There was some excitement about a deal between the Iraqi government and Kurdistan, but it has descended into dispute again. In your opinion, what needs to happen for a meaningful agreement to be reached and what effect is the failure to do so having on the country’s oil and gas industry at the moment?
The relationship between the Iraqi government and the KRG has experienced many ups and downs over the past 12 years. I believe the recent actions by Prime Minister Abadi to strengthen the government’s relationship with the KRG has been well-received and will accelerate the payments owed to the KRG. Given the lower price of oil and the security issues in Iraq, it is essential that the Federal Government and KRG work together to address the security concerns and unify their resources to combat ISIS. The alternative could lead to more security threats, such as more attacks and the occupation of more Iraqi cities by ISIS, a reduction in foreign direct investment.
By the same token, how has the market reacted to the threat of ISIS? Some companies have pulled out workers, while others have stayed – what is your take on the situation?
The threat of ISIS in certain parts of Iraq is imperative for companies to consider. However I believe proper steps are being taken by the Iraqi Government and the international coalition to combat ISIS. Unfortunately, the ISIS occupation of some territories may remain for years to come., But not all areas are under the immediate threat of ISIS, such as southern Iraq, which has proven to be relatively stable and is where the vast majority of Iraq’s oil and gas is being produced. However, companies should always take precautionary measures when sending both local and foreign staff to Iraq, and mitigate as many security risks as they can.
How has the announcement of the lifting of Iranian sanctions been received in Baghdad and is it likely to change the way the two countries do business and work together on oil and gas projects?
If sanctions are lifted by the USA and the international community, it will change the dynamics of not only Iraq, but the entire MENA region. Iran is an enormous market with abundant resources a and an industrious population, so I assume there will be an exchange of resources and that the two countries will do business together if the projects are mutually beneficial. While Iran has strong oil reserves, Iraq’s reserves are larger, so Iraq is an attractive market to Iranian contractors.
Your business works as an EPC contractor and as an oil field services company. Is it important to diversify your activities when working in Iraq?
Diversification is crucial in Iraq. Iraq is extremely volatile, so it is vital to have a diverse client base and a diverse portfolio of service offerings that can carry a company through difficult times in one industry. For example, in addition to the two business units you mentioned, Khudairi Group also offers heavy machinery sales and rentals to a variety of industries.
How are both divisions of the business performing?
The year 2015 has been challenging, but we have remained busy with long-term projects and service agreements signed in 2013 and 2014. I believe many contractors and service providers have experienced a slowdown in business since the start of 2015, but smart companies have used this time to strategize and improve their processes. I am optimistic that we will see the market improve in 2016 and we will see a healthy pipeline of projects. .
Is there anything else you’d like to add?
While Iraq continues to face challenges in the oil and gas industry, the Iraq’s reserves remain strong and there is a tremendous amount of work that needs to be done in the next 20 years to ensure Iraq produces to its full potential.
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