The ancient city of Babylon in southern Iraq is considered to be one of the Seven Wonders of the World. But that prestigious title doesn't seem to bother the country's booming oil industry. The country's government has built a pipeline through the archaeological site, claiming nothing historic has been put at risk. Middle East expert Deepak Tripathi warns that the pipeline may sooner or later destroy the historic site.
A subsidiary of China National Petroleum Corp in Lanzhou, Gansu province. The State-owned company’s investment to develop and explore the Al-Ahdab oilfield in Iraq is about $3 billion. (China Daily Photo)
China National Petroleum Corp (CNPC), the nation's biggest oil company by output, said that the first phase of the Al-Ahdab oilfield in Iraq with an annual capacity of 3 million tons started operations on June 21.
The project marks "significant progress" in CNPC's construction of key oil and gas cooperative areas in the Middle East, Jiang Jiemin, general manager of CNPC, said in a statement posted on the company's website on Monday.
The oilfield, located 180 kilometers southeast of Baghdad, is the first major oil project to begin operation in Iraq for more than 20 years.
Al-Ahdab is expected to produce 25,000 barrels of oil a day in the first three years and 115,000 barrels a day in six years as stipulated in the contract, according to the company.
The oilfield, in south-central Iraq, was discovered in 1979 and has estimated reserves of 1 billion barrels.
The deal was initially signed with the government of Saddam Hussein in 1996 but was postponed after the United Nations imposed sanctions on the war-ravaged state and the subsequent invasion led by the United States in 2003.
CNPC finally signed the agreement under a technical service contract scheme, instead of the original production-sharing agreement, with Iraq's Ministry of Oil in November 2008 after protracted negotiations, allowing CNPC to develop the Al-Ahdab oilfield for the next 23 years.
The State-owned company's investment to develop and explore the oilfield is about $3 billion.
The adjusted contract, in which CNPC will receive a fixed fee for a barrel of oil instead of gaining an equity stake, as it would have done under the previous regime, would reduce CNPC's profits, in particular in an era of high oil prices, said He Wei, a senior analyst at Hong Kong-headquartered brokerage BOCOM International Co.
But he pointed out, "the oilfield is the biggest project for CNPC as a major operator in the oil-rich Middle East, which brought other qualified Chinese companies to participate in the big overseas projects.
Beijing-based Zhenghua Oil Co also signed a service contract to work in the Al-Ahdab oil field for 23 years.
CNPC's Jiang said the company will optimize its overseas structure and distribution of its foreign oil and gas assets against a background of the risks and challenges that arise when "going overseas", according to a statement posted on the company's website also on Monday.
CNPC's listed arm PetroChina announced on June 21 that it failed to reach an agreement for a C$5.4 billion ($5.46 billion) deal with Canada's Encana Corp to jointly develop a natural gas project in the North American country.
Source: China Daily
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China trains petroleum-related workers in South Sudan
13:28, July 12, 2011
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China has started a welder training course to help South Sudanese master knowledge and techniques relevant to the petroleum industry in which the newly-born nation has a large potential.
A total of 30 trainees selected from about 800 applicants are under the vocational training, the first of its kind in South Sudan, and are expected to be backbone workers in the petroleum industry in the future.
The project is conducted by the China Engineering and Construction Corporation (CPECC), an affiliate of the China National Petroleum Corporation (CNPC), in conjunction with South Sudan's Ministry of Energy and Mining.
The training, free for all the students, started on July 4 and will last for more than a month. The trainees will go through theoretical knowledge lecture at Juba University for one or two weeks and the practical operation at working sites in Unity State for about three weeks, said a CPECC training coordinator surnamed Fan.
He said the trainees, mostly in their twenties, take the course seriously and are very active to communicate with teachers.
Some students from remote states who could not afford the accommodation fee in downtown Juba chose to rent a room in the suburb and spend more than three hours going to the class every day, Fan said, "nearly no one is late."
"We hope the trainees can be as skillful as Chinese in managing their own oil resources," he said.
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China, US sign an agreement on clean coal technology
17:25, April 20, 2010
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China Power Engineer Consulting Corporation (CPECC) recently signed agreements with General Electric and the U.S. Trade and Development Agency (USTDA) on the technology of cycle power generation with coal and carbon capture and storage technology.
Under the agreement, USTDA will provide capital to support and promote the feasible research of commercialization. During the initial research stage, USTDA will also evaluate the costs and performance of power plants.
The technology of cycle power generation with coal and carbon capture and storage technology has undergone commercial demonstration, and after widespread applications, the abundant coal resources will be used to generate power at a low cost while at the same time, largely reduce carbon dioxide emissions worldwide. China and the U.S. government and enterprises will take charge of the important task of accelerating its commercialization process.
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China, Iraq pledge further reciprocal cooperation as PM visits
GOV.cn Monday, July 18, 2011
Chinese Premier Wen Jiabao (R) shakes hands with Iraqi Prime Minister Nouri al-Maliki in Beijing, capital of China, July 18, 2011. (Xinhua/Yao Dawei)
China and Iraq on Monday vowed to conduct further reciprocal cooperation in oil exploration, electricity and other fields, and signed two cooperation deals.
The pledge was made during talks between Premier Wen Jiabao and visiting Iraqi Prime Minister Nuri Al-Maliki, who's also the first prime minister to visit China in the over 50 years of history of diplomatic relations.
"The Chinese government will encourage companies to establish a long-term and stable relationship on oil and natural gas supply and demand with the Iraqi side and expand cooperation in oil exploration, refinery and equipment trade," Wen said.
He said China will continue to provide assistance for Iraq's economic reconstruction, seriously implement debt relief agreements, actively participate in Iraq's infrastructure construction, and help its personnel training.
Maliki said he hopes more Chinese companies will invest in Iraq and called for the two sides to expand cooperation in such fields as oil and gas, electricity, transportation, housing, telecommunications and agriculture.
He also vowed to take further measures to protect the safety of Chinese in Iraq and the interests of Chinese companies there.
After the hour-long talks in the Great Hall of the People, the two prime ministers witnessed the signing of a cooperation deal on economic and technology and an exchange of notes on personnel training.
In the talks, Wen also reaffirmed China's support for Iraq's efforts to maintain national independence, sovereignty and territorial integrity, as well as to strive for stability and development.
Noting China always respects the hopes and choices of the Iraqi people, Wen said China will strengthen high-level exchanges, enhance mutual understanding and trust, and conduct closer coordination and cooperation with Iraq on major international and regional issues.
"We believe Iraq is able to realize long-term stability and economic development and contribute to regional peace and stability," the premier added.
Maliki spoke highly of the traditional friendship between the two countries and thanked the Chinese government and people for assistance amid Iraq's difficulties.
The valuable assistance and support played important role for Iraq's stability and reconstruction, Maliki said, adding that the Iraqi government will steadily abide by the one-China policy and will make joint efforts with China, an important strategic partner, to promote bilateral cooperation in all fields.
In addition to the talks, President Hu Jintao is scheduled to meet Maliki during his stay in the capital city. Maliki will also travel to Shanghai.
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Editor: Zhang Xiang
Source: Xinhua
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Iraq and China Strengthen Relationship
Posted on 19 July 2011. Tags: ahdab, China, China National Petroleum Corporation, CNPC
Pages: 1 2
Iraq and China Strengthen Relationship
Iraq has asked China to set up a fund to help with the reconstruction of the war-battered country, Iraqi government spokesman Ali al-Dabbagh said on Monday during a visit to Beijing by Iraqi Prime Minister Nuri al-Maliki.
Reuters reports that he also said Baghdad was keen to get Chinese companies investing in the country, which was China’s seventh largest supplier of oil last year.
The United States has spent $54 billion in relief and reconstruction efforts since the 2003 invasion, and it and the Iraqi government have spent billions more in Iraqi money, but ordinary people have seen little improvement.
