Category: Regions

Shell-Iraq gas company is a monopoly, secret agreement shows

By BEN LANDO, UPI Energy Editor

A secret document obtained by United Press International reveals a planned joint venture company between Royal Dutch Shell and the Iraqi Oil Ministry would give the company a 25-year monopoly on the gas industry of southern Iraq.

Shell and the ministry are currently negotiating the terms of the joint venture company. On Sept. 22 the two signed what’s known as a “Heads of Agreement,” basically a rough draft of the contract, a legal framework establishing the management team and the scope, purpose and other details of the company.

Though it’s non-binding, the confidential document is telling.

If the joint venture company is finalized as outlined in the HOA, it would give Shell the largest role in Iraq’s oil and gas sector since the 1960s, when the world’s Big Oil firms were kicked out after 40 years of virtual control of exploration, production, exports, and payments to the government.

The joint venture will be the “sole gas company engaged in business,” as outlined in the HOA, “and providing gas for domestic and export markets and generating revenues from gas marketing activities.”

At the time of the HOA signing, Shell and ministry officials pitched the future joint venture company’s role as utilizing for domestic needs the natural gas currently being wasted in Basra province. Iraq would own 51 percent and Shell 49 percent.

Developing Iraq’s gas resources is important for delivering basic services like electricity and fuel to citizens and business. Iraq’s once top-shelf state-run oil and gas industry was devastated by Saddam Hussein’s misuse, sanctions and nearly three decades of war. Infrastructure and equipment were harmed, and new technology and training were shut out.

More than 60 percent of Iraq’s natural gas production is burned or released into the air or reinjected into the ground because of insufficient infrastructure to transport and utilize the gas. The gas would be helpful for Iraq’s power and other industries currently, and more so as the economy grows. Electricity last week supplied only 58 percent of demand, according to the U.S. State Department’s Iraq Weekly Status Report.

The oil and gas sector is in need of new and modern investment, though there’s a dispute over how to proceed: rebuild the once prominent domestic oil and gas industry or allow foreign companies to re-enter the sector.

A new oil and gas law is supposed to set post-Saddam guidelines and regulations for developing the oil and gas industry, but a draft of the law has been stalled for nearly two years. A top roadblock: to what extent foreign companies should be allowed to invest. The oil unions say it should be limited to contracts to help rebuild the Iraqi sector. Others, a decidedly smaller group, favor an all-out reversal of the nationalism that saw Shell and others booted out of the country 40 years ago.

The Shell joint venture is an attempt by the Oil Ministry to walk the fine line, relying on remaining Saddam-era laws, though some have complained the Parliament should have more of a say and the contract should not have been a private negotiation with one company.

According to the previously unseen HOA, “the joint venture will off-take and purchase all Raw Gas produced in the South of Iraq by either the South Oil Co. or any other producer.” The HOA defines “South of Iraq” as the southernmost province — and oil and gas capital — of Basra, though a map appendix to the HOA shows the contract territory extending for an unknown distance into the Persian Gulf “and any other areas as may be agreed by (Shell and the Oil Ministry).”

The joint venture would not focus solely on gas currently being produced in the agreed upon area. As oil production increases, as expected by the ministry, so will the gas; most of Iraq’s gas production is what’s called “associated gas,” found during oil production.

Iraq has the world’s 10th-largest proven gas reserves, according to the U.S. Energy Information Administration, most of it located in southern Iraq. Two to three times more reserves could be found when it is fully explored, and much more expected to be “non-associated” gas, reservoirs independent of the oil.

“The Parties acknowledge that access to non-associated gas is essential to ensure that the aims of the Joint Venture are met,” the HOA states, adding one of the objectives of the company is to “pursue development of non-associated gas fields in southern Iraq according to respective rules and regulations for field development in Iraq.”

According to the HOA, the joint venture will purchase the raw gas from producers — mostly state-owned companies — and process it into products used in domestic and foreign markets.

The agreement does not stipulate whether Iraq’s residents and industries would have first dibs on the gas.

