By Samar Whitticombe
The Long Term Plan for Iraq
Since my last article the major development is the battle of retaking Mosul from ISIS. The discussion can now turn from war to the subjects of construction, repairing the infrastructure and the return to their homes of displaced people.
The ultimate aim is to bring the population of Mosul back into being an effective part of the Iraqi economy.
Mosul has been liberated but there is a huge amount of recovery work needed:
- To restore the infrastructure from water, sewage, electricity, transport, communication, health (hospitals, clinics and rehabilitation centres), education – (universities, colleges, schools etc.
- The whole city
A long-term plan must be produced. This will ensure that the local population can live, work and bring up their families in a healthy and safe environment.
The infrastructure is just one element. What is essential to the people of Mosul is looking into human psychology, as what they have been through is traumatic and they need professional help to put the past behind them and move forward in a positive way.
The estimate for rebuilding Mosul is more than $50B. Mousil now needs a security strategy rather than a military strategy, as it has changed from a condition of destruction to one of construction.
In a September referendum the Kurds voted for independence and since then there has been a high level of tension between Baghdad and Erbil, regarding the future of Kurdistan. A major issue has been Kirkuk.
The response from the central government was to place a ban on international flights to and from the Kurdistan Region and to deploy federal troops into the disputed areas which, on the 16th October, eventually lead to Iraqi forces claiming control of the whole of Kirkuk province after intense fighting.
Iran supported Baghdad by temporarily closing its land borders with the Kurdistan Region. Some crossings have now been opened and it is expected that the remainder will be opened very shortly.
It is hoped that the two sides (Baghdad & Erbil) will negotiate and come to an agreement on the issues that need to be resolved, as this will be of great benefit to the Iraqi people as a whole.
We all know about the low and changing oil prices. In Iraq, as in any other country, falling oil prices lead to a government budget deficit, and will ultimately affect the economy. A prolonged military conflict and global low oil prices have damaged Iraq’s economy and made it extremely vulnerable. Falling oil prices is good news for oil importers such as Western Europe, China, India and Japan. However, it is bad news for oil exporters such as Venezuela, Kuwait, Iraq and Nigeria.
At the OPEC meeting in Vienna on 29th November, OPEC’s Secretary General, HE Mohammad Sanusi Barkindo stated that “Global oil demand shows no sign of peaking in the foreseeable future; it is expected to pass 100 million barrel per day (Mb/d) mark for the first time in 2020…Oil to continue to dominate the world’s primary energy mix at least until 2040”.
The tension between Baghdad and Kurdistan is creating a feeling of risk and uncertainty about future development within the region and the situation is being closely monitored within the sector. There is a move to develop relationships with neighbouring countries Saudi Arabia and Turkey, as well as other countries. The oil price is still affecting most countries.
It has been reported that there have been no exports from Kirkuk since Iraqi forces took back control in October. The old main pipeline 600,000 bpd Kirkuk-Ceyhan pipeline has been offline and severely damaged following insurgent attacks and it will take a minimum of three months to repair and possibly up to a year.
Since October, Baghdad and Erbil have been arguing about export routes. It is considered necessary to rehabilitate the old pipeline and bring it back into service. However, at the OPEC meeting, the Oil Minister Jabar Ali al-Luaibi stated that a tender had already been issued to build a new pipeline with a 40” diameter and two pumping stations. This pipeline is planned to extend from Baiji District in the Salah Al Dein Governorate to the Fishkhabor Borderline District.
The minister also said that plans are in motion to increase oil production to one million barrels per day.
Basra Oil, Gas & Infrastructure Conference in Beirut
This was a very high profile networking event and was attended by senior representatives across the energy industry. There were a series of high level round table discussions between the Iraqi government representatives, contractors and investors which focused on strengths, weaknesses and opportunities in the economy in the areas of:
- Reconstruction & Infrastructure
- Oil & Gas
Basra presents a wide variety of opportunities for both international and local companies and investors. It is estimated that Iraqi oil production is now around 3.8 million bpd and likely to rise to 4 million.
