New Tenders for Development of West Qurna-2

By John Lee.

Russian oil company Lukoil has published tenders for two projects at its West Qurna-2 oilfield:

Interested companies have until 23rd July to apply for documents, and bids will be accepted until 23rd August.

(Source: Lukoil)

Rosneft, KRG sign Gas Development Agreement

As part of the XXII St. Petersburg International Economic Forum, Rosneft and the Kurdistan Regional Government of Iraq signed an agreement securing the intention of the Parties to make a detailed analysis of potential gas cooperation options.

The Parties ensure stepwise implementation of the arrangements following the Investment Agreement signed at the XXI St. Petersburg International Economic Forum.

Rosneft will focus its analysis on how to participate in the integrated gas business value chain in the region in order to extract maximum efficiency from investments and operations in such areas as exploration and production, transportation and trading with especial attention given to partnership and project (third party) financing options.

Under the Agreement the Parties will elaborate an integral plan to progress the gas business within the Kurdish Region of Iraq. One step in this plan is the conduct of a pre-FEED of Iraqi Kurdistan’s gas pipeline construction and operation.

This is a key project to the monetization of the exploration and production opportunities Rosneft has been evaluating since signing a Gas Cooperation Agreement with the Kurdistan Regional Government of Iraq at the 10th Eurasian Economic Forum in Verona on 19 October 2017.

Following the outcomes of the integral development plan in terms of the attractiveness and efficiency of the options, Rosneft will decide on how to participate in the regional gas business.

(Source: Rosneft)

Rosneft Discovers Oil at Block 12

By John Lee.

Bashneft, a subsidiary of Russia’s Rosneft, has found oil at its Salman-1 exploratory well at Block 12 in Iraq.

In a statement, the company said that an exploration well was successfully drilled to depth 4,277 metres; oil was found, “which gives grounds for expecting the discovery of industrial reserves“.

Rosneft said it views this discovery as an important milestone in the development of exploration and production projects abroad.

China-based company Zhongman Petroleum and Natural Gas Group (ZPEC) was previously announced as the general drilling contractor.

(Source: Rosneft)

New Development Plan for West Qurna-2

LUKOIL and the Basra Oil Company (BOC) signed a Development Plan for the West Qurna-2 field that provides for an oil production plateau of 800 thousand barrels per day.

According to the Plan, the oil production of 480 thousand barrels per day will be reached in 2020 and 800 thousand barrels per day is expected in 2025.

These indicators will be achieved as a result of drilling and commissioning of new production and injection wells, construction and launching of oil treatment, storage and transportation facilities and facilities for gas treatment and power generation.

The experience acquired by the Company in the region, the existing infrastructure and cost compensation within the project development from the current production will ensure maximum efficiency of the project implementation.

The parties noted that due to the agreements reached, LUKOIL will remain one of the largest investors and employers in Iraq in the coming years. ​

(Source: Lukoil)

Moscow’s Iraq Strategy: Make Lots of Friends

By  for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News

Moscow’s interest in the Middle East and the growing Russian presence in the region go beyond Russian involvement in the Syrian civil war. For several years Russia has been building partnerships with various regional powers, and Iraq — with parliamentary elections only days away — has been a priority.

The Soviet Union helped Iraq industrialize its economy and was the country’s largest weapons provider until the union collapsed in 1991. Iraq’s invasion of Kuwait and the subsequent Western sanctions against it interfered with the Russia-Iraq weapons relationship. Then, after the US-led coalition’s overthrow of Iraqi President Saddam Hussein in 2003, Iraq got most of its weapons from the United States.

Under President Vladimir Putin, Russia has been trying to gradually rebuild its ties with Iraq on numerous levels. Moscow sees Iraq’s May 12 parliamentary elections as an opportunity to breathe new life into relations to create a comprehensive partnership.

In 2014, as Islamic State militants neared Baghdad and the Iraqi government couldn’t immediately receive the arms it needed from the United States, Moscow jumped on the opportunity to provide “without delay” the weapons and equipment needed, including aircraft. Maxim Maximov, Russia’s ambassador in Iraq, later commented that the deliveries represented a long-term commitment.

“We have always said that we are ready to give this country various types of assistance in strengthening its army,” Maximov said in a February interview with Interfax. “The Russian military industry has already provided the Iraqi government with a massive installment of weapons that proved their efficiency in battles against [IS], including MI-35M and MI-28N helicopters, Su-25 jet aircraft, Kornet-E anti-tank guided missiles and other military products.”

Some vital 2017 contracts for T-90 tanks are now being filled. There have been reports that Iraq is going to buy Russian S-400 surface-to-air missile defense systems, but Iraq’s ambassador to Moscow, Haidar Hadi, has denied that possibility.