Shell, which has proposed to the Iraqi government a nationwide gas master plan, will create a “high-level evaluation of dry gas export schemes.”

Shell would have the rights to all liquefied natural gas. Although Iraq currently does not have LNG facilities, the HOA tasks Shell with assessing the “feasibility of an early LNG export project.”

All other products, such as fuel for cooking and heating, would be sold to the Oil Ministry, directly to domestic consumers and bypassing the ministry, or exported.

“The products will be sold at prices linked to international market prices,” the HOA states, and the joint venture would pay for the raw Iraqi gas with “a fixed percentage of the revenues received by the Joint Venture for selling products.”

While the HOA does not bind the ministry and Shell to create the joint venture, it is a legal contract for 12 months — with a six-month automatic extension — during which it restricts the Iraqi Oil Ministry from negotiating with any other company or carrying out any work that could be interpreted as competing with the Shell joint venture.

“The ministry shall not pursue any discussions with the intention of entering into a project with a similar scope to that set out in this HOA with any third parties,” the HOA states.

The joint venture would be “of a long term (25 years extendable),” according to the HOA. Iraq and Shell would split the revenue dividends and required investment 51/49 percent, respectively. The joint venture would owe the state a 15 percent tax as well.

Both sides, however, have equal representation on the six-member Joint Management Committee, which was to begin work Oct. 22. All of the JMC decisions must be unanimous, though only one person each from the ministry and Shell is required for quorum.

The JMC will determine “activities” of the joint venture, and Shell and the Oil Ministry will work together “in good faith with each other and shall not participate in any similar activities with any third parties.”

Shell has the option of offering a part of its stake to a third party, and UPI understands Shell is in talks with Chevron. All equipment and “technical and operational support” will be purchased by Shell, which “has developed a strategic alliance with General Electric (NYSE:GE) for the benefit of the Joint Venture.” Mitsubishi Corp. (OTCPK:MSBHF) and other companies are negotiating “strategic alliances” as well.

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(e-mail: blando@upi.com)

November 5, 2008
Turkey sees ‘parallels’ with U.S. foreign policy, awaits next U.S. president

By BEN LANDO, UPI Energy Editor

ANKARA, Turkey, Nov. 5 (UPI) — Barack Obama wasn’t the Turkish leadership’s top choice for next U.S. president; John McCain was seen here as superior in the foreign affairs arena and the more pro-Turkish of the two candidates.

But President-elect Obama is considered the best person to repair the world’s image of the United States, they say, an important issue for politicians here. Only 12 percent of Turks had a favorable view of the United States, according to a June Pew Global Attitudes Project poll.

Turkish President Abdullah Gul’s advice to Obama is to get “objective” briefings on Turkey, a dig at the lobbying efforts aimed at U.S. recognition of the alleged Turkish genocide of Armenians.

“I would also tell him that Turkey and the United States and the work we do is very important for the region, for stability in the region but also stability in the world,” he said. “I would say that we’ve done good things together so far, and I would say, let’s continue to work together.”

Turkey’s president was asked recently by a colleague about his foreign policy priority list. Mid-answer, he was interrupted: “Are you the United States?”

“If you should list the issues, foreign policy issues, that Turkey and the United States follow and the aims that we pursue,” said Gul, recounting the conversation, “if you list that with Turkey on one side and the United States on the other side, you’d be amazed at how much overlap, how much parallel there is, how these issues are almost entirely identical.”

The geopolitical agenda of the next U.S. president is shared by Turkey, insist government and business leaders here — from Iraq to Middle East peace to energy security.

“I don’t believe there are similar nations where such parallels could be drawn,” Gul told a handful of American reporters, bloggers and think-tankers in a conference room in his office.

With a foot in Europe, a foot in Asia, and the Muslim connection with the Middle East, Turkey says its strategic position is like no other.

“The Caucasus, Central Asia, NATO, Russia, Iraq, Iran, it’s a player in all these issues. It’s not simply anymore a defender of the southern flank against Russia,” said Morton Abramowitz, U.S. ambassador to Turkey from 1989 to 1991. “As the world has changed and the politics and problems have changed, Turkey’s positions, its strength, its dynamism, its size, its military forces, have become a regional player.”

