Corporation and the Multilateral Investment Guarantee Agency—both institutions are members of the World Bank Group) and the national export credit agencies.         

 

 

Basra Governorate’s Petroleum Cluster (Part A)

Alessandro Bacci

London, U.K. –  October 2017 

 

Basra Governorate’s Petroleum Cluster (Part A)

 

INTRODUCTION

The events of the last years have been quite complicated for Iraq because of divisions at the political level, reduced revenues from the sale of crude oil (low oil prices), and the costs of waging a war against the Islamic State of Iraq and Syria (ISIS), which had conquered large swaths of central and western Iraqi territory. Now, thanks to improved results in the war against ISIS, it’s time for Iraq to focus again on developing the country’s struggling economy. In this regard, some months ago, Foreign Minister Ibrahim Al Jaafari declared that Iraq needed a sort of new Marshall Plan, hinting at the American initiative to aid Western Europe after World War II.

At the end of October 2017, the C.W.C. Group, a world-leading events and training producer for the oil, gas and infrastructure industries, will host in Beirut, Lebanon, the Basra Oil Gas and Infrastructure Conference. The conference will be a gathering point for government officials, projects stakeholders, buyers and sellers working in the southern part of Iraq across several industries in three primary business segments: oil and gas, power, and petrochemicals (first segment), infrastructure and construction (second segment), and transport and logistics (third segment).

The timing, the economic topics, and the geographic target of this conference are quite correct. In fact, if, on the one hand, as mentioned above, now, after some positive advances in the war against ISIS, Iraq is obliged to improve and reinforce its economy, on the other hand, it’s almost impossible to develop Iraq’s economy without developing Basra Governorate’s economy.  Basra Governorate, whose capital is the city of Basra (Iraq’s third largest urban center), represents the economic powerhouse of the whole Iraqi state. Last April, Iraq’s Parliament voted unanimously to consider Basra Governorate as Iraq’s economic capital. A few data will clarify this concept.

 

Map of Basra Governorate — Source: Google Maps

 

OVERVIEW OF BASRA GOVERNORATE’S ECONOMIC CONDITIONS

Today, Iraq’s economy is the world’s most dependent on oil. Approximately 58 percent of the country’s G.D.P. and 99 percent of its exports are hydrocarbons; oil provides more than 90 percent of government revenues and 80 percent of foreign exchange earnings. 

What Did Iraq Export in 2014? — Source: The Atlas of Complexity, Harvard University

In fact, of Iraq’s more than 4.4 million barrels of oil per day (b/d), 85 percent of the barrels are produced under the terms of technical service contracts (T.S.C.s.) by the giant oil fields of southern Iraq. Majnoon, Rumaila, West Qurna (1 & 2), and Zubair are located in Basra Governorate; Halfaya is located in Maysan Governorate. Below there is some additional information regarding Basra Governorate’s giant oil fields.  

 

Basra Governorate’s Giant Oil Fields — Source: A. Bacci’s Elaboration of a Map by The Oil and Gas Year (TOGY)

Unquestionably, the bulk of Iraq’s proven oil reserves is in the south of the country and, in specific, 60 percent of all Iraq’s proven oil reserves should be located in Basra Governorate), while more than 3 million barrels a day of oil are exported from Basra Governorate. Two types of crude oil are exported: Basra Light Oil, which has an A.P.I. gravity of 29.7 degrees and sulfur content at 2.85 percent and Basra Heavy Oil, which has an A.P.I. gravity of 23.7 degrees and sulfur content at 4.12 percent. The Basra Oil Company (B.O.C., previously known as South Oil Company, S.O.C.) has its headquarters in Basra. It’s the national Iraqi company in charge of the oil development in southern Iraq. 

As Wood Mackenzie, a U.K. consulting firm, reported, Iraq’s T.S.C.s relating to the southern governorates since 2009 have added 2.3 million b/d (70 percent of the added barrels are growth, while the remaining 30 percent of the barrels are offsetting baseline decline). Indeed, this increase is an important achievement, but Iraq is currently still quite far from its plateau production target (P.P.T.) of 8 million b/d of crude oil production, which has to be achieved primarily through the expansion of the oil fields located in southern Iraq.  