Russian energy companies operating in Iraq are another critical tool for Moscow. These companies had been in Iraq long before the United States invaded in 2003 and had bid on oil and gas projects. Currently, there are two companies developing such projects in Iraq: Gazprom Neft Middle East and Lukoil.

Business for Russia’s Rosneft corporation is still uncertain. The company had contracts in the Kirkuk oilfields with the Kurdistan Regional Government, but when Baghdad overtook Kirkuk last year, the Iraqi Oil Ministry renounced those deals. Negotiations are still possible according to Russian business media reports, but the company has not confirmed the news.

Iraq is important for Russia not only as an economic and trade partner, but also as a factor in influencing regional policy. Russia clearly understands that its possibilities in the country are limited, as Iran and the United States are the main foreign players with direct influence on Iraq. Saudi Arabia, which took a number of steps to reinforce its influence in the country in the past year, still lags behind.

China, Iraq’s key economic partner, keeps a rather low profile regarding Iraq’s domestic politics. What’s important for Russia is that Iran partially and cautiously supports Baghdad’s collaboration with Moscow and the United States doesn’t openly oppose it.

That said, it’s not quite accurate to think Tehran is the one inviting Moscow to Iraq, hoping to create a counterbalance to Washington. In recent years, Baghdad politicians have increased their ability to implement independent foreign policy, and relations with Russia have been important to Iraqi officials. Russia, in turn, doesn’t seek to intervene in Iraq’s internal matters and basically operates by building pragmatic relationships with any government looking for such an arrangement. This approach helps Russians forge important political and business contacts.

For its part, Baghdad supports strengthening Moscow’s positions in an exchange that creates a new point of influence in the country potentially able to balance both Iran and the United States. Iraq thus gets a broader space for maneuvering among all the interested parties.

Certain areas of cooperation that Russia and Iraq have been exploiting have tangible potential. Military sales and energy cooperation are the most obvious ones, but Moscow is also becoming what it sees as a “natural ally” of Iraq in the fight against terrorism.

Since Russia, Syria, Iran and Iraq formed an information-sharing group in 2015, Russia has sought to deepen this area of cooperation through joint operations against radical groups. Russian lawmaker Ziyad Sabsabi has coordinated activities within that group to rescue Russian children whose parents joined IS from Iraq and Syria.

The fight against IS will gradually shift from the front line to broader counterterrorist initiatives, and Russia will be there to experience new forms of engagement with Iraq.

Institutional interaction between Moscow and Baghdad is already rather comprehensive. In addition to the counterterrorism information center and the rescue group, there’s a Russian-Iraqi action group for cooperating in the power industry and a Russian-Iraqi commission on trade, economic and scientific cooperation — a key coordinating intergovernmental body.

Russia takes advantage of all of these formats to interact with Iraqi and Kurdish governments as well as with the highest-level political leaders and contacts among “unofficial players” in the region.

Based on Maximov’s recent meetings, one can see Moscow’s attempts to maintain contacts with virtually all important actors — from major politicians in Iraqi Kurdistan such as Massoud Barzani, Iraqi Secretary-General of the Council of Ministers Mahdi al-Alaq, Vice President Nouri al-Maliki and National Wisdom Movement leader Ammar al-Hakim, among many others.

Therefore, while Russia’s strategy in Iraq aims to develop of all kinds of relationships with Baghdad and stresses support of the country’s territorial integrity, it is also multifaceted, seeking to engage with virtually all players from the country’s leadership to the leaders of the Popular Mobilization Units.

This path is meant to provide the policy flexibility necessary to maintain and increase cooperation regardless of who holds power after the upcoming elections.

Gazprom Neft commissions Second Well at Sarqala

Gazprom Neft subsidiary Gazprom Neft Middle East B.V. has commissioned a second well — the Sarqala-2 — at its Sarqala field (within the Garmian block), located in the Kurdistan Region of Iraq (KRI).

The new well is currently producing 11,000 barrels per day (bpd), with potential to increase this to 15,000. Total daily production at the field has now increased more than two-fold, exceeding 21,000 bpd.

Sergei Petrov, General Director, Gazprom Neft Middle East B.V. commented:

“The Sarqala-2 well is operating under high reservoir pressure and temperature. But by using exceptional technical solutions in well construction we have been able to make significant reductions in operating costs, as well as bringing the project in on time.”

Denis Sugaipov, Director of Major Projects Upstream at Gazprom Neft, added:

“Thanks to the commissioning of this new well we have been able to confirm our geological prognoses and obtain updated information on strata composition at the Sarqala field. The geology of the KRI is, generally, under-researched, so this new well is of major importance in terms of gaining knowledge and experience of the field.”

