emerging markets
largest. But recovery infrastructure is outdated and extracting those reserves will take time and money. Eric Clark, executive vice president for business operations of North America West Asia Holdings, or NAWAH, said that despite low oil prices, increasing EPC activity in Iraq clearly reflects potential. NAWAH handles port operations at Basra, working with Iraqi partners to help re-establish Iraq as a leader in global trade and commerce. “The demand for the EPC market is on the rise with a spurt in the number of public announcements regarding the revitalization of Iraq’s oil and gas development and with formerly stalled projects coming back online,” Clark said. Oil companies – having had old accounts settled and arrears cleared by the government – are looking to re-engage EPCs. “As Basra’s port operator and in close proximity to the major oil fields in southern Iraq, we have had an increasing number of queries as companies prepare for an influx of cargo to be required as part this reinvigorated development and production,” Clark added. Cautious optimism is evident with global oil majors returning to the country. Industry is focused on Iraq’s real and perceived improvements with regards to its financial ability to revitalize stalled projects, and its ability to launch new ones. But it is also closely watching security and political circumstances within the country. “All these competing dynamics, of course, are juxtaposed to the global commodity markets’ sustained downturn. Given the drastic reductions in budgets and staff within companies and EPCs in early 2016, it will take some time to return to the US$100-per-barrel dynamics that international players enjoyed in Iraq merely two years ago,” Clark said. Alastair Caithness, founder and CEO of Ziyen, which offers business intelligence, holds a different view.
IRAQ KEY FACTS
ENERGY PRODUCTION Exported an average of
3.88 million
barrels a day in January 2016 more than
US$90 billion in projects in the gas, oil, and power sectors
$ ECONOMIC IMPACT
US$358 billion
in active infrastructure projects Middle East Gulf’s
third-largest project market
Source: Meed Projects
“Iraq’s EPC work has slowed up due to the low oil price, and as a result new projects have been put on hold. It is not only affecting Iraq, but also the rest of the Gulf region. The continuing fight with the Islamic State in northern Iraq is proving to be very expensive for the government, and that coupled with the low oil price is meaning any new projects have to be 100 percent funded by outside operators,” he said. There’s also a geographical split for project cargo opportunities. According to Caithness, while the situation in northern Iraq is volatile due to unabated violence, activity in southern and eastern Iraq remains buoyant and
“Iraq’s EPC work has slowed up due to the low oil price, and as a result new projects have been put on hold.” – Alastair Caithness 18 BREAKBULK MAGAZINE www.breakbulk.com
oil exports from there increased in August compared with July this year. Oil exports from southern ports have risen to more than 3.23 million barrels per day, generating revenues of nearly US$4 billion. The increase came from fields in southern Iraq with West Qurna 1 field, developed by ExxonMobil, registering record output. Russian operator Gazprom has also said its subsidiary Gazprom Neft Badra has produced 3 million tons of oil over two years from its Badra Oil Field in eastern Iraq. But the specter of low oil prices continues to cause concern for Iraq, which has to engage international oil companies, and needs an oil price of more than US$60 per barrel to be profitable. And despite a return of comparative political stability, major players remain in a holding pattern until the pendulum swings back to a more comfortable, predictable position on economics and security.
STARTING BLOCK
EPCs aren’t necessarily setting up offices in Iraq, but they have started tying up with local companies to move out-of-gauge cargo to sites across Iraq. Peter K. Mathew, managing director of Dubai-based Fleet Line Shipping Services, said that with scores of new infrastructure projects in the pipeline, cargo movers can expect a lot of business in 2017. While many government-funded Peter K. Mathew projects are being Fleet Line Shipping held back, delayed Services or scrapped due to low oil prices, projects such as PetroChina’s Halfaya oil field is going on without any issues. PetroChina and partners Total, Petronas and South Oil Co. are funding the project directly in return for a per barrel remuneration fee above the minimum level of production. “I feel that there will be many changes in the coming six months, as the government has realized that there is no point in waiting for an upward ISSUE 5 / 2016