 

The Oil Production of the Oil Fields Located in Basra Governorate — Source: A. Bacci’s Elaboration of a chart by Wood Mackenzie

 

One of the reasons for the delay in increasing oil production in southern Iraq is the very slow development of the Common Seawater Supply Project (C.S.S.P.) in Basra Governorate. In practice, to obtain a production increase as high as the one envisaged by the P.P.T., the southern oil fields require substantial increases in natural gas and/or water injection to maintain the reservoir pressure. B.O.C. is undertaking the C.S.S.P., a project that initially should have been able to provide the southern oil fields with around 12 million b/d of desalinated water to reinject into the oil fields. The plan is to treat seawater from the Persian Gulf and to transport it via pipeline to the oil fields. The project is estimated to cost $4 to $6 billion. But this project is not progressing according to the planned timetable. Currently a scaled-down version (2.5 million b/d of water) of the project is in the works.             

With reference to natural gas, at the end of 2015, Iraq had total proven natural gas reserves of 3,7 trillion cubic meters of natural gas. Approximately 70 percent of the country’s proven natural gas reserves are associated gas located in southern Iraq. In 2015, Iraq produced 6.1 million tons of oil equivalent of natural gas—this value is expected to more than double by 2021. The gas produced is primarily used for power generation, but around two thirds is still flared. Basra Gas Company (B.G.C.), which is a joint venture between Iraq’s South Gas Company (51 percent), Shell (44 percent), and Mitsubishi (5 percent) was established in 2013 with the specific goal of collecting and treating the until-then-flared gas from Rumaila, West Qurna 1, and Zubair—the cost of this agreement, which will last for 25 years, is $17 billion. This project is the largest flare-reduction program in the world. The processed associated gas is transformed into dry gas for power generation, liquified petroleum gas (L.P.G., i.e., propane and butane) for domestic use, and condensates for road fuels. The company is authorized to export the gas (in the form of liquified natural gas, L.N.G.) once the local demand is satisfied. Basra Governorate will need to build more gas-fired power plants in order to absorb all the produced associated gas.         

Source: Basra Gas Company

Basra’s refinery has a nameplate capacity of 210,000 b/d out of something more than 1.1 million b/d in the whole Iraq (including Iraqi Kurdistan). But, according to the U.S. Energy Information Administration (E.I.A.), it is more realistic to assume an effective capacity of 135,000 b/d. There are now plans concerning the construction of a second refinery in Basra with a refining capacity of 300,000 b/d. Several companies have expressed interest in this project.  

Iraq, as many other MENA countries, needs to satisfy a relevant increase in the demand for electrical power. Last summer, with temperatures touching 52 Celsius degrees in Basra Governorate, as people used their air-conditioners, demand for electricity soared so consistently that blackouts were quite ordinary. Recently, Japan International Cooperation Agency (JICA) has signed a loan agreement with the Republic of Iraq in Baghdad to provide a Japanese official development assistance (ODA) loan to help Iraq retrofit the Al Hartha Thermal Power Plant (feedstock: gas and oil) in Basra Governorate, which had been built in the 1970s by a Japanese company and had been equipped with four 200 MW units, two of which have not been working since the Fist Gulf War.

So, today, in Basra Governorate electricity is generated by the following powerplants: 

And since the beginning of 2016, natural gas from the Majnoon oil field is contributing some fuel to Iraq’s power grid, producing in this way around 300 MW. In addition, Iran will soon supply 5 million cubic meters of natural gas per day via a pipeline to Basra Governorate. The pipeline runs from the city of Ahvaz, the provincial capital of Khuzestan, to Khorramshahr and then to the border between Iran and Iraq.

Indeed, the above data concerning the power plants show that there is some infrastructure to generate electricity, but this infrastructure has to be improved and expanded consistently. An additional problem is that there is not enough natural gas to deliver to the present gas power plants. And this is the reason for the future natural gas imports from Iran into Basra Governorate with the specific goal of feeding gas to the Rumaila Gas Power Plant, the Najibiyah Gas Power Plant, and the Shatt Al Basra Power Plant. The latter is still a project relating to the construction of a gas power plant with 10 turbines capable of producing 1,250 MW.   

Additional activity in Basra Governorate is centered around the petrochemical industry. The State Company of Fertilizers (S.C.F.) has capabilities concerning the production of sulfuric acid, ammonia, urea, and ammonia sulfate. The State Company for Petrochemical Industries (S.C.P.I.) is in the business of manufacturing high quality high density polyethylene, low density polyethylene, polyvinyl chloride (P.V.C.), polyethylene master batch (colored and black), polyvinyl chloride compounding, agricultural film, and other chemical products. Finally, Basra Governorate is located in a fertile agricultural region, which produces rice, maize, barley, pearl millet, wheat and dates and which raises livestock.     

