He sat down with United Press International on the sidelines of the Iraq Oil, Gas, Petrochemical and Electricity Summit organized by the Iraq Development Program in Dubai earlier this month to talk about issues facing his country’s energy sector.
Earlier in the conference, he presented a long-term plan to turn Iraq from an oil and gas giant in need of energy sources to a total energy exporter. Saddam Hussein’s rule handicapped today’s Iraq energy sector, which needs tens of billions of dollars in investment, repairs and security for its pipelines, and an actual infrastructure to put the natural gas to use instead of burning it off.
But how to do that is tricky. A controversial hydrocarbons law, which Ghadhban helped craft, is stuck in Parliament. At issue is the extent of federal control over the oil sector and how much it will be opened up to private/foreign investment. And at a technical level, whether Iraq’s current reserves should be exploited further first or more exploration is needed.
He also speaks about the fight between the current oil minister and the oil unions, as well as the need for transparency to keep the oil sector away from allegations of corruption.
UPI: There are a lot of long-term plans. Once the infrastructure and investment are in place for that it would mean Iraq could meet all of its own oil, electricity, natural gas, fuel needs and export and make money of that. Do I understand that correct?
Ghadhban: It is very clear. What I presented is really a scenario. It is not yet a solid plan. I expect that the Ministry of Oil shall present soon a plan after enactment of the (oil) law and according to the law it’s the federal oil and gas council which has the power to issue a plan, adopt it, and it would be a comprehensive plan for the whole country. The country is in need of energy, all sources of energy such as oil, gas, oil products. And it has the resources, we have the reserves. It’s only a matter of reorganizing ourselves, implementing plans and also, of course, implement the projects.
Such as we have shown, such as the stopping of flaring of the gas, collection of gas, separation, processing, providing LPG and providing the right gas for power generation. There is no doubt that Iraq has the potential to become an exporter of gas, of course as well as it is already an exporter of oil but it will be at a much higher level.
Q: What is the timeframe, if everything goes as hopeful as you’re talking about?
A: Currently Iraq is exporting more than one and a half million barrels per day. It actually achieved 1.7 million barrels per day in July. So with more active implementation of small projects, we don’t need really huge projects now, with modest investment just to complete already drilled wells, there will be a very positive and remarkable impact on production and export capabilities. And this will all lead in a short period of time to the expansion of production capacity as well as export capacity.
The other point is that, of course, we’ve been working on it, not much success but we will have success in the coming months, is to secure the pipelines, the export pipelines from Kirkuk all the way to Turkey, and once this is achieved there will be a positive impact, no doubt about that, on the export capability of some at least 300,000 barrels per day extra.
Q: How important is it to concentrate on the natural gas? Two-thirds of the natural gas that Iraq produces is burned off.
A: It is very, very important. First of all power generation is in dire need for gas. Why are now a number of power stations either are operating at lower capacity or not operating at all? And now the Ministry of Electricity is really in the business of importing the gas oil. Also the Ministry of Oil was and is still importing the fuel for power generation. That’s one. The second point, doing so and providing natural gas for power generation, we would free crude oil being burned now for power generation, we would free it for export and this is about 100,000 barrels per day and this is of course income to the country. It is only right that we should really utilize, maximize utilization of gas into power generation. Also in addition to that by the way is that even industrial projects, industrial plants are operating under its lower capacity like the petrochemical and fertilizer in Basra, they are not having enough feed and they depend on natural gas.
Q: So, once these power plants are operating on the natural gas, not only does that allow Iraq to export more but you have more electricity feeding the oil sector?
A: Exactly, definitely. In addition, to provide more power supply to the citizens and shorten power cuts.
Q: Going to the pipelines, what is the chance that the Syria pipeline is going to be put back in operation and what are the conditions for that to happen?
A: There are no conditions except to secure the pipeline itself. It is not only that we have also to take measures. … We are actually, Iraq was taking measures to regain the pumping capacity from the south northward and the connections at the Haditha, K3 area, so we will have capability of also exporting oil from the south northward. Right now the capacity in the Kirkuk area from the northern oil fields is in the range of 700,000 barrels per day so it is not really large enough to satisfy our needs through Turkey. So if we want to also go through Syria we have to make available more oil from the south northward. But Iraq is really looking forward and has always been to strengthen its relations, economic relations, with Syria and have also an additional access to the Mediterranean through the oil pipelines. Previously a capacity of 200-250,000 barrels per day was available before the war and there were measures to be taken, were planned, with the replacement of a small segment of pipeline with a new one, the capacity could be enhanced to about 300,000 barrels per day, so this is viable.
Q: What about the talk of a pipeline to Iran. If I understand it correctly it will be a pipeline that sends crude to Iran, Iran refines it and sends refined product back to Iraq in a separate pipeline?
A: This is the idea. It has been talked about. The Ministry of Oil signed an agreement with Iran. I don’t know much about it but as you said, the idea is to send crude oil to Abadan, refine it and send the product back and there’s a settlement.
Q: But both countries need refined products so one, why wouldn’t Iraq invest the money in a refinery and refine it yourself and Iraq could use it or why wouldn’t Iran just keep the fuel?
