What are the best investment opportunities in energy in Iraq today?
HABBOUSH: The best opportunities in general today operating in Iraq are investment opportunities in the energy sector and infrastructure space. With that said, I would focus on energy in terms of the upstream and downstream sectors as far as oil and gas. In terms of power generation, there is great demand for power generation in Iraq as well as for infrastructure development.
What is the reality of the security situation in Iraq at the moment?
HABBOUSH: The security situation in Iraq has clearly improved over the past several years. Personally, I visit Iraq often and I see that there has been a huge improvement. This is why we have seen the IOCs moving into Iraq over the past couple of years. They have made extreme moves in terms of investment in Iraq and we can clearly see that in the South of Iraq and in the Northern Iraqi fields as well.
What level of EOR is required to recover resources in Iraq?
HABBOUSH: The technological resources that Iraq requires are immense. Iraq today has a huge demand for new technology. There are even conventional technologies in today’s energy and infrastructure space that it lacks. The demand is there and the demand will be there for a very long time. In the upstream sector Iraq has not, for the past 3 decades, been able to bring in the best of the best technologies in drilling. What we see today, with the presence of companies that are drilling in today’s Iraqi oil fields and rehabilitating or working over the fields, we see great improvements. That example alone can be photocopied into the other spaces in oil and gas, power generation, and infrastructure as well. The oil and gas industry in Iraq in quite general terms is set to be at least a $200bn industry. The way it has been generally bifurcated, about $150bn of that is upstream development and $50bn of that is downstream. With that said, that does not even account for power generation and as I have said, Iraq today is desperately in need of power generation. The people of Iraq are in desperate need of power generation. Then there is infrastructure as well. How you quantify that, well, I would say that Iraq’s needs have been said to require around 30,000MW to 40,000MW and those needs are there. How we address those needs is really what we need to think about and to take to the next step and to the next level. That is also being addressed inside of Iraq today by the authorities, the private sector, by foreign investors, and we hope to see that improve. We hope to see real foreign direct investment come in, more so than what we are just seeing with the IOCs. The IOC investment alone is not enough. We need to see a lot more to complement what the IOCs are doing today.
How would you describe the state of project finance in Iraq?
HABBOUSH: I think when you think about project financing, there are certain elements that are just international standards. They are very simple; what are the risks, what are the potential liabilities, and how to mitigate those. There are risks in any project you invest in anywhere in the world, inside of Iraq or anywhere else. It’s how you mitigate those risks and how you calculate those risks and how you put them into a model. In today’s world I think Iraq would require certain developments and the country does realize that they need to move into an open space that allows foreign direct investment to come into the country. We see those changes occurring. People say that they are moving slowly, and fine, but it is the rebirth of a new country with a very long history of civilization and education. It will take some time but I think we are getting there. People are starting to educate themselves to about what it takes to convince the HSBC’s of the world, the Goldman’s of the world, the JP Morgan’s of the world, and other very prominent banks around the world to provide the necessary financing for a project on a sophisticated basis. Going into what is currently in place, there has been financing inside of Iraq. In the telecom industry, there has been an HSBC deal that just occurred at the end of 2011. You do see the involvement of the prominent banks, but it is all about the terms and conditions and it is all about the risk factors and how you can really mitigate those and get to an intersect which appeases the sponsor, the developer, and the bank.
The oil and gas industry in Iraq in quite general terms is set to be at least a $200bn industry. The way it has been generally bifurcated, about $150bn of that is upstream development and $50bn of that is downstream. With that said, that does not even account for power generation and as I have said, Iraq today is desperately in need of power generation.