Basra Governorate is Iraq’s only access to the sea. The port of Basra is Iraq’s main port, but it doesn’t have deep-water access, which has instead the port of Um Qasr (22 platforms) lying south of the city of Basra on the Khawr az-Zubayr Waterway. The presence of the ports has transformed the governorate in an important center for trade, transportation, and storage.

Al Basrah Oil Terminal (ABOT) and Khawr al ‘Amīyah Oil Terminal (Kaaot) are located 31 miles southeast of the Al-Faw Peninsula in the Persian Gulf. The two loading terminals and three single-point moorings (S.P.M.s) plus a spare buoy, provide the principal point of export for Iraq’s crude oil, but they are operating well below capacity as a consequence of three wars and scarce maintenance. In January 2017, the Ministry of Oil announced that it intended to double the crude loading capacity of Kaaot, which is the smaller terminal of the two, to 1.2 million b/d in order to permit the loading Suezmax vessels. Instead, ABOT alone, without considering the S.P.M.s can transfer up to 3 million b/d. 

Source: Iraq’s State Organization for Marketing of Oil (SOMO)

 

The city of Basra also hosts the University of Basra, which is a large public university comprising all the most important types of faculties and some research centers linked to Basra’s economic activities, and Basra International Airport, which is Iraq’s second largest international airport and serves primarily Middle Eastern destinations and some Asian destinations.

The conditions of the general infrastructure in the governorate are poor. These conditions are common across all sectors. In specific, the oil sector infrastructure is still aging as witnessed by the I.O.C.s that returned to Iraq after the first licensing round in 2008-09. Only recently did Iraq obtain some improvements such as expanding onshore pumping and storage infrastructure in the south to increase crude production, expanding offshore loading with capacity doubling to 4.5 million b/d of crude thanks to single-point moorings, building new tie-in pipelines and pipelines to the loading terminals of the Al-Faw Peninsula for the fields West Qurna 2 and Majnoon (Basra Governorate), Halfaya (Maysan Governorate), Missan (Maysan Governorate), Gharraf (Dhi Qar Governorate), and Badra (Wasit Governorate).

Poor infrastructure is a big limit to the economic development of the governorate. In the past, the Basra region had been an important battleground during the Iran-Iraq war and during the two Gulf Wars. All these wars have damaged the economic infrastructure and have left, scattered throughout the region, a host of mines and unexploded ordnance, which, as a result, necessarily slow the economic development of the region. In addition to the three mentioned wars, after the 2003 invasion, the governorate one more time became a center exposed to violence with militia conflicts and resistance acts against the Multinational Force and the new Iraqi government. At that time, both simple criminality and sectarian violence increased. Only after 2008, was it possible to recreate a sort of peaceful environment in the governorate.    

The governorate of Basra, but this is a recurrent condition throughout Iraq, is hyper-urbanized with 80 percent of its population (4,7 million people live in Basra Governorate) living in the few urban centers present in the governorate. In 2017, the metropolitan area of the city of Basra has an estimated population of 2.8 million. Hyperurbanization means a large and growing housing deficit in all the major Iraqi centers, Basra included. This deficit has been compounded by population growth, the pace of urbanization, and the inflows of internally displaced people.       

According to both the International Monetary Fund (I.M.F.) and the World Bank, in 2016 Iraq’s per capita G.D.P. was around $4,620 per year. The United Nations estimates that at least 10 million Iraqis need humanitarian aid. Iraq’s 18 governorates are divided in districts and sub-districts. And contrarily to expectations, the sub-districts with the highest poverty rate are in the southern governorates despite the presence under the ground of the hydrocarbon reserves.

Iraqi Minister of Planning Salman al-Jumaili last spring declared that, apart from areas directly touched by the war against ISIS, the last survey in Iraq in early 2015 showed that the level of poverty was 31 percent in the southern provinces, 17 percent in the center, 12 percent in Baghdad, 17 percent in Diyala and Kirkuk, and 13 percent in the Kurdish regions. In practice, the percentage of people living under the poverty line of $2.5 per day in the governorate is higher than the national average.

