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1、Q4 2010 oil the patent registry and industrial design registry remain a part of the Central Organisation on Iraq Oil the Paris Convention for the Protection of Industrial Property (1967 Act), the World Intellectual Property Organisations (WIPO) Convention, the Arab Agreement for the Protection of C
2、opyrights and the Arab Intellectual Property Rights Treaty. Under Saddam Hussein, corruption was widespread and the former regime has left a legacy of heavy state procurement. Indeed, even seven years since the US-led invasion, corruption remains a significant problem and Iraq scored a dismal 1.5 ou
3、t of 10.0 in the latest Transparency International Corruption Perception Index, coming 178th out of the 180 countries measured. Investors still may have to contend with requests for bribes or kickbacks from government officials at all levels. However, work is being done to address the problem. The C
4、ommission of Public Integrity (CPI) now known simply as the Commission on Integrity was created by the CPA in 2004, to promote the rule of law and the message that no one is above the law. The CPI is an independent, autonomous governmental agency responsible for countering corruption, law enforcemen
5、t and crime prevention, as well as public education on these topics. It acts as an enforcement arm of Iraqs anti-corruption laws and performs its duties in conjunction with the Board of Supreme Audit and the Inspector General from each ministry. That said, the number of corruption cases brought to a
6、 successful conclusion remains quite small and the statutory and regulatory provisions intended to control corruption will require substantial revision to be effective. Indeed, a number of laws need to be addressed by parliament such as the process for administering bids for government contracts and
7、 appointments to public positions. Infrastructure The US-led invasion of 2003 severely damaged Iraqs already poor physical infrastructure and, in spite of efforts to improve the situation as part of the post-war recovery, the infrastructure remains dilapidated and in need of investment. Investors mu
8、st be prepared to deal with an unreliable delivery of essential sewer, water and electrical services. Electricity provision is a particularly large problem, with supply into the national still only around 60% of estimated demand. On a positive note, the telecommunications infrastructure is currently
9、 being repaired extensively under direction from the United States Agency for International Development (USAID). USAID is overseeing the repair of switching capability and the construction of mobile and satellite communications facilities. Landlines now exceed pre-war levels: in 2008 the number of m
10、ain telephone lines per 100 inhabitants was 4.8, up from 2.9 in 2001. That said, there are limited international phone services and local calls are Iraq Oil the Basra/Khor al-Zubair Free Zone 40 miles southwest of Basra on the Arab Iraq Oil Source: Historical data - BP Statistical Review of World En
11、ergy June 2010; Forecasts - BMI Iraq Oil Source: Historical data - BP Statistical Review of World Energy June 2010; Forecasts - BMI Iraq Oil na = not applicable. Source: Historical data, BP Statistical Review of World Energy June 2010, Forecast: BMI. Iraq Oil na = not applicable. Source: Historical
12、data, BP Statistical Review of World Energy June 2010, Forecast: BMI. Key Risks to BMIs Forecast Scenario Considerable risks exist both in terms of volumes and value. There is absolutely no certainty that Iraq can increase current production and oil exports, let alone deliver substantial long-term g
13、rowth. This partly depends on the political climate and the ability of the country to attract IOC funds. There is arguably greater risk of production/export disappointment than a surprise on the upside. Oil prices will also play a part. Too much Iraqi oil may soon undermine OPEC efforts to manage pr
14、ices. At a flat US$50.0/bbl OPEC basket price, Iraqi oil export revenues should be US$38.64bn in 2014. At an average US$100.0/bbl oil price, revenues would be US$77.27bn. Long-Term Oil and Gas Outlook Details of the BMI 10-year forecasts can be found in the appendix to this report. Between 2010 and
15、2019, we are forecasting an increase in Iraqi oil production of 61.6%, with crude volumes rising steadily to 4.00mn b/d by the end of the 10-year forecast period. Oil consumption between 2010 and 2019 is set to increase by 55.1%, with growth slowing to an assumed 5.0% per annum towards the end of th
16、e period and the country using 1.09mn b/d by 2019. Gas production is expected to climb to 45bcm by the end of the period. With 2010-2019 demand growth of 233%, export potential should rise to 25bcm by 2019. Iraq Oil neither is there much prospect of fresh revenue raising measures outside the critica