FOREIGN POLICY FRIENDS

Ankara has been mediating secret talks between Syria and Israel, and is engaged in Afghanistan-Pakistan dialogue. Last year the Israeli and Palestinian presidents were his guests, riding in the limousine together and addressing the Turkish Parliament. A Turkish-led Israeli-Palestinian industrial zone in the West Bank is under way as well.

“We worked very hard to keep peace in this region,” Gul said. “And we do take concrete steps to find resolution to the conflicts here.”

Turkish officials are wary of a U.S. withdrawal from Iraq that would embolden internal strife or allow too much Iranian or Saudi influence or greater Kurdish autonomy. But despite the 2003 domestic political hiccup preventing U.S. forces from using Turkish bases, Ankara backs U.S. policy in Iraq. As one senior Foreign Ministry official put it: “The failure of the U.S. in Iraq is the failure of Turkey too.”

Turkey also wants to enhance its position as an energy hub, creating interdependence between European consumers and Middle Eastern and Asian energy producers — largely without Russia, a key U.S. strategy for isolating the Eurasian power while increasing the supply of oil and gas.

“A positive and westward-leaning, democratic Turkey is built into all our calculations,” said Abramowitz, now senior fellow at The Century Foundation. “If Turkey were to depart from that — and I don’t think it will — and become more oriented toward the Islamic world or Russia, that would involve a major change in perception on how we have to deal with that world. (Turkey’s) alliance with the West has been a critical part of our thinking for years.”

GROWING PAINS

Turkey’s geopolitical power is less reliant on U.S. “parallels” as it becomes more independent, though.

Despite criticism from the United States, Ankara ensures economic ties with countries like Russia and Iran — major trade destinations and routes — while engaged in their diplomatic rows and has always maintained direct contact with Syria.

“Just because Turkey doesn’t take a hard-line position doesn’t mean we are going to go dancing with the devil,” said Cem Duna, a former top official in the Foreign Ministry and an adviser to the Turkish Industrialists’ and Businessmen’s Association.

The Russia-Georgia fighting in August prompted international condemnation, adding to criticism that Russia is attempting to corner the world’s oil and gas supply chain. Turkey refrained from blaming Moscow publicly.

Iran’s natural gas is crucial for Turkey’s domestic energy demands, but its nuclear program is freezing economic progress. Turkey is increasing trade talks with Iran but is not on the sidelines in the nuclear dispute, Gul said. He says relations with Iran — including the ability to have “a very frank, very sincere, very open discussion” with visiting Iranian President Mahmoud Ahmadinejad recently — are crucial to solving the problem.

Turkey “ruffles feathers” sometimes, a result of its new role in the world, said Meliha Altunisik, chairwoman of Middle East Technical University’s department of international relations. But she says this independence only strengthens its pull with countries that its ally, the United States, does not have.

THE ECONOMIC TIES THAT BIND

One “parallel” Turkey is keen on avoiding is the economic meltdown seen as having started in the United States and exported to the world.

“Intervention by the United States has been delayed,” said Rifat Hisarciklioglu, president of the powerful Union of Chambers and Commodity Exchanges of Turkey, adding U.S. policymakers have been distracted by elections.

“No one can see the darkness of this crisis,” Hisarciklioglu said. “Right now we have a panic environment.”

Turkey has had its share of economic disasters, most recently in 2001 when banks lost tens of billions of dollars. Officials say the resulting tightened regulation and fiscal guidelines will protect the financial sector, but the real economy is at risk.

Turkey was banking on steady economic growth, but unemployment will likely rise upon the expected surge of youth entering the workforce, funding for major projects will dry up and demand from export markets such as Europe will drop.

“Whatever happens in the whole world happens here,” said Cuneyd Zapsu, an adviser to Turkish Prime Minister Recep Tayyip Erdogan.