The Iraqi government, which gets most of its $72 billion budget from oil revenues, says it is committed to improving basic services, but progress is painfully slow.
“We are asking the China side to make a fund, for … reconstruction and to guarantee and assure the investment in Iraq for Chinese companies,” Dabbagh told reporters in Beijing.
“Koreans they did the same; they had to create a fund [with] which they support their companies to work in Iraq. Germany is going to make such a thing. Iraq is requesting from China to have such (a) fund,” he added, speaking in English.
Chinese oil firms from have been working hard to rebuild their presence in Iraq since several big contracts signed by Chinese oil firms were cancelled in 2003 following the toppling of former president Saddam Hussein.
In 2008, the state-owned China National Petroleum Corporation (CNPC) successfully renegotiated a contract originally signed by the previous regime to develop the al Ahdab oilfield, becoming the first country to sign an oil service contract in Iraq under the new U.S.-backed regime.
CNPC completed construction of the first phase of the oilfield in June this year, and it is also developing Iraq’s Halfaya oilfield with France’s Total and Malaysia’s Petronas. CNPC also has a 37 percent stake in a service contract to develop the Rumaila oilfield, which pumps out almost half of Iraq’s total oil output.
Iraq and China Strengthen Relationship
Posted on 19 July 2011. Tags: ahdab, China, China National Petroleum Corporation, CNPC
Pages: 1 2
Iraq and China Strengthen Relationship
China Daily reports that during a meeting with Maliki on Tuesday, Chinese President Hu Jintao hailed the traditional friendship between the two peoples, saying bilateral ties have entered a new stage since the founding of the new Iraqi government:
“China will work with the Iraqi side to steadily promote exchange and cooperation in politics, economic and humanitarian fields, and enhance communication and coordination on international and regional affairs.“
Dabbagh said Iraq wanted more than just Chinese investment in the energy sector:
“In oil, they have a good investment but we want to have more than in oil, more than energy. In reconstruction … I think there are huge opportunities for Chinese to participate in construction. Petrochemicals and steel, there is a good chance. And refineries as well, there is a good chance.“
Dabbagh also said Iraq was open to Chinese help in providing training for its military, and maybe weapons:
“Iraq is going to take over and Iraq is going to take the full responsibility and we don’t think there is going to be any gap. Training, we are negotiating with many countries. I think that China could have training support if we buy some weapons and equipment from them.“
China traditionally has had limited diplomatic sway in the Middle East, even as it relies heavily on energy imports from the region.
Analysts say China wants to avoid messy entanglements with Middle East countries and has no appetite for turning the regional upheaval into a point of confrontation with the United States.
(Sources: China Daily, Reuters)
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China brings Ahdab field online
Chinese workers conduct seismic surveys at the Ahdab oil field in Wasit province on March 11, 2009. The field has just begun producing. (THAIER AL-SUDANI/Reuters)
By Ben Lando and Staff of Iraq Oil Report
Published July 26, 2011
The Ahdab oil field is now producing 35,000 barrels per day (bpd) - and could reach 200,000 bpd by the beginning of 2013 - having overcome controversy since a Chinese state oil firm inked the deal in 2008.
Its development is both a bellwether of an emerging Sino-Iraqi strategic partnership, and a product of the oil strategy pioneered by Hussain al-Shahristani, who was oil minister at the time of the deal's signing and subsequently enlisted the world's largest oil companies in a dozen more c...
China begins oil production in Iraq
China begins oil production in Iraq
Gulf News - [7/24/2011]
China National Petroleum Corp, known as CNPC, yesterday started crude oil production from the Al Ahdab oil field in central Iraq, Iraqi oil officials said.
The officials said output is running at a rate of 40,000 barrels per day, and will rise to 60,000 barrels a day within the next few days. By the end of the year, the field, which has reserves of 1 billion barrels, should be producing 120,000 barrels, rising to 160,000 barrels a day by the end of 2012, the officials said.
Oil will be sent to a gathering station in Tuba in southern Iraq before being pumped to export terminals. "Crude oil for export from [Al] Ahdab is expected to reach Tuba on August 10," an official said.
In March 2009, CNPC secured the first major oil-development deal with Iraq since the fall of Saddam Hussain in 2003 with its $3 billion (Dh11 billion) project to develop the Al Ahdab field, which lies in Wasit governorate, some 160 kilometres south of Baghdad.
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Iraq’s al-Ahdab oil field starts production at around 40K barrels per day, official says
Iraq’s al-Ahdab oil field starts production at around 40K barrels per day, official says
washington post - [7/24/2011]
An Iraqi oil official says China’s National Petroleum Corp. has begun pumping oil from al-Ahdab oil field in central Iraq.
Oil Ministry spokesman Assem Jihad says production started Saturday at about 40,000 barrels per day and will be ramped up to 60,000 barrels per day over the next week.
An Iraqi oil official says China’s National Petroleum Corp. has begun pumping oil from al-Ahdab oil field in central Iraq.
Oil Ministry spokesman Assem Jihad says production started Saturday at about 40,000 barrels per day and will be ramped up to 60,000 barrels per day over the next week.
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Date posted Tuesday 21:51
Subject China makes a bid for favor in Baghdad
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China makes a bid for favor in Baghdad
Posted: July 26, 2011 by THE CURRENCY NEWSHOUND -
http://bit.ly/qJQBUt
The withdrawal deadline for U.S. forces in Iraq is drawing nearer and officials in the Obama administration are pressuring Iraqi politicians to make a decision on whether to extend the American military presence. Much debate has arisen around which foreign powers will wield most influence in the country, especially once all American troops are withdrawn. Indeed, some American publicists worry that Iraqi Prime Minister Nouri al-Maliki will turn Iraq into an Iranian satellite state.
However, one nation in particular, China, is rapidly developing ties with Iraq and looks set to be a major contender with the United States and Iran for influence in Baghdad. The most recent indication of this has been the signing of several Memorandums of Understanding, or MOUs, between China and Iraq. So far, the MOUs have involved broad economic and technical cooperation and the training of Iraqi cadres in China, to be followed by an MOU on electricity.
Cooperation in the field of electricity is noteworthy in light of the fact that since the Coalition Provisional Authority lifted import tariffs in late 2003, Iraq has a seen a flood of cheap imports of consumer goods from China. As a result, real demand for electricity has soared even as overall output has increased. The result has been a reduced average daily availability of electrical power since 2003 in cities like Baghdad.
More generally, there are two principle reasons, namely oil and reconstruction, to suggest that Chinese influence in Iraq will continue to grow to the detriment of other foreign countries.
Let’s start with oil. Iraq’s oil industry is still state-run, and in signing deals with foreign corporations to develop oil fields, Baghdad has successfully imposed high taxes and low fees per barrel, so that profits have been tipped overwhelmingly in the government’s favor. For corporations seeking to import Iraqi petroleum, Chinese firms have arguably fared the best in securing oil deals from Iraq’s government.
In fact, the first agreement signed with a foreign corporation after the war in 2003 came in August 2008, with the China National Petroleum Corporation, or CNPC, to develop the 1 billion-barrel Ahdab oil field in Wasit in southern Iraq. Similarly, in the first bidding round in June 2009, CNPC was able to acquire a joint venture deal with British Petroleum (BP) for the massive 17.8 billion-barrel South Rumaila oil field near Basra. In securing the bid, the companies hoped to achieve an eventual production goal of 2.85 million barrels per day.
Over the next two decades, it is expected that the greatest growth in demand for oil will come from China, with global consumption predicted to reach 105 million barrels per day by 2030. Thus, as Iraq’s daily output continues to grow, expect further cooperation between the two nations in the development of Iraqi oil reserves. It is conceivable that CNPC and other Chinese energy companies will take over most of the joint ventures as Western oil companies increasingly look beyond the Middle East for oil supplies.