First oil from the Garmian block was obtained in 2011, with commercial crude shipments from the field commencing as early as 2015. As at 15.04.2018 total cumulative production at the field stood at seven million barrels of oil.

The first phase of expanding gathering and treatment capacity to 25,000 bpd is now complete, with work continuing on expanding infrastructure to accommodate 35,000 bpd. Drilling of the Sarqala-3 well is planned for Q3 2018, completing Phase I of field development.

(Source: Gazprom Neft)

Oil Ministry, Rosneft discuss increasing Cooperation

By John Lee.

Oil Minister Jabar Ali al-Luaibi [Allibi, Luiebi] has met with Deder Kasemero, the vice president and the regional manager of Rosneft, to discuss the expansion of cooperation in the Iraqi oil and gas sector.

The Minister said he is open for international companies such as Rosneft to participate in investment projects to rehabilitate oil pipelines, develop oil fields, build refineries and invest in flare gas.

(Source: Ministry of Oil)

Lukoil reports Less Compensation Oil from West Qurna-2

By John Lee.

Russian oil company Lukoil has said that lower volumes of compensation crude oil from the West Qurna-2 project in Iraq had “a negative impact on EBITDA dynamics“.

In its audited consolidated financial statements for the full year of 2017, it added that net of this project, EBITDA increased in 2017 by 17.8 percent year-on-year.

(Source: Lukoil)

Procurement in Iraq: Cinderella or Superman?

By Elena Kornienko.

Little did I know back in 1999 when I got my first job in procurement on the Sakhalin-2 project which became one of the mega projects in oil and gas industry not only in Russia but also worldwide.

I was young, ambitious and also very naive about what years later became my biggest passion. Procurement, Purchasing, Supply Chain – various organizations use different names for this function, but the truth about it is very simple – we do impact the production of our companies as a Superman hero, and also are treated internally as a Cinderella.

My first boss worked very hard – we could see him already in the office when we arrived. He was the last one to leave and always spent at least one weekend day at his desk catching up with all the requisitions, purchase orders and expediting reports. It was the first offshore platform in Russia, with nternational standards and a limited presence of contractors and suppliers who could help us, the Procurement team, to deliver goods and services to our internal client, the Production team.

I started working with a strong believe that no matter how hard you work, how many hours you spend in the office, how many phone calls and emails you do every day, there will be always someone to blame Procurement for a delay.  Our cruel “stepmother” and jealous “stepsisters” from the Production and Drilling teams constantly mistreated us by giving more and more unrealistic requisitions. Perhaps it was not that bad, but it felt like we are given impossible tasks.

Years later I realized that this was not bad treatment of the Procurement team, but rather a challenge for us to rise and shine. This challenge was accepted by us as we knew that there would not be a Fairy Godmother to make a change. The change has to come first from understanding that tne Procurement function brings the value for all levels of the organization.

Today’s focus is on sustainability as well as ethical and environmental factors, and the supply chain organization needs to ask itself “why” questions before any action. Why procurement makes this decision and why it is important to the organization. Why its sourcing strategy is like that and not anything else. Why the company spends that money on procuring goods or services. Why, why, why…. I will be answering these and so many other questions related to procurement in the blog articles here at Iraq Business News.

However, lets get back to the question “Is Procurement a Cinderella or a Superman?”. It is no secret that Iraq’s economy is dominated by the oil sector and most of the oil exploration and production is done by International Oil Companies (IOCs). It is estimated that on average between 70% and 80% of a company’s spend is related to procurement activities for purchasing of goods or services. That is quite impressive, right? And of course, the procurement process is regulated by the internal procedures.

It is questioned wherever regulations governing public procurement in Iraq apply to procurement procedures of the IOCs in relation to their subcontracts or not. And while it is debatable if procurement regulations and instructions are applicable to subcontracts or not, IOCs follow their internal procedures to govern the procurement process. What not everyone realizes is that procurement procedures always have room for improvement.

Very often the whole procurement process – from demand identification up to contract award – is quite lengthy and not always transparent to potential contractors. In the articles to come we will be reviewing all processes related to procurement and how they are applicable to IOCs operating in Iraq.

Elena Kornienko has more than 15 years of professional experience in contracts, procurement and tendering in various roles from demand-identification to contract close-out. She has worked on major international oil and gas projects, including the Sakhalin-1 and Sakhalin-2 fields in Russia, and Iraq’s West Qurna-2. Now based in Dubai, she provides consultancy services to the oil and gas industry. Elena is a fluent English and Russian speaker, and a graduate of the Moscow State University of Commerce, holding a degree in Economics. She also graduated with distinction from the School of Business Administration at Portland State University and holds a CIPS diploma.