 

THE LOGIC BEHIND THE ECONOMIC DEVELOPMENT OF BASRA GOVERNORATE

So, if Basra Governorate doesn’t continue to develop, there will be serious problems throughout the whole Iraq—and the country’s survivability could be at stake. In brief, this southern governorate is the only one that can consistently provide Iraq with the economic resources necessary to the federal government in order to then reconstruct part of the country with the specific goal of assisting the recreation of a fabric of Iraqi small and medium enterprises (S.M.E.s). For instance, before ISIS’s capture, the city of Mosul boasted an interesting S.M.E. fabric capable of producing medicines and medical equipment, sugar, yogurt, clothes and cotton textiles, pre-cast concrete elements, furniture, and leather products.              

Indeed, as confirmed by the best textbooks of economics, Iraq should try to diversify its economy. On paper, this goal is always the best outcome because a diversified economy permits a country to have an improved resiliency in the face of difficulties in one specific economic sector. Diversifying a portfolio of investments reduces the implied risk. This concept is true in relations to private investors, companies, and countries as well. And to confirm this point, it’s good to underline that presently, on the basis of Iraq’s current economic structure, low oil prices immediately mean that the federal government will experience a consistent reduction in its revenues, which later on will translate into fiscal budget troubles.

But, is it easy to diversify the economy of a country? The answer is no. Petroleum literature well shows how diversifying an economy primarily relying on the export of commodities is never an easy task. And, if a positive result is obtained, it normally takes several years. Norway, a country in 6th position in June 2016 in the World Bank’s Ease of Doing Business, a business ranking relating to several parameters, shows a still quite unbalanced export sector. And in the Middle East, Saudi Arabia, OPEC’s most important member with around 10 million b/d of crude oil production, has been trying to diversify its economy since the 1970s through 10 development plans, but it has obtained unsatisfying results.

What Did the Saudi Arabia Export in 2014? — Source: The Atlas of Complexity, Harvard University

 

Iraq’s National Investment Commission (N.I.C.)—the body responsible for all the national policies for investment and the promoter, facilitator, monitor, and policy advisor for investments in Iraq—correctly underlines that Iraq needs a more diversified economy via the increase in the number of Iraqi S.M.E.s. The idea is that more S.M.E.s will enlarge the job market, which in turn will provide the federal government with an enlarged and more stable tax base. And if Iraq wants to increase the number of its S.M.E.s, it has to attract more foreign direct investment (F.D.I.). The problem is, and this is especially true (and quite normal) in a country that is at least partially exiting a conflict, the presence of a high level of corruption.

International oil companies (I.O.C.s) and foreign national oil companies (N.O.C.s) can deal with corruption problems because the former often have deep pockets while the latter have big pockets often coupled with a political agenda. In other words, in their operations, companies with large shoulders can better factor in all the additional costs linked to corruption. But, to an Iraqi investor, the costs and the risks involved in supporting a small or a medium enterprise are too high if they are not at least partially covered by the back-up of F.D.I. On top of this, Iraqi banks don’t easily lend financing resources to local businesses because the local guarantees are insufficient. 

Summing up, while the goal of diversifying Iraq’s economy should stay as a long-term goal on the radar of Iraq’s institutions, right now it’s of paramount importance the promotion of the economic development of Basra Governorate. This development of Basra Governorate will then be instrumental in the long-term diversification of Iraq’s economy. This two-step process is necessary especially now that Iraq requires a continuous flow of revenues to redistribute to its young population. In fact, almost 40 percent of the Iraqi population is aged between 0 to 14 years. In summary, if the country won’t be able to provide the young Iraqi citizens who will enter the job market with real jobs, it should at least try to provide them with some economic assistance, which under the current circumstances could only come from the oil revenue.

And, it’s then important to understand that, as it has been studied by the World Bank, youth exclusion is probably the main factor favoring youth radicalization and recruitment by militias and violent groups. Most Iraqi youths joined ISIS because they had no realistic life opportunities other than that in order to improve their social standing—most youths earn a week salary of less than $22, while a very basic rent costs around $180 per month. 

Interview with Ahmed Tabaqchali, CIO of AFC Iraq Fund

Ahead of the Basra Oil, Gas & Infrastructure Conference taking place on the 30-31 October in Beirut, we caught up with one of the speakers, Ahmed Tabaqchali the CIO of AFC Iraq Fund on the importance of Iraq, the economy and what to look forward to at the event.

