IBBC Senior Manager, John Cookson attended a Iraqi Oil Ministry/Shell conference in Basrah which looked at the development and growth of Iraq’s private sector.

Below is his report:

 

DEVELOPMENT AND GROWTH OF IRAQ’S PRIVATE SECTOR FORUM International Hotel, Basrah, March 16th 2013.

Reported by IBBC’s senior manager John Cookson.

 

EXECUTIVE SUMMARY

 

* This conference was primarily about growing the private sector in Iraq’s oil an gas industries and delegates heard Oil Minister Dr AbdelKarim Louaibie outlined his vision for the next 5 years – but it was his statements about the sector generally which made headlines.

 

* He said Iraq will spend US$130 billion on the country’s upstream sector to 2017  to help raise Iraqi production capacity to 9 million barrels a day.  He also said the country will allocate $US18 billion to raise natural gas output and US$25 billion to expand refinery capacity.  Iraq forecasts US$600 billion in revenue from the oil expansion.

 

* Dr Al-Louaibi added oil exports in February reached 2.54 million barrels a day. Production from Iraq’s Majnoon oilfield will reach 100,000 barrels a day in May 2013 and 200,000 daily by the end of the year, he said.

 

* Delegates also heard Shell plans to spend US $1billion developing Al Majnoon.

 

* Returning to the main theme Dr Al-Louaibi said he wanted to use this conference to launch the Iraqi private sector’s involvement in the hydrocarbons industry.  “This must happen, as soon as possible,” he said.

 

* Sabah al-Barzouni of the Basrah Provincial Council said laws must be amended to ensure local firms are given contracts and that difficulties such as skill shortages must be overcome. He added that lack of good local raw materials was a huge problem for which a solution must be found.

 

* Chairman of Shell’s companies in Iraq, Hans Nijkamp said Shell was totally committed to developing local private industries and described the conference as: “a land mark event.” He added: “If Shell is not relevant to Iraq we have no reason to be here.”

 

* The IBBC’s Baroness Nicholson looked at the bigger picture and said she believed Iraq had a prosperous future and that in her lifetime millions of Iraqi lives would be changed for the better.  She also condemned the inaccurate picture painted by the media of Iraq today as a broken country or failed state.

 

* The Iraqi Ministry of Oil’s Deputy Director Saadi al-Dujaili said the next five years would be critical and the  opportunity for change must be seized to ensure the local private sector develops.

 

* Other highlights from the conference included noting the huge gap in the number of skilled workers.  It was estimated another 5,000 would be needed to meet expansion driven by the oil sector.   One speaker said the oil industry would generate either directly or indirectly 12 million jobs before 2020.

 

CONFERENCE REPORT.

 

* The big picture

 

This conference was thought to be the first of its kind looking at the role of the Iraqi private sector in the country’s hydrocarbons industry.

 

Oil Minister Dr AbdelKarim Louaibi said the conference was the launch of a new initiative to boost private sector involvement in a region where unemployment was high.

 

But – as he tends to do on these occasions – he used the opportunity to look at the bigger picture and revealed figures for the sector as a whole.

 

He said Iraq plans to invest US$173 billion in its energy infrastructure over the next five years in order to dramatically ramp up crude output.

 

The investment in upstream activities, refineries and will boost oil production to 9.0 million barrels of oil per day and bring in revenues of $600 billion.

 

He went on: “This plan will achieve revenues that will reach about US$600 billion in the coming five years.”

 

Iraq currently produces around 3.15 million bpd – according to Oil Ministry figures – of which around 2.5 million bpd is exported. The country has proven reserves of 143.1 billion barrels, among the highest figures in the world.

 

It has sought in recent years to sign contracts with international energy firms in order to boost output sharply and cement its role as a key global oil supplier.

 

Dr Louaibi also said Royal Dutch Shell will resume operations at Iraq’s Al-Majnoon oilfield on May 1, with initial production of 100,000 barrels per day.

 

The production re-start at one of Iraq’s major fields could help boost the OPEC member’s exports towards the 2.9 million bpd average projected in the budget, making up for a cut by the country’s autonomous north.

 

Dr Louaibi added: ” The significant factor which affected exports was the weather… but we hope, these months… we will compensate the lost amounts of the first season.”

 

Majnoon was shut down in June for maintenance and to bring new production facilities online.

 

He said: “Majnoon is planned to start producing on May 1 2013 . The production average will be 100,000 bpd to begin with and speedily rise to 200,000 bpd.”

