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Foreign firms eyeing Iraq deal as security improves

Gulf-Times.com

Foreign firms eyeing Iraq deal as security improves

Published: Sunday, 13 July, 2008, 01:17 AM Doha Time

AMMAN: Iraq hopes by year-end to conclude production sharing deals with foreign firms to renovate 35 major state industries, including its sole petrochemical complex, the industry and minerals minister said on Friday.

Fawzi al-Hariri said better security in the country had drawn over 120 firms and consortia keen to bid for 10 to 15 year joint ventures that aim to revamp ailing industrial firms under an ambitious multibillion dollar privatisation plan.

Hariri said foreign investor bids would be evaluated as soon as a July 31 deadline closes for international firms vying for six cement factories, a major petrochemical plant in Basra, an iron and steel facility, pharmaceutical, chemical, textile and other plants.

“We have had over 120 international investors from the US, Europe, Asia and the Arab Gulf who have sent expressions of interest and will submit bids soon,” Hariri told Reuters in Amman.

“After shortlisting an average of three firms for every plant ..I hope to conclude these deals between October and end of December,” he added.

For decades before the 2003 invasion, oil-rich Iraq had invested billions of dollars to set up a massive industrial base that once made it a major regional economic powerhouse.

Sanctions, which brought industries from petrochemicals to construction set up under Iraq’s former command economy to a standstill, were worsened after the war by electricity shortages and rampant corruption, officials privately say.

Hariri said investors would be offered attractive terms such as production sharing percentages that offer them a bigger share than what the government gets to entice them to invest both technology and funds to restore idle capacity.

“We want investors to have a quick return on their investments and that is what will make most of them take the risk into coming into the Iraqi market,” Hariri said.

But investors must ensure they invest most of the needed capital within an initial three years.

“Most of the investments will have to be executed within the first three years of the agreement…..these industries are all essential to jumpstart the reconstruction effort which is gaining momentum. But the return can be huge,” Hariri added.

Iraq offered the first production sharing deals last January for three of the largest state-owned cement firms. But they failed to get major international firms involved.

France’s Lafarge, whose 12% production sharing offer was seen as too low in January, was among several gaints who will bid for the latest cement firms, Hariri said.

Iraq was also studying at some point offering the same foreign investors equity stakes if rehabilitating the plants under the production sharing schemes went well, Hariri said.

Foreigners currently can only acquire 100% ownership in turnkey projects but not in state owned enterprises.

Investors with an eye to Iraq’s enormous potential sought a a strategic foothold in one of the Middle East’s most lucrative markets that has long been deprived of investment, Hariri said.

International investors, including Royal Dutch Shell, Dow Chemical Co, Japanese Marubeni and India’s Reliance, were showing heightened interest in the country’s main petrochemical plant near Basra.

Iraq would offer at first a production sharing deal in return injecting at least $150mn to revamp the complex that has an annual capacity of 100,000 tonnes of ethylene.

“The major firms are all testing the waters in this project that has seen a great deal of interest,” Hariri added.

A second stage would give investors a production sharing deal in an estimated $1.5bn extension of the plant to raise production to over 1mn tonnes of products annually.

Feedstock would come from associated oil field gas that Iraq, an Opec oil producer, is currently flaring, or gas from new field developments, he said. – Reuters

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