Iraq Oil Report

Plus:
*KRG denies DNO export permit rumor
*Kirkuk gas pipeline blast not affecting oil exports
*Details on the Iraq oil and gas bidding process
*Bush cuts Iraq oil grab ban from defense bill
*Alive in Baghdad: A fuel crisis?
*Top McCain official wanted Saddam off rogue list to secure oil deal
*Iraq Press Roundup
*Much, much more

Pipelines vital to Iraq’s oil industry are in such poor condition they could rupture at any time, choking off the supply of oil from the region and devastating the country’s economy, Daniel Dombey and Carola Hoyos report for the Financial Times. A previously undisclosed notification to the US Congress says the ageing underwater pipelines, which link storage facilities near Basra to offshore tanker fueling terminals, are in urgent need of back-up or repair.

The Iraqi Kurdish region denies reports that Norwegian firm DNO received the OK to begin exporting oil, prompting speculation of a broad political deal, United Press International’s Ben Lando reports. The Tuesday report pushed DNO shares up 54 percent, though the company says no permit has been granted. Export rights also hinge on political progress. “When we are ready to export, we will export,” said the Kurdistan Regional Government’s Minister of Natural Resources Ashti Hawrami. He refused to respond to the claims, giving only basic details on how the KRG does oil business. He said the way contracts work, the operator must be technically capable of entering Iraq’s export routes — in this case, tying into the northern pipeline to Turkey — and then apply for a permit.

Oil exports not affected by Kirkuk gas pipeline explosion, the cause of which is unknown, Reuters reports.

For more on the Iraq Oil Ministry’s bid round, announced Monday,International Oil Daily’s Ruba Husari breaks it down:

- Payment: cash or oil. “Remuneration under the service fee will be deferred until the incremental production comes on line for the oil fields, which is expected to be within 24 months of the effective contract date or once incremental production hits 10 percent above baseline production. Remuneration will start on first production for the gas fields.”
- “Tender protocols and data packages will be made available to the participating companies by the end of the month”
- “They will be required to pay a participation fee for each field they intend to bid on ranging between $250,000 for the two non-producing gas fields on offer and $500,000 for the giant producing fields.”
- Ministry conducts bidding workshops early next year; questions and comments through March
- Bids submitted May-June
- Rumaila and Kirkuk fields only open to companies pumping more than 500,000 barrels per day now
- West Qurna-1, Zubair, Missan, Bai Hassan open to all pre-qualified
- Smaller companies allowed to participate in consortiums with proper operators; limit of three bids per consortium
- Winners have three weeks to sign deal, which will be OK’d by council of ministers; 90 days to open Iraq office; operations directorate established in 30 days from deal
- Contract signed with North, South or Missan Oil Co’s., who will get 51 percent stake
- Income tax at 35 percent rate
- Signing bonus: $10M and fee per barrel above baseline production

President Bush has struck from the new defense authorization bill a section banning the U.S. from controlling Iraq’s oil, The New York Times’ Charlie Savage reports.

Alive in Baghdad: Is there a fuel crisis?

The Oil Department in province of Anbar had disbursed cards for the petroleum products distribution to families in ready for winter, as precautionary plan to avoid the scarcity of petroleum products when demands increase at low temperatures during winter, Iraq Directory reports.

John McCain’s presidential transition chief worked with two pro-Saddam Hussein lobbyists to ease sanctions and attempted to buy and sell Iraqi oil, Murray Wass writes in Alternet.org. William Timmons and the two lobbyists — who have been convicted or pleaded guilty to federal charges – carried out their effort in 1992, and could have earned $45 million if it were blocked as Saddam was considered an enemy of the United States.

The chief strategist and co-founder of a pro-Iraq war organization scheduled to endorse Republican Bob Schaffer in his run for the U.S. Senate on Wednesday was paid to promote investment in the Kurdistan region of Iraq at the same time Schaffer had a hand in securing an oil contract in Kurdistan—despite warnings the deal could prolong the war, Ernest Luning reports for The Colorado Independent.

Gulf Keystone Petroleum Ltd. said it continues to make rapid progress on both blocks in the Kurdistan region of Iraq, and added that preparations for spudding the first well in the Shaikan block are advanced, Thomson Financial reports. A drilling rig is expected to arrive in the country before the end of this year with a target date for the commencement of drilling in early 2009, the company said.

Security, Society & Politics

US more cautious in Iraq appraisals, Howard LaFranchi reports for The Christian Science Monitor. Last week, both Gen. David Petraeus – the US commander in Iraq during the “surge” of US troops who is about to assume the top spot in the US Central Command – and Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, said that they see recent progress in Iraq as “fragile” and “reversible.” And Gen. Ray Odierno, the US commander in Iraq who replaced General Petraeus, is speaking publicly of his concern that power struggles exacerbated by the upcoming elections could undo recent political gains.

Haj Ali’s family had been home for less than a month when a makeshift bomb blew off part of his garage. The message was clear: Go back to wherever you came from, Corinee Reilly reports for McClatchy Newspapers. Iraqis are being attacked and killed for returning to their homes

Read what Iraqis read: the Iraq Press Roundup by UPI’s Alaa Majeed.

Iraq’s Economy

A steep drop in the price of oil may force Iraq to scale back its $79 billion budget for 2009, the Finance Ministry said Wednesday, Sinan Salaheddin reports for The Associated Press. Also, a U.S. projection for a cumulative $79 billion budget surplus this year based largely on oil revenues is now unlikely. The surplus projection by congressional auditors brought angry demands from Americans for Iraq to shoulder more of the financial burden of reconstruction.

Engineering teams from the State Company for Iraqi Ports on Wednesday completed all studies concerning the construction of a new port in Basra’s Umm Qasr, a spokesperson for the Iraqi Ministry of Transport said. “The new port will include four quays, four stores and an administration building,” Jawad al-Kharsan told Aswat al-Iraq. “The port will be located between the northern and southern ports, and will provide a new opportunity for investors in a manner that will increase operational energy efficiency in Iraqi ports,” Kharsan noted.

British forces in southern Iraq view the handover of Basra International Airport as a key objective to economic development in the region, officials say, UPI reports. British military officials said expanding the dual-use facilities at the 20-year-old airport is vital to restoring the economy in the port region and the rest of the country, the British Ministry of Defense said Wednesday.
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