Then there is reconstruction: During a visit to Shanghai, Maliki affirmed that Iraq was willing to invite more Chinese companies to aid in the country’s reconstruction programs. Pointing to what he saw as China’s advanced experience in technology and infrastructure building, the prime minister expressed his hope that a greater number of Chinese firms would participate in the construction of harbors, airports and railways, and other projects in Iraq.
Maliki’s desire is partly rooted in Iraqi politicians’ appreciation of the fact that China has forgiven all Iraqi debt and assisted in the removal of Iraq from the authority of Article 7 of the United Nations Charter, which had imposed economic sanctions against Baghdad.
Another thing is worth bearing in mind. The Iraqi government is reluctant to work with the United States and other Western nations on reconstruction because of the general failure of U.S. reconstruction efforts in Iraq since 2003, as assessed by the U.S. Special Inspector General for Iraq Reconstruction. Besides a lack of planning, poor coordination of rebuilding projects, and a problem of insurgent attacks, the United States often failed to take into account local Iraqi needs.
For example, in Hilla, a town 60 miles south of Baghdad, a huge $4 million maternity hospital built by the Americans is largely unable to function because the Iraqi staff cannot operate most of the equipment. Hence, it is not surprising that Iraq is now tempted to turn elsewhere for help in reconstruction efforts.
And so it is that at a cost of over $1 trillion and the lives of more than 4,500 troops, the United States may be on the verge of handing China – America’s main economic rival and long-term threat to its global dominance – the gift of a firm foothold in the Middle East. And this took place without the Chinese having ever supported the Iraq war in any way. Such are the ironies of modern geopolitics.
http://bit.ly/qJQBUt
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China trains petroleum workers in S Sudan
Updated: 2011-07-11 17:25
(Xinhua)
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JUBA - China has started a welder training course to help South Sudanese master knowledge and techniques relevant to the petroleum industry in which the newly-born nation has a large potential.
A total of 30 trainees selected from about 800 applicants are under the vocational training, the first of its kind in South Sudan, and are expected to be backbone workers in the petroleum industry in the future.
The project is conducted by the China Engineering and Construction Corporation (CPECC), an affiliate of the China National Petroleum Corporation (CNPC), in conjunction with South Sudan's Ministry of Energy and Mining.
The training, free for all the students, started on July 4 and will last for more than a month. The trainees will go through theoretical knowledge lecture at Juba University for one or two weeks and the practical operation at working sites in Unity State for about three weeks, said a CPECC training coordinator surnamed Fan.
He said the trainees, mostly in their twenties, take the course seriously and are very active to communicate with teachers.
Some students from remote states who could not afford the accommodation fee in downtown Juba chose to rent a room in the suburb and spend more than three hours going to the class every day, Fan said, "nearly no one is late."
"We hope the trainees can be as skillful as Chinese in managing their own oil resources," he said.
While 75 percent of Sudan's oil wells lie in the south before the split of the Africa's largest country, all the pipelines run to the north, where the refineries are located. Few South Sudanese have acquired the knowledge in the oil industry.
South Sudan (Listeni/suːˈdæn/ or /suːˈdɑːn/), officially the Republic of South Sudan,[6] is a landlocked country in East Africa. Its capital and largest city is Juba.[7] South Sudan is bordered by Ethiopia to the east; Kenya to the southeast; Uganda to the south; the Democratic Republic of the Congo to the southwest; the Central African Republic to the west; and Sudan to the north. South Sudan includes the vast swamp region of the Sudd formed by the White Nile, locally called the Bahr al Jabal.
What is now South Sudan was part of the British and Egyptian condominium of Anglo-Egyptian Sudan and became part of the Republic of the Sudan when independence was achieved in 1956. Following the First Sudanese Civil War, the Southern Sudan Autonomous Region was formed in 1972 and lasted until 1983. A second Sudanese civil war soon developed and ended with the Comprehensive Peace Agreement of 2005. Later that year, southern autonomy was restored when an Autonomous Government of Southern Sudan was formed. South Sudan became an independent state on 9 July 2011.[8][9] On 14 July 2011, South Sudan became a United Nations member state.[10][11]
South Sudan is one of the poorest countries with possibly the worst health situation in the world.[12]
Undersecretary in the Ministry of Mining and Energy, David Loro Gubek, said the lack of skills is a serious development bottleneck South Sudan must overcome. He encouraged those who did not get the chance now not to give up because there are more opportunities in the near future, "this is just the start."
Li Zhiguo, Charge d'affaires of the Chinese Embassy in South Sudan, said China is ready to cooperate with South Sudan in various fields including energy, infrastructure and agriculture.
In the cooperation with South Sudan, the attention to human resources development will be a salient feature as it is in Sino-Sudan cooperation, Li said.
Since China and Sudan began cooperation in the energy sector in 1995, Beijing has helped Khartoum build a complete oil industry and trained tens of thousands of Sudanese oil workers as well as senior professional managers, bringing an economic boom to the African country.
"Compared with other countries, China's advantage in energy cooperation is its investment based on equality and mutual benefit," he said, "we'd like to carry forward the advantage in future cooperation with South Sudan."
Concerning the wide gap between the north and south on how to share the oil revenues, Li said China would not offer any proposal or suggestion "because the issue is an internal affair of the two brothers of Sudan."
"Any intervention in this key sector from the outside would only complicate the situation and would not help resolve the issue," he said, "we will respect the decision by the two sides and adjust our plans of cooperation accordingly."
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BP Rewrites Rumaila Oil Contract
Posted on 01 August 2011. Tags: BP, Oil, Rumaila
BP Rewrites Rumaila Oil Contract
The 2009 contract between BP and the Iraqi government for oil production at the Rumaila oil field has been quietly rewritten in favour of the oil giant, according to Aknews.
the Iraqi government will now continue to pay BP when production is affected by civil disruption, disruption in oil transportation, political decisions or OPEC cuts.
Platform, which campaigns for social and environmental justice, first reported about the “illegitimate contracts” between BP and the Ministry of Oil when they were signed back in 2009, as workers unions believed this would put 10% of Iraq’s proven reserves effectively under the control of foreign companies – BP and its Chinese partner CNPC.
Now, Platform said these new changes “reveals what subsequently happened behind closed doors to make the contracts much more attractive to the multinational companies, at the expense of the Iraqi people.”
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China petrochemical plant starts shutdown procedure
16 Aug 2011 10:57
Source: reuters // Reuters
(Adds industry comment, oil market impact)
BEIJING, Aug 16 (Reuters) - A petrochemical plant in the northeast Chinese city of Dalian, ordered to shut after large-scale public protests over the weekend, has begun shutdown procedures, state media said on Tuesday, citing local officials.
A full and prolonged closure of the 700,000 tonne-per-year paraxylene plant, which is China's leading importer of heavy naphtha, would mean additional supply would become available in the Asian market, which is now short of heavy naphtha.
Authorities in Dalian in northeast Liaoning province ordered Dalian Fujia Petrochemical Co Ltd to shut on Sunday after thousands of local residents demonstrated, demanding relocation of the factory at the centre of a toxic spill scare.
Although the order was issued on Sunday, the complexity of the production cycle meant that the plant could not stop immediately due to safety concerns, state news agency Xinhua said, citing Dalian government authorities.
An industry source said on Monday that the plant was running as normal.
Xinhua did not give further details about how long the plant will be shut or any indication of a timeline for the plant relocation. But an oil industry official familiar with PX plants said it takes 24 hours to turn off production.
The Fujia plant, jointly owned by local government-backed Dalian Chemical Group and private real estate firm Fujia Group, imports 100,000-120,000 tonnes of naphtha a month, with term supply agreements with Iran and Papura New Guinea.