Q. Why Iraq is such an important market in the Middle East?
A. The size and quality of Iraq’s hydrocarbon wealth would alone make the country one of the most significant markets in the region. As a consequence of over 35 years of conflict, much of Iraq has not seen any meaningful exploration and thus the potential for significant discoveries is exciting. The rebuilding of its hydrocarbon industry since 2003 has a long way to go, and as such there are enormous opportunities for upgrading the sector across the whole spectrum.

Q. What are the positive implications for the economy and for Basra for the new era of reconstructing Iraq?
A. The reconstruction process will have far reaching implications for the overall economy and Basra in particular with the potential that the associated economic activities to contribute to the development of a diversified economy. The short term effect impact on the economy would be to add fuel to the expansionary economic effects produced by the reversal of the negative forces, i.e. escalating costs of war & collapsing oil prices, that crushed the economy over the last 3 years.

Q. While the Iraqi economy is driven by the state, how do you assess Basra province role as Iraq’s economic capital in driving multiple industries?
A. Arguably, the state’s domination of the economy has stifled the development of both the private sector and regional development in the country. Basra can and should play a leading role in reigniting economic growth given its position as the economic powerhouse of the country. Its rich history & traditions coupled with its mineral & human wealth are significant assets that would allow it to assume this leading role.

Q. How do you at Asia Frontier Capital assess Basra’s role?
A. Personally, Basra has a special place in my heart as it is the burial site of my grandmother since the 1940’s when my grandfather was the governor of Basra, and so I have a bias for the province and its people. It’s worth repeating that its  rich history & traditions coupled with its mineral & human wealth give it an outsized role in Iraq’s future.

Q. What is the role of AFC in Iraq in enhancing projects performance and driving growth?
A. The AFC Iraq Fund, as an investor in Iraq’s equity market signifies AFC’s belief in the long-term economic potential of the country. As long-term institutional investors, we bring foreign capital into the country and contribute to the development of the country’s institutional investor sector, which like much of its frontier market peers is underdeveloped. The long-term horizon of Institutional investors allows them to invest counter cyclically especially during financial crisis by acting as shock absorbers which in the process provides the underlying companies with shareholder stability that allows them to rebuild, grow and expand.

Q. What is your main interest at the Conference? And what are you going to discuss at the Basra Oil, Gas & Infrastructure 2017 Conference in Beirut 30-31st of October?
A. The conference provides an opportunity to meet the players and participants in potentially one of the most dynamic drivers of Iraq’s economy through Basra’s industries spanning oil, gas, power, petrochemicals, infrastructure, construction, transport and logistics. I am hoping to discuss the role and challenges of the private sector in the reconstruction process. Specifically, to explore the role that institutional investors can play as shareholders in infrastructure projects both as an additional source of financing and as contributors to long-term stability as anchor investors.

 

 

Developing Energy Infrastructure in Basra Governorate By: Alessandro Bacci

LONDON – September 2017 — Iraq is primarily a state-run economy dominated by the petroleum sector, which, since the 1950s, has been the main pillar of the country’s economic development. Today, Iraq’s economy is the world’s most dependent on oil. Approximately 58 percent of the country’s GDP and 99 percent of its exports are hydrocarbons; oil provides more than 90 percent of government revenues and 80 percent of foreign exchange earnings.

However, Iraq’s reliance on oil doesn’t provide a broad base for economic development. Diversifying Iraq’s economy would be a rational step because it would give Iraq a stronger resilience in the face of low oil prices; however, diversifying the economy of a country like Iraq is a very complicated and long-term task.

On a short to medium term, considering the recent political turmoil and the fight against the ISIS insurgency in parts of western Iraq, it would be better for the country, to stick to producing and exporting oil. Moreover, the next spring Iraq will hold parliamentary and provincial elections, so it’s difficult to imagine how the federal government could implement these massive economic changes over the months leading to the elections. 

Iraq requires a continuous flow of revenues to redistribute to its young population—almost 40 percent of the Iraqi population is aged between 0 to 14 years. In summary, if the country won’t be able to provide the young Iraqi citizens who will enter the job market with real jobs, it should at least try to provide them with some economic assistance, which under the current circumstances could only come from the oil revenue.