Turkey’s political and business leaders tout this marriage of U.S.-Turkish interests as proof the next president must enhance relations with Ankara, regardless of who is elected. “It’s not only the president of the United States, it’s like electing the president of the world,” said Hisarciklioglu, joking, “Everyone in the world should be able to vote.”

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(e-mail: blando@upi.com)

November 5, 2008
Energy at Root of Karabakh Accord

By Nikolaus von Twickel / Staff Writer

The presidents of Armenia and Azerbaijan have signed a declaration on the Nagorno-Karabakh conflict at a meeting with President Dmitry Medvedev in a sign of the Kremlin’s growing role and the importance of energy politics in the South Caucasus.

Armenian President Serzh Sargsyan and Azeri President Ilham Aliyev signed the largely symbolic document at Medvedev’s Maiendorf residence, just outside Moscow on Saturday.

Armenia has traditionally been a staunch ally of Russia, while energy-rich Azerbaijan has maintained friendly ties with Georgia, but Moscow has been looking for greater cooperation with Azerbaijan on energy issues.

The five-point document, published on the Kremlin’s web site, says both countries will step up efforts to find a peaceful solution over Nagorno-Karabakh, an ethnic Armenian enclave inside Azerbaijan that broke away after a bloody conflict in the early 1990s that killed more than 30,000 and displaced more than 1 million.

The declaration is the first such document signed by the heads of the two states since Russia mediated a cease-fire agreement in 1994.

While it stresses the need for a political settlement based on international law, the document does not contain any significant commitments, such as to forego the use of force, nor does it mention the conflicting issues at the heart of the conflict, territorial integrity and national self-determination.

The outcome of the meeting was not as significant as some may have hoped.

“This was not much different than dozens of meetings before,” Svante Cornell, research director at the Central Asia-Caucasus Institute, a joint U.S.-Swedish think tank, said Tuesday by telephone from Tbilisi, Georgia. “All we have seen is basically two leaders committing themselves to solving the conflict.”

Alexei Malashenko, an analyst with the Moscow Carnegie Center, said the declaration was largely ceremonial.

“The fact that Medvedev [presided over the talks) just means that both sides accept Russia as mediator,” Malashenko said Tuesday. “Russia needed an urgent rehabilitation as peacekeeper in the region.”

Moscow’s relations with the West worsened dramatically after it sent soldiers and tanks deep into Georgia to repel a Georgian military attack to reclaim its breakaway region of South Ossetia in August.

The declaration also says negotiations should continue within the framework of the so-called Minsk Group, a 12-member body headed jointly by Russia, France and the United States, and overseen by the Organization for Security and Cooperation in Europe.

U.S. Deputy Assistant Secretary of State Matthew Bryza and French Ambassador Bernard Fassier were at Maiendorf, an OSCE spokesman said by telephone from Vienna.

Bryza, the senior U.S. diplomat overseeing the South Caucasus region, praised the result.

“My country fully supports this document. The declaration shows that both presidents can work seriously towards solving this conflict,” he said, Interfax reported Monday.

Cornell said the declaration was a show of force by the Kremlin capitalizing on the weakness of the West, as the Georgian war in August, the global financial crisis and the leadership change in the United States would all work to cripple Western influence in the region.

“There is a new geopolitical situation now,” he said.

Russia, he said, was offering a solution that would mean a loss of independence for Azerbaijan, possibly through the deployment of a Moscow-sponsored peacekeeping force on its territory.

Cornell said Moscow was probably eyeing a “common state” solution, something that had been on the negotiating table back in the 1990s.

This proposal, which had been rejected by Baku, focuses on bringing Azerbaijan and Nagorno-Karabakh together in a confederation.

Carnegie’s Malashenko said that while its influence in the region has grown, Russia would not go it alone.

“To solve this conflict, you need more than one mediator; you need a group of mediators,” he said. “Moscow won’t act outside the format of the Minsk Group.”

Malashenko also denied that the talks might herald a weakening of Moscow’s traditional support for Armenia.

“I cannot imagine that one country will give one-sided support to one party, because this is impossible,” he said.

Both Azerbaijan and Armenia depend on trade routes through Georgia.