"If it defers the entire shipment of 100,000-120,000 tonnes a month of naphtha, it will impact the market, which is currently short of heavy naphtha," said a Singapore-based trader.
For now, traders are looking past the shutdown and say a plant of this size normally would have storage capacity of up to three weeks of production before being forced to defer shipments.
Cracks
"Once we see Fujia's naphtha flowing out to the spot market, we will see the impact," said another trader.
Oil industry officials questioned how long the shutdown would last and if and when the plant, a major taxpayer to the local government, would be relocated.
"How are they going to relocate? It will be hugely costly," said one official familiar with PX facilities.
Heavy naphtha can be processed into gasoline or used as feedstock to produce paraxylene, an intermediate for making polyester.
PX can cause eye, nose and throat irritation, and chronic exposure may result in death. State media said earlier this month that Dalian residents fled when a storm whipped up waves that burst through a dyke protecting the plant. The break was later repaired. (Reporting by Suilee Wee and Chen Aizhu in Beijing, and Seng Li Peng in Singapore, editing by Jane Baird)
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China says not yet set damages for oil spill
16 Aug 2011 11:48
Source: reuters // Reuters
* SOA branch to represent govt in suing responsible parties-Xinhua
* ConocoPhillips says has recovered over 2,100 barrels of oil (Adds SOA denial, ConocoPhillips comments)
BEIJING, Aug 16 (Reuters) - China's maritime authority said on Tuesday it had not determined the compensation it would seek for ecological damage caused by a spill at the Bohai Bay oilfield, while it plans to sue the parties responsible for those damages according to state media.
The State Oceanic Administration (SOA), on its website, denied a report by the Economic Information Daily, citing unidentified sources, that the government was considering demanding more than 100 million yuan ($15.6 million) from CNOOC Ltd and ConocoPhillips , which own the oilfield.
"Related work on compensation for ecological damage from the Bohai oil spill is ongoing," the SOA said on its website (www.soa.gov.cn).
"Final compensation has not been fixed," it said, adding that the newspaper report was "untrue".
The North China Sea branch of the SOA will represent the government in suing responsible parties for ecological damages by the oil spill, Xinhua reported.
The oil leak at the Penglai 19-3 oilfield, China's biggest offshore oil field, which started in June, have polluted 840 square kilometres of water, the SOA has said.
ConocoPhillips China said on Friday that as many as 2,500 barrels of oil and mud had leaked from the oilfield in the Bohai Bay, off the coast of northern China.
The subsidiary of the Houston-based company, which operates the oilfield, said it could not comment on speculation about future actions the SOA may take but was making efforts to finish the clean-up by the end of this month.
"ConocoPhillips is making significant progress cleaning up the mineral-oil based mud on the sea floor, which we expect to have complete by the end of August," the company said in a email to Reuters.
By Tuesday, ConocoPhillips China had recovered 337 cubic meters (2,119 barrels) of oil-based mud from around the Penglai 19-3 C platform, the company said on its website (www.conocophillips.com.cn).
Small oil droplets were seen bubbling from the sea floor near Platform C on Sunday, and this area is being continuously monitored to determine the source of the droplets, it said.
Near the B Platform, the containment device that has been placed on the seabed over the current location of the seep is containing any hydrocarbons that are released from the seep, it added.
ConocoPhillips has a 49 percent stake in the oilfield and acts as the operator, while China's offshore oil specialist CNOOC Ltd has the remainder.
Last month, the SOA said ConocoPhillips could be fined up to 200,000 yuan ($30,946) for the accident, according to law. But that figure did not include any compensation for ecological and economic damage.
The administration has accused ConocoPhillips of being too slow to clean up the spill and has demanded an apology. It has also asked the company to contain the oil spill, clean up polluted areas and conduct a thorough investigation before Aug. 31 to eliminate further risks of oil spills.
($1 = 6.390 Chinese Yuan)
(Reporting by Chris Buckley and Judy Hua; Editing by Ken Wills and Jane Baird)
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Update on Peng Lai 19-3 Incidents
Recent Activity Report
August 16, 2011
To date, ConocoPhillips has recovered 337 cubic meters (2,119 barrels) of mineral oil-based mud (OBM) from around the Peng Lai 19-3 C platform and has more than 900 personnel and more than 30 vessels involved in the response efforts. The company expects to have all of the OBM cleaned up by the end of August.
Cleanup activities have been temporarily suspended today due to poor weather and sea conditions in Bohai Bay.
On August 14, small oil droplets were seen bubbling from the sea floor near Platform C where the OBM had been removed. This area is being continuously monitored to determine the source of the droplets and, to the extent possible, these droplets will be captured prior to moving to the surface.
Near the B Platform the containment device that has been placed on the seabed over the current location of the seep is containing any hydrocarbons that are released from the seep. The estimated volume of hydrocarbons released and captured by the containment device is estimated at less than one liter per day.
ConocoPhillips, with SOA approval, is flowing some wells on the wellhead platform B that were shut in July 13 at SOA’s direction. The flowing wells are reducing the pressure in the subsurface formation and should assure that the seep is stopped.
Over the past 24 hours, shoreline protection activities included more than 100 people walking approximately 164 kilometers (accumulative 4,066 km) and driving approximately 2,875 kilometers (accumulative 59,742 km) of shoreline along Bohai Bay. These teams are not only collecting any potential oil material they find, they are also picking up debris on the beaches and have so far collected 9,932 kilograms of debris. Relevant materials collected are being tested to see if any of it matches the chemical makeup of the oil released near the Peng Lai B and C platforms in June.
Activity Report Archive
Overview of Peng Lai 19-3 Incidents
On June 4 oil was observed on the sea surface near Platform B in the ConocoPhillips-operated Peng Lai field. We checked our facilities and determined they were not the source. ConocoPhillips later confirmed that the oil was coming from a seep in the seabed floor. The majority of seepage has been stopped. A containment device was designed, constructed and put in place. There continue to be trace amounts of oil, estimated to be no more than a few liters per day, seeping intermittently and occasionally causing minor surface sheens. Booms are deployed around the immediate surface area and are containing and collecting any such oil.
On June 17 oil and gas bubbles were observed on the surface about two miles away near C Platform during drilling operations. A cementing procedure successfully stopped the release within 48 hours. Trace amounts of bubbles are occasionally observed from the sea floor. Final clean up operations are ongoing.
ConocoPhillips responded quickly to both events and promptly notified authorities and our co-venturer China National Offshore Oil Corporation ("CNOOC").
ConocoPhillips' current estimate of the aggregate amount of fluid spilled from the two incidents is approximately 240 cubic meters (1,500 barrels) of oil and oil-based drilling fluids.
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Wassit Province signs MOU with US company to build oil refinery
9/8/2011 3:14 PM
WASSIT / Aswat al-Iraq: Southern Iraq’s Wassit Province’s Council has signed a Memo of Understanding (MOU) with an American company to build an oil refinery with a daily capacity of 150,000 barrels, the Council’s Media Member, Taha al-Rudeiny reported on Thursday.
“Wassit Province’s Council has signed an MOU on Thursday with the American BMG Company for the construction of an oil refinery in western Kut’s al-Ahdab Oil Field, with a capacity of 150,000 barrels per day (BPD),” Rudeiny told Aswat al-Iraq news agency, adding that the Council had got the preliminary official approval by the Ministry of Oil for the deal.
He said the American company had expressed wish to implement the project, to take place with the beginning of the pumping of oil from al-Ahdab Oil Field, 25 km to the east of Kut.
Kut, the center of Wassit Province, is 180 km to the southeast of Baghdad.