 

* Conference theme

Returning to the conference theme Dr Louaibi said expanding the Iraqi private sector was an absolute priority to lift local companies up to international standards. “This is a new beginning,” he said.

Basrah Governor Dr Khalaf al-Khalaf was also a platform speaker and he emphasised the need for the involvement of private companies which would  expand economic growth in the region. He noted lack of skilled local manpower and low grade industrial equipment in Basrah which has a population of 3 million, but he said: “These obstacles must be overcome. ”

Sabah al-Barzouni of the Basrah Provincial Council told the conference that international oil companies had not always complied with the requirement to employ local people and suggested laws be tightened to address this. He also noted the lack of raw materials for local firms to use.

 

Mr Ali Dhari al-Fiadh of Basrah Council’s Energy Committee said the involvement of local private industry was the “cornerstone,” of future economic prosperity. He added that: “if we understand the private sector we will develop our country,” and went on: ” we all want to make the Iraqi people happy and we must do our best to promote the private sector.”

 

The Iraqi Ministry of Oil’s Deputy Director Saadi al-Dujaili told the conference: ” We cannot make it alone, we need the involvement of the local private sector.”

 

He noted Iraq was at the bottom of a league table of of regional countries in terms of gross domestic product with unemployment officially at around 15 per cent. He said the private sector had a critical role to play in developing Iraq’s economy in the next five years.

 

The conference was sponsored by Iraq’s Oil Ministry and supported by Shell and Chairman of Shell’s companies in Iraq, Hans Nijkamp said Shell was totally committed to developing local private industries and described the conference as: “a land mark event.”

 

He went on: “It is time the local companies were involved and we have to find out a way of structuring Iraqi companies into the system. We are very pleased to help the Ministry of Oil who are driving this with us. I hope this conference becomes an annual recurrence.  The other international oil companies are going to get involved.

 

“It is the private sector which builds our oil and gas projects. As an IOC you have a choice. You can bring in a lot of international companies to build the project or you can make the efforts and the choices and do the hard work which is necessary to ensure it is local Iraqis as much a possible. I think we have a responsibility in that respect and I think the other IOC’s should think about it in the same way. ”

 

“If Shell is not relevant to Iraq we have no reason to be here.”

 

The conference heard Shell has already provided employment for local Iraqis including mine clearance and in construction such as the new jetty on the Shat al-Arab waterway.  Shell has transported 48, 000 tonnes of oil field equipment to Al-Majnoon equivalent in metal to 6 Eiffel Towers

 

* “Iraq is on the way to greatness”

 

Baroness Nicholson focussed on the big picture and welcomed this new initiative to engage local businesses as a means of generating jobs and wealth.

 

She highlighted local projects including new highways in Basrah and Sports City built by IBBC member Anwar Sourra Construction whose CEO Abdullah Al-Jibouri gave the Baroness a guided tour.

 

She said it is: “a  breathtaking stadium and a wonderful achievement. ”

 

She added: ” I believe Iraq is on the way to achieving greatness and in my lifetime I will see millions of lives here transformed. And to those who say Iraq is a broken country or failed state, you are are wrong.

 

” I would ask gainsayers to consider the extraordinary steps Iraq is taking – steps which only a few years ago would have seemed impossible.

 

” I have no illusions about the scale of task ahead. Terrorists and corruption must be beaten.

 

” And I refuse to accept Iraq cannot once again become great and prosperous.  I hope Basrah will be in the forefront in the race for wealth and jobs to regain its position as the region’s commercial capital. ”

 

The Iraqi Ministry of Oil’s Deputy Director Saadi al-Dujaili said the next five years would be critical and urged that the Iraqi private sector be engaged in major works.

 

He noted unemployment in the region was around 15 per cent and that Iraq was at the bottom of the league for gross domestic product in the region.  He said Iraq’s oil fields and spin off industries could generate 12 million jobs by 2020.

 

Mr Ibrahim al-Baghdad, Chairman of the Iraq Business Council reminded the conference thousands of Iraqi businessmen fled the country during the previous regime and are only now returning.

 

* Other conference points

 

* There is a supply gap of 5000 skilled workers in the Basrah region and a lack of local capacity in key areas on the hydrocarbons supply chain.

 

* Health and safety is Shell’s number one priority and the company is passing on these skills to local companies

 

* Shell has 260 Iraqi companies on its vendor register and a new support office for Iraqi firms has been set up in Energy City

 

* A committee will be set up to help local private enterprise

 

* Petroleum consultant Dr Husain al-Chalabi urged the Oil Ministry to create a set of health and safety rules and earmark a budget for training,