17、l oil and gas sector. US funding has largely ended, though the IMF is continuing with a US$3.6bn standby arrangement for the time being. Iraq will nonetheless struggle to create enough jobs and channel investment towards productive areas of the economy, which will remain heavily skewed towards its h
18、ydrocarbons sector. Public-sector corruption described by the US Special Inspector General for Iraq in its July 30 report on Iraq as the second insurgency will remain a significant drain on resources over the forecast period and beyond. Yet the biggest challenge facing the country is the absence of
19、a government and the concomitant failure to take investment decisions on key national economic projects. This will constrain economic performance in 2011, foreclosing any possibility of capitalising on the stronger oil price climate. Investment in the hydrocarbons sector will increase this year and
20、next as development programmes get under way in major fields, but this is unlikely to spread to non-oil sectors to any significant degree. Manufacturing and agriculture are particularly badly affected by the lack of investment, with the former also particularly challenged by the inadequate electrici
21、ty supplies endured by all Iraqis. Despite a significant 24% forecast rise in nominal GDP this year, we are therefore more cautious than the IMF, which forecasts real GDP growth around the 4% mark in 2010. However, higher oil prices may yet exert a more supportive impact on economic growth in Iraq t
22、his year. Hydrocarbons Will Dominate As IOC Investment Flows In If Iraq had been able to form a government in the tortured aftermath of the March 7 elections, there would Iraq Oil but it will have a negative impact on the countrys key economic sectors, which urgently need new spending. There has bee
23、n some progress, but not enough to give greater confidence in economic development. In mid-June the Iraqi authorities announced the release of oil income to oil-producing governorates, highlighting a likely future trend that will see the hydrocarbons-rich areas having a call on the available budget.
24、 The main focus of non-oil growth is overwhelmingly on the construction sector, the area that is earmarked for 43% of the US$186bn in public and private expenditure proposed under the national development plan, which was unveiled amid much fanfare in June. Around 30% of the 2010 budgets US$72.1bn sp
25、ending has been earmarked for infrastructure and development projects. The real estate sector will drive growth as the government puts into place plans to build at least 3mn new homes, mainly low-income. The National Investment Commission (NIC) says 12 investment licences have been awarded in seven
26、provinces for the development of housing, worth US$1.9bn this year. However even in the construction sector, the failure to form a government is reaping a bitter harvest; obtaining licences and approvals is proving a lengthy process for developers outside the Kurdish north. The NIC has, however, unv
27、eiled a new plan, approved by the government in June, to build 1mn homes this year for civil servants and public employees that would tap foreign development finance for 75% of the cost of the houses, each of which will sell for US$50,000. Transport will also receive new investment, with the US$3bn
28、Baghdad metro intended to overhaul urban transport in the capital. Iraqs Civil Aviation Authority is looking to attract US$5bn to expand Baghdad International Airport, with the construction of three new passenger terminals doubling capacity to 15mn a year by 2015. A new airport in the south to servi
29、ce the Shia holy cities of Najaf and Kerbala is also planned. Industry is another focus for investment. Some deals are being done, and construction work began in August 2010 on a US$200mn rehabilitation cement plant in Karbala undertaken by Frances Lafarge and UK-based private equity house Merchant
30、Bridge. However, these are the standout deals in a sector that has underperformed expectations. Industry Minister Fawzi Hariri says that it will take investment of US$5-7bn to overhaul Iraqs industries, with 30% of factories in the country currently standing idle. Until now, the government has faile
31、d to mobilise investment towards the manufacturing sector, with less than Iraq Oil 2 OPEC/CBI/BMI; 3 IMF/BMI; 4 World Bank/BMI calculation/BMI; 5 COSIT/UN. Iraq Oil * excludes 25% carried state interest Second Bidding Round Following the disappointment of its first bidding round, Iraq pressed ahead
32、with its second licensing round, which was held in December 2009. Baghdad put 10 groups of fields, covering a total of 15 fields, on offer in the second tender: Najmah, Qaiyarah, East Baghdad (Central and North), the Eastern Fields (Gilabat, Khashem Al-Ahmar, Nau Doman, Qumar), Badra, Middle Furat (
33、Kifl, West Kifl, Merjan), Halfaya, Garraf, Majoon and West Qurna-II. Importantly, as in the first licensing round, all contracts were 20-year TSCs. The government has said that developing the fields could add another 2.6mn b/d to Iraqi oil output. The fields on offer under the second round held extr
