Iraqi ministries clash over deep-sea port plan

18 September 2009

Fresh proposal for dedicated oil export facility threatens to undermine development of commercial port

Plans for a multi-billion-dollar port on Iraq’s Gulf coast are in disarray as government ministries in Baghdad pursue separate agendas ahead of national elections in December.

The Transport Ministry has spent months weighing up two rival proposals for a deep-sea port on the Al-Faw peninsula: a new port at Ras al-Bisha and the redevelopment of the existing port at Al-Faw. It appeared to have backed the plans at Al-Faw following a meeting with the port’s prospective developers in early September.

However, the Oil Ministry has thrown these plans into turmoil with its own proposal for a new deep-water oil export facility off the Gulf coast.

Several sources accuse both the transport and oil ministries of announcing new project developments simply to attract headlines and public support ahead of national elections scheduled for December.

Under the plan favoured by Oil Minister Hussein al-Shahristani, Iraq will pump all its marine oil exports to this new terminal, ignoring both the ports proposed for the Al-Faw peninsula.

Developers behind the two rival proposals say they will find it impossible to get international funding for either of their multi-billion-dollar projects if they cannot be guaranteed that they will be the country’s marine oil export facility.

“No international finance will be put into a purely commercial cargo port in Iraq at this time,” says one official from the consortium proposing the $12bn scheme at Ras al-Bisha. “No one will put up that kind of money for a project of this size without oil exports through the port.”

Until now, Baghdad has leaned towards the cheaper proposal: converting the existing port at Al-Faw. Italian consultant Consorzio Italiano Infrastrutture e Trasporti per l’Iraq (CIITI) has drawn up the Al-Faw feasibility study, under which 15 commercial berths will be developed at the port over two years.

The first phase of the redevelopment would cost e2.8bn ($3.7bn), with subsequent phases allowing further expansion of the port (MEED 8:5:09).

The government appeared to confirm its preference for the redevelopment of Al-Faw after a 4 September meeting between Iraq’s deputy prime minister Rafi al-Issawi and Italian diplomats. On 7 September, Transport Minister Amer Abduljabbar held talks with several Italian companies and said bidding could begin soon.

“As far as we know, the Iraqi government is going to develop our proposal,” says one CIITI official. “The two governments have discussed fundraising and then they will move to preparing tenders.”

However, with the government set for a shake-up next year following the election, no project on this scale has a realistic chance of moving forward for months.

“We were invited to the same meeting with the Italians by the Transport Ministry, but we decided not to go because it felt like electioneering and we did not want to be part of that,” says the official at the Ras al-Bisha consortium.

“The government is split over this, but nothing is going to move on the new port or the oil facility for the next four or five months. Al-Sharistani could be gone next year. Even the Prime Minister [Nouri al-Maliki] could be gone. This government only has three or four months left to run. It cannot make these kinds of decision now.”

Certainly, any co-ordination between the two ministries to reach a mutual solution appears to have broken down. “Financing the ports is not our concern,” says one Oil Ministry official. “The [oil] ministry has its own plans. We are moving ahead.”

One US embassy source in Baghdad agrees that recent announcements from the ministries have more to with the impending election than any prospect of imminent progress.

Moreover, Baghdad has provided no specific details of how it can afford to build projects of this size. “These things pop up from time to time, but there are no specifics on financing the port, who the contractors involved might be, nothing to suggest the ministry is close to a decision,” says the US embassy source.

“At the same time, you have to question the wisdom of pumping all Iraq’s marine oil exports out of a single site. There have to be security concerns, particularly in that part of the world.”

With any new port project still years from completion, Iraq’s only deep-sea marine outlet is its existing facility at Umm Qasr. Revenues have surged since the central government reclaimed the port from Sadrist militants last year, but it has made little progress on redeveloping the facilities.

Abduljabbar halted plans for a $1bn part-privatisation of Umm Qasr’s southern port when he took office in August 2008. Instead, the Transport Ministry has invited foreign operators to manage individual berths at the port on three-year lease arrangements.

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