In light of the above, if there is an area that has to be protected in order to continue developing, it would be the Basra Governorate. In fact, of Iraq’s more than 4.4 million barrels of oil per day (b/d), 85 percent of the barrels are produced by the giant oil fields of southern Iraq. Majnoon, Rumaila, West Qurna, and Zubair are located in Basra Governorate; Halfaya is located in Maysan Governorate. Unquestionably, the bulk of Iraq’s proven oil reserves is in the south of the country, while more than 3 million barrels a day are exported from Basra.

The oil sector requires infrastructure to enable the extraction and the export of oil, and this infrastructure must be developed at all the levels of the petroleum chain to avoid production bottlenecks as the IOCs present in southern Iraq experienced after the country’s first licensing round in 2008-09.

After some years, the infrastructural gap has been partially reduced, but still a lot of work has to be done in Basra Governorate if Iraq wants to increase its oil production, refining capacity, and export capacity. In this regard, the CWC Group, a leading events and training provider for the oil, gas, and infrastructure industries, will host in Beirut, Lebanon, on October 30-31, the Basra Oil, Gas, & Infrastructure Conference.   

This conference, which is held under the patronage of Basra Governorate, Basra Council, and Basra Oil Company (BOC) and which is now in its fourth edition, is one of the most important business platforms concerning Iraq. The conference will be a gathering point for government officials, projects stakeholders, buyers and sellers working in the southern part of Iraq across several industries in three primary business segments: oil and gas, power, and petrochemicals, infrastructure and construction, transport and logistics.

In other words, to have a successful business development in Basra Governorate, which then will have a positive impact on Maysan Governorate and Dhi Qar Governorate, it is important to work at the same time on the development of the three above-mentioned business segments. In this regard, Iraq has to attract private sector funding.  

Private investment would allow Iraq to establish business relationships with foreign countries. The federal government is currently promoting partnerships between foreign companies and lenders. Last March, the United Kingdom and Iraq signed a historic memorandum of understanding authorizing UK Export Finance, UK’s export credit agency, to work closely with the Iraqi authorities to identify suitable infrastructure development projects that will utilize UKEF’s export finance support for the UK companies. Thanks to this initiative the United Kingdom has agreed to provide up to $12 billion of support to Iraq over the next ten years.   

Building infrastructure in Iraq could serve to improve the lives of millions of Iraqi citizens, to expand private sector activities, and to create new jobs for the Iraqi population—instead, as a matter of fact, when petroleum production is up-and-running in any country in the world, it generates revenue, but it doesn’t create many permanent jobs. 

Basra Governorate is the federal government’s revenue generator, so it must be given top priority in Iraq to secure the private investment required to close the infrastructural gap. In addition, Iraq has to improve the environment of doing business, as recently underlined by the World Bank through its Doing Business indicators.

INTERVIEW with Ali Fares:

Ahead of the international Basra Oil, Gas & Infrastructure 2017 Conference which CWC Group hosts annually with the Basra Governorate, the Basra Council and the Basra Oil Company, Nawar Abdulhadi, MENA Director for CWC Group interviewed Mr Ali Shadad Al Faris, Chairman of the Oil & Gas Committee at the Basra Council.

This interview is available to download as a PDF file in either English or Arabic:

English Version Arabic Version

 

London – INTERVIEW with Ali Fares:  Overview of the opportunities available in the Region to be discussed at Basra Conference 2017

Ahead of the international Basra Oil, Gas & Infrastructure 2017 Conference which CWC Group hosts annually with the Basra Governorate, the Basra Council and the Basra Oil Company, Nawar Abdulhadi, MENA Director for CWC Group interviewed Mr Ali Shadad Al Fares, Chairman of the Oil & Gas Committee at the Basra Council.

Mr Ali Fares highlights the importance of the Conference for the province this year as well as for the rest of Iraq as Basra moves towards expanding to accommodate the upcoming projects in the new era focusing on rebuilding Iraq. Mr Al Fares touched upon the oil, gas, petrochemicals and power projects, the infrastructure and constructions projects as well as the transportation and logistics projects which will be addressed at the international conference in Beirut between the 30-31st of October.

 

Nawar Abdulhadi: What are the current opportunities for companies investing in oil and gas in Basra?