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China Outbids Oil Majors in Iraq
Written by: Andrea Tse 10/04/11 - 5:03 PM EDT
Tickers in this article: RDS.A CEO XOM BP PTR
NEW YORK (TheStreet) -- Chinese national oil companies are now the biggest beneficiary of Iraq's oil resources, beating the oil majors, according to analysts.
"Chinese companies backed up by the Chinese government enjoy serious advantages over the international oil companies (IOC) and also have better bargaining power," according to Gal Luft, the executive editor at the Institute for the Analysis of Global Security. "One should not forget that those companies are less risk-averse and therefore can take on projects that the IOCs wouldn't want to touch."
Adds Cameron Hanover analyst Peter Beutel: "China has the money and is clearly a rising power. It can offer political help, technological help in some cases, military aid -- which none of the majors can."
"So, take Libya for example. China can offer guns and weapons and can offer political protection to the new government. So can France, but the majors can't. That's the biggest difference right there," Beutel continues.
A.T. Kearney's partner in the Energy Practice, Neal Walters, agrees that China's ability to aggressively pursue oil and gas investments in developing nations at a higher rate than Western super major competitors lies in the country's ability to offer incentives beyond cash. This also includes economic cooperation and training agreements in return for secure access to oil in Iraq.
The Chinese and Iraqi governments signed two agreements on economic cooperation and training in July 2011.
China is willing to make significant investments in infrastructure -- in Iraq's case, pipelines -- to procure the oil, says Walters. PetroChina(PTR), for instance, is in the early stages of studying a plan to build two oil and gas pipelines to move oil from Iraq and eventually gas from Iran to China, he said.
"Exxon(XOM), on the other hand, has shareholders to answer to and can't simply bid up resources without regard to return on investment," says Morningstar analyst Allen Good.
The other advantage for the Chinese companies: "they have a wolf pack strategy in which three or four of their companies -- all state-owned -- bid at the auction," says Luft of the Institute for the Analysis of Global Security. "When you have a few companies all working under the same umbrella, bidding simultaneously, that gives a huge advantage. I wouldn't be surprised if the bids are coordinated."
"As for Iraq-to now, China is the biggest beneficiary of Iraq's oil treasure," Luft sums up.
Walters of A.T. Kearney says China's ultimate objective is to repatriate the oil to support its growing energy needs. Because of this, Chinese-backed oil companies and their subsidiaries are willing to accept the tight financial terms of operating in Iraq.
Dragan Trajkov, an oil and gas analyst at Renaissance Capital, says the fiscal terms in Iraq are among "the most stringent ones in the world," with the government taking between 90% to 95% of the profits. On the bigger fields, the companies only make $1.50 to $2 a barrel, and the rest of the profit goes to Iraqi government.
The other thing, says Trajkov, is all the oil produced is put in a federally-owned pipeline and sold by an entity that's owned by Iraqi government. Therefore, it's difficult to split the production and say where the "Chinese-produced" barrels are going and where the rest are going.
Since 2009, the Iraqi government has conducted two rounds of open bidding to award oil-field development rights to foreign consortia. The total potential daily output from these fields could approach 11 million barrels a day, or represent about 10% of total global production when they're fully developed, Walters estimates.
Of the development rights awarded, Chinese interests, specifically the China National Petroleum Company, (CNPC) were the leading bidder for the Rumaila and Halfaya fields, which represent almost 3.5 million barrels a day of production; or more than one-third of the total production potential from all the fields being auctioned, according to Walters.
"For global supply ... China is expanding the pie by adding product that would otherwise not be in the market today," said Luft of the Institute for the Analysis of Global Security.
Walters added that while many large, Western integrated super majors such as ExxonMobil, Shell(RDS.A) and BP(BP) were successful bidders as well, only Shell has interests in fields with as much production potential as those that CNPC has.
Other major winners in the Iraq bidding included Petronas of Malaysia, Gazprom of Russia and Lukoil of Russia. Renaissance Capital's Trajkov says recently, PetroChina may have also concluded a deal on Halfaya and Rumaila.
Since the initial awards, CNPC has increased its holdings in Iraq with, for instance, the acquisition of an additional 12% interest in the Rumaila field from BP in late 2009. CNPC also has an interest in the Ahdab field, which is the first, new Iraqi oil field to be brought on stream since the fall of the Saddam Hussein regime in March 2003.
Luft says in total, CNPC and China's Cnooc(CEO) have won at least three major deals in southern and southeastern Iraq and are also bidding for other deals.
"Personally, I find it interesting that the Chinese oil companies are already competing 'shoulder to shoulder' with the Western oil majors after coming onto the scene just in the last five to 10 years," said Platts editor Calvin Lee.
"I don't see it as part of preferential treatment by the Iraqi government, but rather a timid and risk-averse attitude by the IOCs," Luft reiterated. "They just don't want to bite more than they can swallow and need to see a more stable regulatory environment before they take a deeper plunge."
Chinese state-owned Sinopec in 2009 entered Iraqi Kurdistan through the acquisition of Addax Petroleum, but has since met obstacles investing in the rest of Iraq due to the ongoing tension between Iraqi proper and Iraqi Kurdistan.
-- Written by Andrea Tse in New York.
>To contact the writer of this article, click here: Andrea Tse.
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Posted on 26 July 2011. Tags: Ahmed Mousa Jiyad, al-Ahdab, Centre for Global Energy Studies, China, Oil & Gas
Ahmed Mousa Jiyad is an independent development consultant, scholar and Associate with Centre for Global Energy Studies (CGES). He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN. He is now based in Norway. The opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
A recent ceremony for Al-Ahdab oilfield commencement of commercial production was attended by former minister of oil Dr. Shahristani, now the deputy prime minister for energy affairs, and his successor, Mr. Abdul Karim al-Luaibi. This is significant development from more than one aspect:
The contract for this oilfield was converted from a production sharing contract-PSC concluded under former régime in 1997 into a service contract concluded in November 2008. Practically, the contract serves as a base, with modifications, for the “model” service contracts that followed for the three bid rounds concluded so far. Thus an end to the PSCs in Iraq’s upstream petroleum was consolidated;
It also signifies a needed achievement for the ministry and the Shahristani strategy of opening of the sector before the IOCs, as the ministry been heavily criticized for not delivering substantial results;
The early local resentments seems to be fading away and this field alone would secure three important privileges for the governorte/province of Wasit: more revenues through the known “petrodollars” allowances for every barrel of produced oil; the oil and gas produced from the oilfield will be used for generating power in the Zubeidiyah power station which is being set up by China, also in Wasit; and a place at the Federal Oil and Gas Council when this council is established under the proposed Federal Oil and Gas Law currently under consideration.
That said and though it is surely welcoming and encouraging news to see the development of this oilfield is coming on stream, however, AlAhdab contract with CNPC requires serious attention with highly justified revision.
I have since January 2010 reputedly exposed the weaknesses and problems with Al-Ahdab contract and how, in comparative sense, it works against the Iraqi interests. Credible information indicates that the negotiating team at that time was “instructed” from the office of the prime minister to accept these unfavourable terms.
To be specific, this contract has many flaws regarding the following variables, which has significant financial implications for the Iraqi interests:
The “signature bonus” was extremely insignificant amount (of only 3 million dollars) that is not commensurate with the corresponding signature bonus paid for the oilfields under the second bid round taking into consideration the envisaged Production Plateau Target-PPT, as measure of proportionality.
With original 115 thousands barrels per day-tbd PPT for AlAhdab, which is between 110 tbd for Najmah and 120 tbd for Qaiyarah oilfields, CNPC should pay 100 million dollars NOT 3 million dollars. Upgrading the PPT to 200 tbd as recent data indicates, the signature bonus should be even higher. This is the least to ask, considering that another Chinese oil company had paid $2.2 billion signature bonus for two exploration blocks only in Angola.