Moscow has recently been courting Azerbaijan, which wants to sell more gas to Russia.

Medvedev signed a cooperation agreement with Aliyev in Baku in July, and in Moscow this September both leaders discussed direct talks between Azerbaijan and Armenia over Nagorno-Karabakh.

Europe has also been making overtures to Azerbaijan as a vital supplier to a proposed new gas pipeline, which would reduce Western dependence on Russian energy.

The Nabucco pipeline project has been backed both by the European Union and the United States.

EU Energy Commissioner Andris Piebalgs will travel to Turkey and Azerbaijan this Wednesday to show Europe’s commitment to the project, The Associated Press reported.

Moscow has worried the EU by negotiating with Turkmenistan and Kazakhstan to commit to sending their Caspian Sea gas through Russia.

It is also pushing South Stream, a rival pipeline project by state-controlled Gazprom, which is slated to cost some $13 billion.

November 5, 2008
“ARMENIAN CULTURAL HERITAGE IN TURKEY” CONFERENCE AT THE EUROPEAN PARLIAMENT

AZG Armenian Daily #203, 04/11/2008

“Azg” daily has already informed that on the occasion of the 70th anniversary of the Dersim Genocide the European Parliament is organizing “Dersim 38 conference” November 13, according to Turkish newspapers “Zaman” and “Vatan”. Turkish version of “Euro news” also touched upon the conference on abhaber.com website.

We cleared up that the European Parliament is going to hold another conference on November 13 under heading “Armenian cultural heritage in Turkey”. The information has been avoided by the Turkish press.

According to abhaber.com, EC member Michael Lei, well-known Turkish lawyer, author of the book “My grandmother” Fethien Cetin, historian, publicist Osman Keocker, French-Armenian Prof. Patrick Tonapetian, Director of London “Komitas” Institute Ara Sarafian, also German-Armenian historian Vahe Taschian will participate in the conference. It’s surprising that no Armenian specialist in cultural heritage is invited to the conference.

By Hakob Chaqrian, translated by L.H.

November 5, 2008
LECTURE- Turkish-Russian Relationship & Its Importance for Eurasia, Istanbul, 11/06

As the first lecture of its Lecture Series on Eurasia,
Maltepe University presents:

“Turkish-Russian Relationship and Its Importance for Eurasia”

By Professor Norman Stone (Department of International Relations,
Bilkent University, Turkey).

Time: Thursday, November 6, 2008, 2:00 PM
Venue: Marma Congress Center, Maltepe University, Maltepe, Istanbul

Norman Stone is a professor of Modern History and an expert on the
history of the Central and Eastern Europe as well as the
Turkish-Russian relations. He has served at Cambridge and Oxford
Universities, and now lectures at Bilkent University. Some of his
books are “The Eastern Front 1914-1917″, “Europe Transformed
1878-1919” and “Czechoslovakia: Crossroads and Crises, 1918-88″. He
is also a co-author of “The Other Russia” with Michael Glenny.

For further details:

Dr. Güljanat Kurmangaliyeva Ercilasun
Maltepe University
Faculty of Fine Arts
ercilasun@maltepe.edu.tr
+90 (216) 626 10 50 ext. 1841
www.maltepe.edu.tr

November 5, 2008
EU Fights For Nabucco’s Future

Andris Piebalgs heads to Istanbul and Baku to make his case.

November 05, 2008

By Ahto Lobjakas

BRUSSELS — The fate of the Nabucco pipeline project appears to be hanging by a thread. No EU official would publicly admit this, but the signs tell their own story.

First, as a senior EU official told reporters in Brussels on November 4 on condition of anonymity, transit talks with Turkey have stalled.

Second, Azerbaijan is dithering between competing Russian and EU bids for its gas exports, which are crucial to bringing Nabucco on line in 2012 as planned.

Third, in the long term, Azerbaijani gas alone will not be sufficient. The EU official said that “other countries in the region” must supply most of the 31 billion cubic meters (bcm) of gas Nabucco is expected to carry by 2020.

