Iraq becomes centre for investment activity in the region- 19 Apr 10

According to the Washington headquartered International Monetary Fund, Iraq's first priority is its oil and gas sector. Income from hydrocarbon exports contributed 88% of total revenues in 2009 and it is these revenues that will be used to rebuild the country.

Baghdad plans to increase oil production to drive its reconstruction efforts. In 2008, crude oil production averaged 2.4 million barrels per day. Iraq wants to boost production by 4.7 million barrels per by 2016 and is targeting total output in excess of 12 million barrels per day by 2020.

According to MEED Projects, with oil prices expected to top USD 100 per barrel over the next decade, this would create a nominal income of USD 12 billion per day for the country, which has run consistent budget deficits since the early 1990s. To meet its production targets, Iraq has a total of USD 126 billion of oil and gas schemes either planned or under way. Revenue generating upstream oil and gas production forms the majority of the work, with USD 115 billion worth of projects in the pipeline.

Away from the oil fields, Iraq has USD 5.6 billion of power developments in the pipeline, but it needs more. In 2003, the Washington headquartered World Bank estimated Iraq would need an injection of USD 20 billion into the electricity sector to meet its population's demands. And in 2006, the Electricity Ministry said the figure had risen to USD 27 billion. Now that number will almost certainly be higher.

So far the progress on projects has been slow. The ministry has launched a host of independent power projects and government funded schemes, but the country still suffers from blackouts for much of the day. To make matters worse, most of Iraq's power plants run on imported diesel fuel and Baghdad spends around USD 1.2 billion per year on imports just to fire up the country's utilities. The most progress in pushing through new power plants has been made in Iraqi Kurdistan. In the absence of investment from international players, local developer Mass Global Investment Company recently opted to develop 1,750 MW of gas fired capacity on its own.

Iraq hopes these projects are just the start and that more schemes will move forward once the new government has improved the regulations governing power projects.

Mr John Dempsey general advisor to the Iraq Transition & Assistance Office said that "Iraq has complex contractual arrangements. The system would work better with framework agreements and this will be the first order of business when the Council of Representatives is seated."

For Iraq's general infrastructure, Baghdad is planning a huge spending programme, with USD 150 billion earmarked for new projects by 2025. With urban areas devastated by the 2003 invasion and subsequent attacks by insurgent groups, housing is a key priority and the government plans to build 1 million new homes by 2015, at an estimated cost of up to USD 50 billion.

The country's National Investment Commission aims to add a further USD 20 billion of new infrastructure projects across the country, including roads, water, sewage & electricity and telecommunications facilities. The commission is planning additional construction work in regions that require schools, hospitals, offices, retail and hospitality buildings.

Apr 19, 2010 11:17
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