The payment “cap” for petroleum cost and remuneration fee was fixed at 100% of the “deemed revenues”. This implies that CNPC gets its investment and remuneration fees first, and unless there is surplus in the deemed revenues, Iraq would not get any revenues from the field. Therefore, the payment “cap” ought to be reduced to 50% of the “deemed revenues”.
Level of “commercial production”, which decides the commencement of payment could be specified at 25000bd (again somewhere between that for Najmah and for Qaiyarah oilfields as reference points) or proportionately higher if the 200 tbd PPT is adopted.
Unpaid dues carry “LIBOR+3” interest.((London Interbank Offered Rate - LIBOR
)) Due to this Iraq paid in July 2010 some $250 million as its 25% share in the investment requirements to “avoid paying the interest”. So far the development cost mounts to $1.5 billion, meaning Iraq has already paid $375 million in cash.
These unmet payments should be interest free, similar to the provisions of the model contracts for rounds 1 and 2. Therefore, the “LIBOR+3” interest on these unpaid dues should be deleted from AlAhdab contract.
The overhead charges for AlAhdab is 2% compared with 1% for all other contracts. Hence this charges should be cut to that paid by other IOCs.
The corporate income tax of (15%) should be amended to become (35%) and the provisions relating to “stabilization” should also be amended to that effect to be in line with other service contracts.
The R-factor should also be adjusted to be in line with those applied for green- fields offered under the 2nd bid round. The remuneration fee will thus be reduced from the maximum of $6/b to a minimum of $1.2/b, instead of the current minimum of $3/b. The scale of R-factor would also be adjusted from 4 to 5 levels accordingly.
Unfortunately, the parliament had missed good opportunity few months ago to remedy these shortcomings, safeguard Iraqi interests and assert its authority and constitutional role, and thus
continues in pacifying itself and accepting circumvention by the executive branch.
On 27 March 2011 the Parliament voted to abrogate a former law, of 1997, that ratified the Development and Production Contract and the Memorandum of Understanding related to AlAhdab oil field signed in Baghdad on 4 June 1997 between MoO and CNOC and CNI, represented by Alwaha Co. (China).
The parliament, in my view, should have insisted that AlAhdab Contract of 2008 must also be revised and if approved then ratified by law, and thus the parliament should have seen that contract before abrogating the old law. Thus, not only the parliament had missed excellent opportunity to set powerful legal precedence for having all other contracts enact by law, the parliament had in fact gave its consent to remain passive and be on the sidelines of effective authority regarding such oil contracts.
Ahmed Mousa Jiyad,
Iraq Development Consultancy and Research (I/DC&R)
Norway.
Mou-jiya@online.no
26th July 201
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Discovery of three oil sites in Thi-Qar
20/10/2011
Nasiriyah - Hazem Mohamed Habib said the director of the oil fields of Dhi Qar, the discovery of three locations of new oil contains a large inventory of crude. and Karim Yasser said in a statement singled out the "morning", said the province is going to explore new oil fields, one in the field of Ur, which contains the large stock very crude and not the only oil wells and one was drilled in the eighties of the last century. He added that the other site was identified south eliminate market Senate, and the third site in another unspecified, indicating that the sites discovered you can not call it oil fields until after the digging wells and making sure they contain oil by 100 percent. He pointed out that there are a number of sites of oil conservation have been identified earlier, in addition to a number of oil fields explored and unexplored, indicating that the province currently has four oil fields are the Abu column and Mesopotamia, Nasiriyah and Gharraf . and on the operations of the development of oil fields in the province, said Yasser that the Southern Oil Company continues to develop the fields of Nasiriyah, Gharraf, and work continues to raise the productivity of the field of Nasiriyah to 50 thousand barrels per day, adding that the Ministry of Oil plans to develop the field of pouring south of Nasiriyah, but the delay in the Canadian company which was referred to the project development of the processing equipment to work site prevented the direct development of the field.
http://alsabaah.com/ArticleShow.aspx?ID=15683
More View thread 1 Respond==========Iraq’s first EITI report raises as many questions as it answersPosted on January 17, 2012 by Johnny W| Leave a commentIraq issued its first report under the EITI mechanism just before the New Year and it was circulated last week in English, Arabic and Kurdish. It’s the first formal deliverable in Iraq’s participation in the transparency scheme since it signed up two years ago. Price Waterhouse Cooper reconciled financial reporting from Iraq’s monopoly oil marketing organisation SOMO, and the 34 companies that bought its oil in 2009 for sums totalling $41.3 billlion. The result is interesting reading but raises as many questions as it answers, about Iraq’s selling process and the various stages in it, why many company reports were submitted without executive sign-off, as stipulated in the process and, most curiously, why the Federal Reserve Bank of New York failed to send account statements for Iraqi oil receipts despite repeated requests over a period of many months. The report follows the EITI norm of building transparency step by step, but a critical point remains because of the unique nature of this first report, which was restricted merely to the sale of oil: will Iraq be asked to report on any of the billions of dollars of activity in the upstream inside the country before it is reviewed for – and possibly granted – compliant status? Here’s an executive summary of our analysis.=IRAQ'S FIRST RECONCILIATION REPORT: EXECUTIVE SUMMARYOn December 23, 2011, Iraq's national level board to implement the Extractive Industries Transparency Initiative (EITI) issued a report reconciling oil industry revenues as stated by the government of Iraq (GoI), and international oil companies (IOCs). This reconciliation report was the first formal reporting in Iraq's EITI process since Prime Minister Nouri al-Maliki declared the country's candidacy for the initiative in January 2010. As such it is seen as a key milestone in the path to compliance, either later in 2012 or in 2013.The report covered calendar year 2009. Following are highlights of the report:•Some $41.3 billion of revenue was included, reported by the SOMO, GoI's monopoly seller of Iraqi crude, and 34 oil companies which bought it.•Discrepancies of over $1 billion were initially reported in the figures between the two sides, though the reconciling company, Price Waterhouse Cooper (PwC), said these were easily reconciled and explained as a difference between cash and accrual methods of accounting – all the discrepancies occurred in either January or December 2009 as a result of carry forwards or backs to fiscal years 2008 and 2010.•The report included useful details of Iraq's policies in price setting and allocation of its crude oil for sale, which have not been widely publicised before. However these details also raised further questions about these policies, which it would be good for the purposes of good governance to find answers to.•PwC listed several problems in the process of compiling the report: which entities were supposed to report information; what kinds of information were to be reported; and how commercially sensitive information was to be interpreted. Submissions from the companies were supposed to be signed by the CEO or CFO but often weren't; the submissions were supposed to be supported by statements from auditors mapping the figures mentioned to internal company accounts but often weren't.•The Central Bank of Iraq was unable to obtain from the Federal Reserve Bank of New York 2009 statements for the Development Fund for Iraq accounts where Iraq's oil revenues are paid. This was despite multiple requests over a three-month period. Thus, there is a critical missing stage of confirmation that the money GoI received in the end corresponded to the invoices SOMO sent out.•PwC states that the level of materiality, or granularity in reporting requirements, set by Iraq's EITI board was not met in this report.