But Iran, with the world’s second-largest reserves, remains off-limits as long as it continues to enrich uranium. And Turkmenistan, with its enormous export potential, has yet to decide whether to invest in a trans-Caspian pipeline linking it to Azerbaijan — and Nabucco.

The common thread for all these countries, and the EU as the ultimate beneficiary of the 3,300-kilometer-long pipeline, is the question of intent and commitment.

EU Makes Its Case

On November 5-7, EU Energy Commissioner Andris Piebalgs will visit Turkey and Azerbaijan to demonstrate the bloc’s continued commitment to Nabucco.

“The first objective of this trip is to show the political commitment of the European Commission to the Nabucco project and to reaffirm once more that we are convinced that it is going to be online according to the planned timetable,” says Piebalgs’ spokesman, Ferran Tarradellas.

The Russian-Georgian conflict sent shock waves through the region and among potential investors. But official Brussels remains steadfast in the belief that Nabucco is safe from Moscow’s interference. “Russia would jeopardize its reputation as a reliable supplier” to the EU if it acted in any way to damage Nabucco, said one official.

However, none of Nabucco’s essential building blocks is currently in place. Turkey continues to hold out for a better transit deal while Azerbaijan has yet to formally commit its gas exports to the project.

Tarradellas says that while Piebalgs’ visit is a sign that the EU is upping the ante in its talks with the two countries. “We’re going to discuss also the remaining differences with the Turks and the question of the transit of the gas through Turkey,” he says, “and then we’re going to be visiting Azerbaijan, which will be probably be the first supplier of gas for the Nabucco pipeline.”

The senior EU official who spoke on condition of anonymity said that, apart from charging a transit fee, Turkey wants to divert 15 percent of Nabucco’s gas for cheap domestic use. As Azerbaijan is insisting on selling its gas at European market rates minus transit costs, the Nabucco consortium and its subsidiaries in Turkey, Bulgaria, Romania, Hungary, and Austria would be left to pick up the tab.

Piebalgs is keen to break the deadlock before the end of the year. In Turkey this week he will meet with the country’s president, prime minister, foreign minister, and economy minister.

Where Will Gas Come From?

Azerbaijan, meanwhile, has yet to decide to whom to sell the estimated 7-9 bcm of gas it is able to export annually in the early years of Nabucco’s operations. The senior Brussels official said EU companies are pitted against Russian competitors. There are fears in the EU that Russian political pressure could clinch the deal for Russian bidders. A decision is expected sometime in 2009.

EU officials say that the fact that Piebalgs has secured a meeting with Azerbaijani President Ilham Aliyev is a sign of “interest” on the part of Baku in doing business with the EU.

But Azerbaijan’s gas reserves, even if supplemented by the planned expansion of the Shah Deniz field, will not be sufficient to keep Nabucco in business.

And this is where Nabucco currently hits a wall. Iran will remain untouchable in trade terms as long as it refuses to cease uranium enrichment. Like Azerbaijan, Turkmenistan and Kazakhstan can be swayed by Moscow’s cash — or outright pressure. And even if Turkmenistan’s recently confirmed reserves of 14 trillion bcm dwarf Russia’s own transit capacity, Moscow will be seeking to deny the EU a piece of the pie.

Piebalgs is hoping to soon visit Turkmenistan and Kazakhstan, his aides say.

This leaves Iraq and Egypt as the only other viable regional suppliers for Nabucco — with one extremely unstable and the other rather remote.

Meanwhile, EU officials reject suggestions Nabucco could eventually carry Russian gas diverted south. This, they say, would defeat the purpose of Nabucco — which is to diversify supplies. (Competing Russian projects, such as South Stream, are not seen as a problem, however. The EU’s growing demand for gas will make sure it has a market and the diversification of transport routes is a good in itself).

If the degree of insecurity associated with the 8 billion-euro ($10.3 billion) project coupled with the global financial crisis is making potential investors nervous, officials in Brussels remain serene. When pressed, they do point out, however, that should private investors balk, public lenders such as the European Investment Bank and the World Bank stand ready to step in.

November 5, 2008