A: Actually, I cannot elaborate on that.
Q: There have been some concerns of the oil law that would have undue exploration and you said no, that the exploration is necessary. Can you elaborate on this disagreement among experts?
A: There are some people whom I respect, at least one of them, based on proven oil reserves and production targets and taking the market in consideration and also national interest, they are concerned that Iraq might embark on an extensive exploration program and this may not provide the best contractual terms to the country. And they recommend that we slow down or perhaps postpone exploration for the future. I am of the opinion that any future policy in terms of exploration as well as development should be based on a sound basis and of course the first priority is to take the national interest in consideration and one of this is that from a planning point of view it will not be a wholesale as some fear or it will not be a random and haphazard, it will be done in a constructive manner and we have to have the following objectives to be met. One, is that we want to replace production by additional exploration from finding and proving. Number two, this probable reserve, the figure of 214 billion barrels, we have to work hard to convert parts of it into proven reserves and therefore there has to be exploration by Iraqi efforts in addition to that by IOCS.
Q: Is this extra, on top of the 115 billion barrels proven …
A: Of course, it is a separate category. We have to work on this and convert it from the probable category in the classification to the proven. And this is done only by actual hard work of exploration, i.e., seismic work and drilling and testing and assessment. And therefore there should be a target for how much to be achieved. I give a figure based on previous studies and plans, a figure of around 30 percent to be achieved in coming years until 2015.
Q: Speaking of something less friendly is the interaction between the oil minister and the oil unions. Obviously there are a lot of politics involved. Can you explain the sense from your point of view what’s going on with that dispute?
A: I’m not really, directly involved in this matter, OK. I worked in Basra for 16 years and I know those people. I know most of them if not all of them, they are sincere people, they are dedicated, they work hard and they contributed and they mean well. Of course there is no law right now making it legal to form, to organize labor organizations or societies. But in the constitution it preserves this right. I am of the opinion that we should hear there grievances and their opinion. When I was in charge I met them. Even when I was chief executive officer of the ministry during 2003 after the fall of the regime they sent people they came to Baghdad and I talked with them, I listened to them and so on and I’m of this opinion, of course the minister has the right to take whatever he thinks right about the decisions, no doubt about that, but also I think it is wise of labor organization not to go into political issues. I believe they should concentrate on their social issues, their rights to improve the conditions of the workers in Basra. But also if they have an opinion regarding the oil law it should be based on the oil law, it should not be based on rumors and so on. I remember seeing a video by (Iraqi Federation of Oil Unions President) Hassan Jumaa and I found him a very serious person, sincere and he was polite. He expressed his opinion. I didn’t see a problem with that really.
Q: You’re saying that their analysis of the oil law is wrong, is that what you’re saying?
A: I didn’t say that, I don’t mean that. We actually heard and read and saw people talking about the law and without knowing what the law is about. It’s not their domain, it’s not their profession. People talking about PSAs and people converting it from a comprehensive law into whether we have a PSA or not. And there will be a rip off of the Iraq oil wealth. This is completely nonsense. Or that 70 percent of the profit will go to the foreign company, again this is completely nonsense. The law as it is, although we have differences and the differences are basically on the power of the authorities, whether it should be a centralized form of law or whether it is a sharing between the regional governments and the federal government. These are the main actual differences here. And of course we had lots of differences while we were debating the law. And we arrived at the consensus and of course still many of us are not happy at what we arrived at but this is now the prevailing conditions in Iraq and the prevailing wisdom in Iraq and after all no law is really gospel truth. It is subject to amendments in the future and what I drive to is I really advise that labor unions work and concentrate on its priorities as normally the priorities of such societies is to improve and fight for their member rights, but they have the right to express an opinion, especially on laws affecting their life.
Q: There’s a United States government report coming out that looks at the corruption and the Commission on Public Integrity in Iraq. Supposedly it’s going to outline a number of issues in a number of ministries, including the Oil Ministry, detailing corruption inside the Oil Ministry. What are your thoughts on what needs to be done to make the oil sector more transparent, to make sure the fears that people have of returning to the Saddam type of corruption?
A: If anybody, say an objective and thorough analyst, looked at the law, at the draft law, you’ll find that we put so much precautions and we wrote articles to achieve what you have said. As an example, all awards of contracts will have to be done through competitive, transparent rounds. All contracts, after signatures, have to be published within two months. And therefore nothing will be hidden under a table. And also there is an article about anti-corruption laws, everybody has to abide by it and anyone, Iraqi and non-Iraqi, if proven that he has indulged in corruptive matters and so on he will be subject to taken to court. And I really believe, of course there is an article about transparency, well written and well documented, and it is up to the standard now in the world. So I believe we have taken enough measures, legally, in order to ensure such objectives to make the awards of contracts and the practice to be transparent and without corruption. Of course it is then up to the practice and implementation. And now in Iraq in each ministry there is an office, the inspector general, and also the whole country there is this commission on integrity, plus we have the auditing agency in Iraq, and I believe Iraq has been subjected to lots of harsh treatment regarding this point, because many other countries do not publish what now we are publishing or data that is now available in all sectors in the country. I think we are moving forward and Parliament is also moving forward on this matter.