•The scope of the first reconciliation report is limited in scope by global EITI standards, confined to export sales between SOMO and buying companies, omitting revenue streams on activities inside Iraq, and only covering transactions once oil has already left Iraqi soil.Recommendation: Iraq's first reconciliation is a useful start and the deficiencies revealed are typical of the start-up of an EITI process. But the main issue is to ensure better functioning of the system, and above all a more normal, wider scope of implementation, before Iraq is granted compliant status. Under current scheduling, Iraq is due to be considered for compliant status in August 2012 but this will be before a second report covering 2010 with a wider scope will have been prepared. There is ambiguity in the compliance evaluation process: EITI documentation says Iraq's scope of reporting must be widened but does not explicitly make compliance conditional on that. The international community should advocate that compliance is delayed until a second reconciliation report is completed.Report on Iraq's first EITI reconciliation report: Executive Summary, Johnny West, johnny.west@openoil.net---Iraq’s First Oil Transparency Report Fails to Include $2.5 Billion in “Signature Bonuses”February 25, 2012 in FeaturedIraq's Prime Minister Nuri al-Maliki (C) cuts a ribbon during the inauguration of a new Single Point Mooring (SPM) outlet in Iraq's southern province of Basra February 12, 2012. Iraq opened a new Gulf crude export outlet in the southern oil hub of Basra on Sunday, clearing the way for Baghdad to increase exports by around 300,000 barrels per day soon after crude begins loading. REUTERS/Atef HassanThe missing pieces in Iraq’s first EITI report (Open Oil): On December 20th, 2011, Iraq published its first EITI Reconciliation report, a report which was heralded as “a historic step toward oil sector transparency” by the international community, as the report outlined in great detail the money received from export sales by the Baghdad government. However, as already noted by Johnny,there were many questions raised by the report itself, and over the past couple of days I’ve been seeing how much information already in the public domain can answer just some of those questions.The sole revenue stream covered in the EITI report is that of export sales. At the time that the terms of reference for the this EITI report were agreed, in 2009, the Iraqi oil industry was entirely state run and without foreign participation. However, with the re-entry of international oil companies in 2009, revenue streams into the Baghdad government are no longer limited to export sales. The first licensing round, which began proceedings in 2008 and was concluded in 2009, saw only one field- Rumaila- being awarded, although two further fields, Maysan and West Qurna Phase 1, were subsequently awarded in bilateral negotiations. Under the second licensing round which took place in December 2009, seven of the ten oil fields offered in the round were awarded to various consortia of companies. The technical service contracts (TSCs) signed under this licensing round included a number of clauses that have created multiple revenue streams. These TSCs included clauses for cost recovery mechanisms, signature bonuses, and remuneration fees, none of which were included in the EITI report. I began looking at the most clear cut of these revenue streams; the signature bonuses. These bonuses, which were widely reported upon in the media, ranged from $100 million, which Sonangol paid for the Qayara field, to $500 million, paid by a consortium led by BP for the Rumaila field. One point of uncertainty was the form in which these payments were made. Some, such as the $500 million Rumaila field signature bonus, was reportedly paid by the company as a ‘soft loan’, to be paid back in 20 quarterly payments, in either crude oil or cash as decided by the company. Others appeared to have been renegotiated, such as the $300 million paid by Eni and Oxy for the Zubair field, reportedly slashed to $100 million in April 2010. Bearing in mind these uncertainties, the total of the signature bonuses reported to have been paid by international oil companies to the Baghdad government during the period of November 2009 until January 2010 comes to $2.25 billion, as you can see in the spreadsheet I created. Even taking into account the discrepancy of reducing the Zubair field signature bonus, that still leaves a figure of around $2 billion dollars that is unaccounted for in the EITI first report.Spreadsheet detailing Iraqi oil contract signature bonuses compiled by Open Oil:
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The missing pieces in Iraq’s first EITI report
Posted on February 22, 2012 by Zara Rahman| Leave a comment
The next few months are an incredibly crucial time for Iraq as an implementing country of the Extractive Industries Transparency Initiative (EITI). It has until August 2012 to achieve EITI Validation, following the beginning of its candidacy in February 2010. As such, any issues with regards to the activities designed to display their increase in transparency which have taken place as part of their EITI workplan need to be addressed immediately, or risk being forgotten about among the celebrations which would otherwise take place in just 5 months time.
As the principal global standard for transparency in the extractive industries, countries implementing the EITI should see a real difference in transparency in their respective industries following their validation and subsequent EITI Compliant status. But as things stand currently, will this be true for Iraq?
On December 20th, 2011, Iraq published its first EITI Reconciliation report, a report which was heralded as “a historic step toward oil sector transparency” by the international community, as the report outlined in great detail the money received from export sales by the Baghdad government. However, as already noted by Johnny, there were many questions raised by the report itself, and over the past couple of days I’ve been seeing how much information already in the public domain can answer just some of those questions.
The sole revenue stream covered in the EITI report is that of export sales. At the time that the terms of reference for the this EITI report were agreed, in 2009, the Iraqi oil industry was entirely state run and without foreign participation. However, with the re-entry of international oil companies in 2009, revenue streams into the Baghdad government are no longer limited to export sales.
The first licensing round, which began proceedings in 2008 and was concluded in 2009, saw only one field- Rumaila- being awarded, although two further fields, Maysan and West Qurna Phase 1, were subsequently awarded in bilateral negotiations.
Under the second licensing round which took place in December 2009, seven of the ten oil fields offered in the round were awarded to various consortia of companies. The technical service contracts (TSCs) signed under this licensing round included a number of clauses that have created multiple revenue streams. These TSCs included clauses for cost recovery mechanisms, signature bonuses, and remuneration fees, none of which were included in the EITI report.
I began looking at the most clear cut of these revenue streams; the signature bonuses. These bonuses, which were widely reported upon in the media, ranged from $100 million, which Sonangol paid for the Qayara field, to $500 million, paid by a consortium led by BP for the Rumaila field.
One point of uncertainty was the form in which these payments were made. Some, such as the $500 million Rumaila field signature bonus, was reportedly paid by the company as a ‘soft loan’, to be paid back in 20 quarterly payments, in either crude oil or cash as decided by the company. Others appeared to have been renegotiated, such as the $300 million paid by Eni and Oxy for the Zubair field, reportedly slashed to $100 million in April 2010.
Bearing in mind these uncertainties, the total of the signature bonuses reported to have been paid by international oil companies to the Baghdad government during the period of November 2009 until January 2010 comes to $2.25 billion, as you can see in the spreadsheet I created. Even taking into account the discrepancy of reducing the Zubair field signature bonus, that still leaves a figure of around $2 billion dollars that is unaccounted for in the EITI first report.
As stated in a model TSC published by the Ministry of Oil, the signature bonus should be “deposited in cash into a bank account designated by the Ministry of Oil” ; so finding and reporting these amounts should not require much more work on the part of the MoO.
The second revenue stream I researched was that of remuneration, the fee that the government pays back to an operating company, in this case, after they’ve reached a pre-agreed production level. Evidence of these payments only begins in May 2011, which makes them inapplicable to the period of time covered in the first EITI report. However, with the scope of EITI as it stands, they still wouldn’t be included in future reports. To show how important the remuneration payments are to government revenues, I compiled another spreadsheet showing payments that the Baghdad government made to international oil companies, the first of which began with a payment in kind of 2 million barrels of crude oil to BP in May 2011.
The main hole in this spreadsheet came from being unable to find the date and amount of the second remuneration payment to CNPC for their activities (as partnered with BP) in the Rumaila field.
To put these figures into context, I used the average monthly price of a barrel of Basra light from the Ministry of Oil website and multiplied it by the number of barrels taken as payment by the IOCs to get an estimate of the market value of each shipment. Here, the total in barrels of oil comes to 11.65 million barrels of Basra Light, which comes to an estimate of $1.25 billion. Clearly, these payments constitute a large enough amount to need to be included in the scope of the next Reconciliation report.
The research done here does not seek to be exhaustive with regards to payments from the Iraqi oil industry. Rather, it is intended to highlight that there may well be many other avenues of revenues flows both in and out of the Iraqi oil industry. These multi-million or even billion dollar payments need to be addressed before August 2012, when the EITI will face the decision of whether or not to grant Iraq EITI Compliant status.