New Projects under construction were mentioned such as:
- Export pipelines from Basra Oilfields to Fao Depot
- Yamama Degassing station
- Common sea water supply project where the Front End Engineering Design (FEED) and the prequalification are completed
- Storage tanks, turbine pumps, pumps, turbine generators in Fao, Zubair1, Zubair2, Tuba and PS1 Depots are being constructed
New Upcoming Projects that will be contracted were revealed by Basra Oil Company (BOC)
- Bin Umer Depot
- Two sea lines from Fao to Basra Terminals
- Development of Bin Umer & Ritawi Oilfields
- Export pipeline from Basra to Alaqaba
- Storage tanks and pipelines
The Ministry’s intention is to build new grass root refineries and refurbish existing refineries in order to increase Iraq production, which will in turn improve the Iraq economy.
With all the above projects, the plan of the Iraqi Ministry of Oil (MOO) is to raise production capacity in 2018.
Iraq is the world’s third biggest crude oil exporter, and it plans to triple its refining capacity by 2021 to stop its reliance on refined-product imports. In order to increase its processing capacity from 500,000 to 1.5 million bpd, the Ministry of Oil is planning to build a new 300,000 bpd refinery in Basra’s Fao, which is capable of being extended by adding new units for the petrochemical industry.
Iraq is actively seeking international investment and expertise to help in the development of its oil and gas sectors. The Ministry of Oil’s ambitious plan to increase oil production and exports during this decade depends mainly on foreign investment in order to achieve this goal.
Iraq’s estimated investment requirements in the Petroleum Sector come to $200 billion:
- $100bn to develop upstream oil and gas fields
- $40bn to develop the gas industry
- $30bn to increase refinery capacity
- $30bn to expand export facilities
It is clear that the Iraqi officials are eager to drive forward economic development through major projects. There are also numerous other opportunities in a broad range of sectors, including 32 Separate Power projects
The Ministry of Electricity (MOE) shared at CWC their plan for conversion from a simple cycle to a combined cycle in South Region power plants in order to improve efficiency. They intend to do this through the use of natural gas.
There are investment opportunities here for the private sector in different Governates such as Basra, Maisan, Nasiriya and Samawa. Security and stability in the region is, as usual, vital in order to attract investors.
The MOE also mentioned its plans to increase the use of renewable energy and stated that it was vital to involve the private sector in this and make sure the workforce is properly trained.
Iraqi Banking and Investment
If Iraq seeks to sustain its economic progress, develop new financing opportunities and modernise the country’s banking infrastructure, it is imperative that the serious problem of corruption is dealt with once and for all. The Prime Minister, Haider Abadi, appears to be taking this issue very seriously and states that “fighting corruption is no less important than fighting terrorism, and Iraqis will unite against the corrupt”.
Fighting corruption is an arduous process which, if it is to succeed, needs to start with serious and substantial reforms in all the state institutions, which will then have to be monitored very closely to make sure they are being adhered to.
UK Loan to Iraq
On 5th March 2017, Britain agreed to arrange £10b in loans to finance infrastructure projects in Iraq over a 10 year period. The two countries signed a Memorandum of Understanding in Baghdad, which serves as a framework for these funds to be used for specific projects including water, sewage, electricity, healthcare and transport.
The Way Forward
Employees need to be trained in the areas of Anti Money Laundering and Technology Transfer.
Investment is needed in technology and sharing knowledge and expertise is vital.
Safety is a top priority and world class procedures, standards and governance need to be introduced.
Equipment and infrastructure need to be modernised.
Training and safety will make all the difference to the future of Iraq, as locals with relevant and up to date training will allow Iraq to prosper. The increasing future use of local contractors is the key to Iraq’s strength. This is the ultimate business strategy and investment in training and technology will eventually pay off.