34、a attraction for foreign investors as they were undeveloped. This means that significant additional reserves and production potential could be available, and that the fields have not been subject to the poor reservoir management techniques that have damaged the productivity and longevity of the pre-
35、developed fields on offer in the first round. According to Sabah Abdul Kadhim from Iraqs oil ministry, of the 45 companies that had pre-qualified for the licensing round, 40 companies paid the US$250,000-500,000 participation fees. Despite the added attraction of the second round fields, the governm
36、ent recognised the need to amend contract terms in order to avoid a repetition of the embarrassing result of the first round. According to Dow Jones Newswires, Iraqs Petroleum Contracts and Licensing Directorate (PCLD) set two main bidding requirements: the remuneration fee and production plateau ta
37、rget, with 80% of the weighting in the awarding of the contracts to be put on the remuneration fee. The service fee paid to foreign companies were reported to be higher than in the first bidding round when it was US$1.90-2.00/bbl, because the fields are undeveloped, but no further details were relea
38、sed. Another change to the bidding terms was that signature bonuses to be paid by IOCs were been reduced. During the first round, IOCs were required to pay a total of US$2.6bn in signature bonuses. According to reports, in the second round the bonuses ranged from US$100mn to US$150mn, depending on t
39、he field. Iraq Oil Shell will hold only 15% owing to its commitments elsewhere in the country. The mandatory 25% carried state interest will be held by Oil Exploration Company. Reserves at West Qurna-I are estimated at 8.7bn bbl. Lukoil Summary After more than a decade of lobbying, Lukoil finally cl
40、inched a contract for the second phase of the giant West Qurna project in December 2009, winning a TSC for the second phase of its development in partnership with Statoil. The JV is targeting a production plateau of 1.8mn b/d by 2017 and hoping to hold it until 2040. West Qurna-II is estimated to ho
41、ld reserves of 12.9bn bbl of oil. In January 2010, Statoil said that it plans to invest US$1.4bn in the project over the next four to five years. Drilling is expected to start in 2011 and first production is expected in late 2012. The field development plan provides for additional seismic data gathe
42、ring and drilling of over 500 wells. Under the final contracts signed with the government Lukoil will hold 56.25% in the project, Statoil will hold 18.75% and the state will be represented by North Oil (25%). Others Summary Garrafs two developers Petronas and Japex are planning on drilling two appra
43、isal wells at the field starting in November 2010. In July, the two companies were reportedly close to awarding drilling contracts related to their field development plans. In July 2010, Calgary-based Vast Exploration farmed in to Iraqi Kurdistans Qara Dagh Production Sharing Contract (PSC) operated
44、 by the KRG. Under the terms of the farm-in agreement, Vast Exploration received an additional 10% stake in the PSC through the payment of 30% royalties on future output at Qara Dagh. The company now holds a 37% stake in the PSC. South Koreas Yonhap news agency reported on August 10 2010 that KNOC m
45、ade oil discoveries at the Bazian and Sangaw North blocks in the KRG region, according to an unnamed source at South Koreas Ministry of Knowledge Economy. Yonhap did not cite reserves estimates, but South Koreas Maeil Business newspaper reported that the blocks estimated total reserves were 2bn barr
46、els (bbl). Iraq Oil ! Company-specific capacity data, output targets and capital expenditures, using national, regional and multinational company sources; Iraq Oil ! Government projections for oil, gas and electricity demand; ! Third-party agency projections for regional demand, such as the IEA, EIA
47、 and OPEC; ! Extrapolation of capacity expansion forecasts, based on company- or state-specific investment levels. Cross checks Whenever possible, we compare government and/or third party agency projections with the declared spending and capacity expansion plans of the companies operating in each in
48、dividual country. Where there are discrepancies, we use company-specific data as physical spending patterns to ultimately determine capacity and supply capability. Similarly, we compare capacity expansion plans and demand projections to check the energy balance of each country. Where the data sugges
49、t imports or exports, we check that necessary capacity exists or that the required investment in infrastructure is taking place. Oil And Gas Ratings Methodology BMIs approach to our Oil Downstream Oil Risks To Realisation Returns Evaluates both Industry-specific dangers and those emanating from the states political/economic profile that call into question the likelihood of expected returns being realised over the assessed time period. Iraq Oil low penetration scores highly. Growth outlook Oil demand growth