Mr Al Fares: There are many opportunities, which are the focus of the local government of Basra and the Federal Oil Ministry. I would like to highlight the following:

  1. Strategic Sea Water Project to supply the fields for water injection.
  2. Aqaba pipeline project, which extends from Rumaila field to Najaf Governorate.
  3. Investment project in the gas fields with a new economic model (Nahran Omar, national fields, the exploitation of gas flared in the fields of other remaining licensing rounds)
  4. Investment in non-invested oil fields that are managed through the small and medium national effort.
  5. The joint fields with the Iranian side and the Kuwaiti side.
  6. There are different projects within which the size of investment is very important as they must be within the contracts of the licensing rounds, such as digging new wells and the maintenance of the old and the infrastructure of the oil and gas sector.
  7. The Muftiyah tourist project in Basra, located on the Shatt al-Arab, using the private investment model .

 

Nawar Abdulhadi:  How did the electricity, oil and gas sector develop in Basra in the past years?

Mr Al Fares: The development of the electricity, oil and gas sector in the past years happened through 3 key aspects:

  1. The entry of investment projects, including non-investment projects aimed at the completion of work, including power plants and electricity transmission and distribution projects funded either by the Budget of the Local Government or the petrodollar.
  2. The support of the electricity, oil and gas sectors by activating the federal and local laws which contributed to protecting the sectors.
  3. The adoption of modern technology in the completion of projects related to the sectors to take advantage of time, transfer of knowledge and experience to develop the human resources sector (and sustainable development) in the different fields of the oil and gas sector and to rely on local Iraqi human resources.

 

Nawar Abdulhadi:  How do you see the future development in which the Council aspires to cooperate with the relevant ministries to grant facilities to investors and accelerate the construction of projects?

Mr Al Fares: Development in the future requires the passing of a number of laws and decisions that protect the means and tools to develop and activate the law of Basra becoming Iraq’s economic capital.

Yes, the Council in cooperation with the relevant ministries and in accordance with the principle of decentralization especially the liberation of the province from  the control of some of the Ministries  which is entirely supported by the Council of Ministers in accordance with the principle of decentralization.

We will cooperate by issuing orders and instructions to implement the Basra Law which stipulates that Basra is to become the Economic Capital of Iraq and consequently opening the free zones and developing the border crossings, the land borders as well as controlling the sea and the air space.

 

Nawar Abdulhadi: How do you assess the relationship between the oil and gas sector, petrochemicals and electricity with other sectors in Basra?

Mr Al Fares: The relationship between the oil and gas sector, petrochemicals and electricity with other sectors is unfortunately been inconsistent, sometimes we see the ministry as a hindrance to the implementation of some of the strategic projects that could be saving us from the financial and economic crisis.

One of the projects, the Nebras Petrochemicals project, has been stalled because of the lack of coordination between the Ministry of Industry and the Ministry of Oil.

The most important reasons for the disruption of other development sectors is the nature of the relationship between these sectors, Iraq is losing and the absence of coexistence weakens all sectors.

 

Nawar Abdulhadi:  Does this rise to your ambition? How can further cooperation be achieved?

Mr Al Fares: Therefore we hope that international Conferences will be held in the future on the land of Basra province, specialized exhibitions and workshops, both technical and economic, so that Basra becomes the focus of the world’s attention.

 

Nawar Abdulhadi:  How do you describe the relationship with other provinces, in the construction sector as well as other sectors?

Mr Al Fares: The relationship between the province of Basra and the other governorates is good, Basra’s location is crucial to other provinces.

The possibility of developing the relationship with the neighboring provinces is to focus on the respect of the rights of Basra and its financial share as well as the prospects of the development of common infrastructure.

 

Nawar Abdulhadi: Regarding the Conference this year, what are your expectations as well as your focus of participation?

Mr Al Fares:

We hope that the Basra International Conference will market the province of Basra with its economic components to become the focus of the world’s attention in Europe, the Middle East and America.

At the Conference I will present my vision for my beloved province as well as highlight the projects for investment. The most prominent points of my presentation will be :

  1. The Issuance of the Law of Basra, Iraq’s Economic Capital and the push for the full activation of this Law
  2. Highlighting the Investment opportunities in the oil and gas sector and the ambitions of Local and Federal Government.
  3. Development of land and sea border crossings and the development of the ports
  4. Identifying the Investment opportunities in different sectors in the province of Basra.

 

 

View the full Conference programme here: //www.cwcbasraoilgas.com/programme/

Basra Oil, Gas & Infrastructure Conference 2016 (video)

2016 Interview: Mr Ali Fares, Chairman of the Oil and Gas Committee of Basra Council, Iraq

This interview is avaiable to download as a PDF file in either English or Arabic

English Version

Arabic Version

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