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    Petrofac Continues Iraqi Projects Despite Claims

Summary

The engineering giant is still bidding for contracts in Iraq

by: Dalga Khatinoglu

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Petrofac Continues Iraqi Projects Despite Claims

Iraqi media outlets reported April 17 that UK-based Petrofac has been banned by the oil ministry from a huge gas project tender bidding list due to “bribery scandal”, but its existing projects in the country would likely remain unchanged.

Iraqi Akhbaar newspaper released a report February 10, 2019, referring to the UK Serious Fraud Office’s allegations against a former senior executive of company on February 7, charged on paying bribes to secure contracts abroad, including $730mn-worth of contracts with Iraq. 

Petrofac itself put the Iraqi contracts at $1bn, mostly in the oil-rich south of Iraq, where much of the associated gas is flared.

The newspaper warned about the issue and asked the oil ministry to investigate and take action against the company. Iraqi media outlets say Petrofac is continuing its existing projects, but it was banned from the Ratawi gas hub project tender, issued last summer.

Petrofac has been competing against others, including the US-based Honeywell International, for the tender for supplying equipment for $2.2bn Ratawi gas hub project.

A spokesperson for Petrofac told NGW the company’s status in Iraq remains unchanged. “We continue to work as normal both on current operations and tendering for bids.” Oil ministry and Iraq’s Basrah Gas Company (BGC) – the issuer of the tender – have not commented as of now.

The Ratawi gas hub is a major project to manage gas gathering and transport in southern Iraq, where Petrofac has been already active in some projects. The $17bn Basrah Gas Company joint venture, established in 2013, gathers around 500mn ft³/day of associated gas according to 44% partner Shell, but this will grow over the coming years. The BGC was set up to capture, treat and monetise associated natural gas that is being flared in the West Qurna 1, Zubair and Rumaila oilfields.

Iraq has a US waiver allowing it to continue buying Iranian gas until mid-2019, but it is not clear whether Washington plans to extend that.

Iraq says more time is needed to replace the 28mn m3/day imported from Iran. Iran is obliged to send 70% of the contracted volume to Baghdad and Basra during the hot seasons and the rest in autumn and winter.

Iran started flowing 7mn m3/day of gas to Baghdad in June 2017 and gradually doubled that until the end of last year. Exports to Basrah started in mid-2018. Gas import disruption in last November caused massive power outages in Baghdad and other cities.