======
The missing pieces in Iraq’s first EITI report
Posted on February 22, 2012 by Zara Rahman| Leave a comment
The next few months are an incredibly crucial time for Iraq as an implementing country of the Extractive Industries Transparency Initiative (EITI). It has until August 2012 to achieve EITI Validation, following the beginning of its candidacy in February 2010. As such, any issues with regards to the activities designed to display their increase in transparency which have taken place as part of their EITI workplan need to be addressed immediately, or risk being forgotten about among the celebrations which would otherwise take place in just 5 months time.
As the principal global standard for transparency in the extractive industries, countries implementing the EITI should see a real difference in transparency in their respective industries following their validation and subsequent EITI Compliant status. But as things stand currently, will this be true for Iraq?
On December 20th, 2011, Iraq published its first EITI Reconciliation report, a report which was heralded as “a historic step toward oil sector transparency” by the international community, as the report outlined in great detail the money received from export sales by the Baghdad government. However, as already noted by Johnny, there were many questions raised by the report itself, and over the past couple of days I’ve been seeing how much information already in the public domain can answer just some of those questions.
The sole revenue stream covered in the EITI report is that of export sales. At the time that the terms of reference for the this EITI report were agreed, in 2009, the Iraqi oil industry was entirely state run and without foreign participation. However, with the re-entry of international oil companies in 2009, revenue streams into the Baghdad government are no longer limited to export sales.
The first licensing round, which began proceedings in 2008 and was concluded in 2009, saw only one field- Rumaila- being awarded, although two further fields, Maysan and West Qurna Phase 1, were subsequently awarded in bilateral negotiations.
Under the second licensing round which took place in December 2009, seven of the ten oil fields offered in the round were awarded to various consortia of companies. The technical service contracts (TSCs) signed under this licensing round included a number of clauses that have created multiple revenue streams. These TSCs included clauses for cost recovery mechanisms, signature bonuses, and remuneration fees, none of which were included in the EITI report.
I began looking at the most clear cut of these revenue streams; the signature bonuses. These bonuses, which were widely reported upon in the media, ranged from $100 million, which Sonangol paid for the Qayara field, to $500 million, paid by a consortium led by BP for the Rumaila field.
One point of uncertainty was the form in which these payments were made. Some, such as the $500 million Rumaila field signature bonus, was reportedly paid by the company as a ‘soft loan’, to be paid back in 20 quarterly payments, in either crude oil or cash as decided by the company. Others appeared to have been renegotiated, such as the $300 million paid by Eni and Oxy for the Zubair field, reportedly slashed to $100 million in April 2010.
Bearing in mind these uncertainties, the total of the signature bonuses reported to have been paid by international oil companies to the Baghdad government during the period of November 2009 until January 2010 comes to $2.25 billion, as you can see in the spreadsheet I created. Even taking into account the discrepancy of reducing the Zubair field signature bonus, that still leaves a figure of around $2 billion dollars that is unaccounted for in the EITI first report.
As stated in a model TSC published by the Ministry of Oil, the signature bonus should be “deposited in cash into a bank account designated by the Ministry of Oil” ; so finding and reporting these amounts should not require much more work on the part of the MoO.
The second revenue stream I researched was that of remuneration, the fee that the government pays back to an operating company, in this case, after they’ve reached a pre-agreed production level. Evidence of these payments only begins in May 2011, which makes them inapplicable to the period of time covered in the first EITI report. However, with the scope of EITI as it stands, they still wouldn’t be included in future reports. To show how important the remuneration payments are to government revenues, I compiled another spreadsheet showing payments that the Baghdad government made to international oil companies, the first of which began with a payment in kind of 2 million barrels of crude oil to BP in May 2011.
The main hole in this spreadsheet came from being unable to find the date and amount of the second remuneration payment to CNPC for their activities (as partnered with BP) in the Rumaila field.
To put these figures into context, I used the average monthly price of a barrel of Basra light from the Ministry of Oil website and multiplied it by the number of barrels taken as payment by the IOCs to get an estimate of the market value of each shipment. Here, the total in barrels of oil comes to 11.65 million barrels of Basra Light, which comes to an estimate of $1.25 billion. Clearly, these payments constitute a large enough amount to need to be included in the scope of the next Reconciliation report.
The research done here does not seek to be exhaustive with regards to payments from the Iraqi oil industry. Rather, it is intended to highlight that there may well be many other avenues of revenues flows both in and out of the Iraqi oil industry. These multi-million or even billion dollar payments need to be addressed before August 2012, when the EITI will face the decision of whether or not to grant Iraq EITI Compliant status.
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It is land and not just history that binds us
Few Iraqis recognize the organic connection between the mountains of Kurdistan and southern Iraq. Many say that Iraq is an artificial state created by the british. I submit to you that geology supersedes humanity. Before the last Ice Age ended some 11 to 13 thousand years ago, the sea water level was some 450 feet (150 meters) lower than it is today and southern Iraq was a valley carved out the waters of the Tigris and Euphrates. With the end of the Ice Age water levels rose and
there are theories that postulate that a large land slide occurred from the Zagros Mountains due to increase rains in that time blocking the path of the Tigris and Euphrates and creating an inner delta which caused the deposition of the soils that come with the waters of Tigris and Euphrates from the mountains of Kurdistan creating the plain of southern mesopotamia.
Another theory says that there were alluvial fans from Kargh and Karoon rivers as well ask another fan from the Najad highlands that actually blocked the path of the Tgris and Euphrates. Regardless of which theory is right, there is no disputing the fact that the soils of southern Iraq are actually soils from the mountains of Kurdistan!!! So beware, disputed territories can go all the way to the tip of the Fao ;)
This is food for thought for those who are concerned with nature of Iraq as a country and the connection between the Kurds and Arabs of Iraq. We Arabs need to recognize the contribution of Kurdistan (be it people or nature) to the civilization of the south and the fact that if we are what we eat, we are all connected to Kurdistan by virtue of our need for the waters of the Tigris and Euphrates. The Kurds also need to understand that the easiest way to export their oil is through southern Iraq. Yet I meet many Arabs from southern iraq who resent the Kurdish dominance in the politics of todays’ Iraq and of course the reverse is true. I meet many Kurds who are resentful of the way the Arabs have treated Kurdistan in modern Iraq.
Until we all recognize that we are partners in this land called Iraq and that the south of Iraq needs Kurdistan’s contribution as much as the Kurdish people need the south of Iraq, we are not going to have stability in this country. Moreover, in an increasingly globalized world, I am one of those who have bought into the vision that Barham Salih, current Prime Minister of KRG, has expressed about the future of the region. He is quoted as saying in 50 years, there will not be boundaries in this region but rather we will create a region based on economic well being and trade. There will not be an Iran, Iraq, Syria, Lebanon, jordan, Israel, etc. Rather there will be regions that are trading together and forming a common market, ala the European Common Maket that developed into the European Union. We should make sure that those of us who live in Mesopotamia (and that has the Arabs of Iraq, and the Kurds of Iraq, Syria, Iran and Turkey) have the economic strength of Germany in todays’ European Union.
I know, I know… You are all shaking your heads and saying this is an impossible dream, but I am one who does not believe anything is impossible if there is will… You all have to choose if you want to live in the past or work for a better future for yourselves and your children and grandchildren.
Salam
Dr. Azzam Alwash is the Director of the Eden Again Project. Born in Kut, Iraq in 1958, he spent much of his younger years in Nasseriya on the fringes of the marshlands. He left Iraq in 1978 as a result of the Baathist regime and completed his Bachelor of Science (Civil Engineering) and his PhD in Geotechnical Engineering in California. Where he subsequently he worked as a soils engineering consultant for 20 years. He is on the Board of Directors of the Iraq Foundation and the Iraqi Forum for Democracy. In August 2003, Azzam took a leave of absence from his consultancy practice to direct the Eden Again operations in Iraq. His inspirational work in reviving the marshes has been the subject of international praise and documentaries. He now divides his time between Baghdad, the marshlands, and international speaking engagements.
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