Identifier
Created
Classification
Origin
06BAGHDAD1216
2006-04-13 19:33:00
CONFIDENTIAL
Embassy Baghdad
Cable title:
SOMO PLANS TO IMPROVE EXPORT EARNINGS
how-toVZCZCXRO2871 PP RUEHBC RUEHDE RUEHIHL RUEHKUK RUEHMOS DE RUEHGB #1216/01 1031933 ZNY CCCCC ZZH P 131933Z APR 06 FM AMEMBASSY BAGHDAD TO RUEHC/SECSTATE WASHDC PRIORITY 3886 INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY RUEHAK/AMEMBASSY ANKARA PRIORITY 0302 RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RHEBAAA/USDOE WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001216
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/10/2016
TAGS: ECON EPET ENRG EFIN KCOR PGOV PREL TU IZ
SUBJECT: SOMO PLANS TO IMPROVE EXPORT EARNINGS
Classified By: Acting ECON Minister Counselor Harry O'Hara, for reasons
1.4 (b) and (d).
C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001216
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/10/2016
TAGS: ECON EPET ENRG EFIN KCOR PGOV PREL TU IZ
SUBJECT: SOMO PLANS TO IMPROVE EXPORT EARNINGS
Classified By: Acting ECON Minister Counselor Harry O'Hara, for reasons
1.4 (b) and (d).
1. (C) Summary: The newly-appointed Director General of the
State Oil Marketing Organization (SOMO) requested USG
assistance in upgrading platforms in Basrah to allow
increased exports of heavy fuel oil (HFO). According to
al-Amiry's calculations, Iraq would increase revenue from the
sale of HFO that is currently being mixed in with crude oil
exports, and would also receive higher prices (approximately
$2 million/day) for crude unadulterated by excess HFO.
Al-Amiry complained that Bayji refinery is for all intents
and purposes not under MoO control; instead, "terrorists" and
criminal elements dictate how the refinery is run. End
Summary.
--------------
Ideas for Improving Exports
--------------
2. (SBU) Al-Amiry eagerly sought EmbOffs assistance to
upgrade platform 12 at Khor al-Zubayr (KAZ) in an attempt to
increase Iraq's exports of heavy fuel oil (HFO),an overly
abundant by-product of Iraq's technology-deficient
refineries. Al-Amiry said that SOMO has a large number of
contracts to sell HFO; the problem is transporting it from
the refineries to Iraq's borders. Basrah produces some 2,000
tons of unused HFO/day and Bayji another 11,000 tons/day,
over and above that which is utilized domestically for power
generation and some, limited, exports. For lack of
alternative means of disposal, Basrah currently mixes its
excess HFO with Iraq's crude oil exports, thereby solving the
immediate problem (disposing of the HFO),but lowering the
value of crude exports by as much as $2 million/day (the
crude sale price is downgraded $.40/Bbl per degree of API
gravity lower). According to al-Amiry, Bayji refinery cannot
move excess HFO by often-interdicted pipelines and can only
truck no more than 100 tons/day, re-injects HFO into the
Kirkuk oil fields or dumps it into a mountain area reservoir
with negative environmental effects.
3. (C) Al-Amiry plans to refurbish platform 12, thereby
allowing Basrah to export excess HFO and as much as an
additional 2,000 tons over and above the HFO loaded from
existing facilities at platform 11. At SOMO's current
contract price of $313/ton (FOB Khor al-Zubayr),this would
bring in another $19 million/month, as well as increasing the
quality (and hence selling price) of Iraqi crude. Al-Amiry
said that the Iraqi Tanker Company had already allocated the
necessary $150,000 to cover the initial set-up to make the
platform functional, adding that he was prepared to authorize
the additional $1 million from SOMO's budget to complete a
full refurbishment. He has been thwarted in these efforts,
however, by what he called "criminal elements of the Basrah
lobby," who he claims threatened him and blocked the project.
The Ministry of Transportation, who controls the port, also
opposes the plan, al-Amiry said, but supplied no specific
reasons.
--------------
Problems at Bayji
--------------
4. (C) Calling Bayji his biggest problem, al-Amiry asserted
that Bayji was under the influence of terrorist groups who
run things "their own way." Contracts are useless, he
continued, as MoO-sanctioned trucks are deliberately delayed
in favor of those who pay bribes. He suggested stationing
troops from other parts of Iraq at Bayji to bring the
refinery and its environs under control.
5. (C) Al-Amiry said it was not cost effective to truck HFO
from Bayji to Basrah for export. Bayji HFO is exported to
Turkey in exchange for electricity imports at reduced rates;
but the terms (the equivalent of $27/ton) are disadvantageous
to Iraq. Al-Amiry said that when he directed his staff to
renegotiate the Turkish HFO-electricity countertrade, he was
advised to leave the deal as is, given delicate relations
with Turkey on fuel imports (septel). In light of security
concerns on and the limited capacity of the railways, he was
skeptical about moving HFO south by rail for export via
Basrah, but agreed to consider the idea.
--------------
Bio Note
--------------
6. (C) A fluent English speaker, al-Amiry received his PhD
BAGHDAD 00001216 002 OF 002
from Dundee University in the UK. His family still lives in
the UK and he travels back and forth regularly. A part of
the "returnee group" (those who returned to Iraq from abroad
in 2003) at MoO, al-Amiry came to SOMO from his previous
position as DG of the largely defunct (as it has no ships)
Iraqi Tanker Company, after the ouster of former SOMO DG Dr.
Musab al-Dujayli one month ago. We found al-Amiry to be
organized, energetic and knowledgeable. Based on first
impressions, we find his style of concrete ideas and active
follow-through promising.
KHALILZAD
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/10/2016
TAGS: ECON EPET ENRG EFIN KCOR PGOV PREL TU IZ
SUBJECT: SOMO PLANS TO IMPROVE EXPORT EARNINGS
Classified By: Acting ECON Minister Counselor Harry O'Hara, for reasons
1.4 (b) and (d).
1. (C) Summary: The newly-appointed Director General of the
State Oil Marketing Organization (SOMO) requested USG
assistance in upgrading platforms in Basrah to allow
increased exports of heavy fuel oil (HFO). According to
al-Amiry's calculations, Iraq would increase revenue from the
sale of HFO that is currently being mixed in with crude oil
exports, and would also receive higher prices (approximately
$2 million/day) for crude unadulterated by excess HFO.
Al-Amiry complained that Bayji refinery is for all intents
and purposes not under MoO control; instead, "terrorists" and
criminal elements dictate how the refinery is run. End
Summary.
--------------
Ideas for Improving Exports
--------------
2. (SBU) Al-Amiry eagerly sought EmbOffs assistance to
upgrade platform 12 at Khor al-Zubayr (KAZ) in an attempt to
increase Iraq's exports of heavy fuel oil (HFO),an overly
abundant by-product of Iraq's technology-deficient
refineries. Al-Amiry said that SOMO has a large number of
contracts to sell HFO; the problem is transporting it from
the refineries to Iraq's borders. Basrah produces some 2,000
tons of unused HFO/day and Bayji another 11,000 tons/day,
over and above that which is utilized domestically for power
generation and some, limited, exports. For lack of
alternative means of disposal, Basrah currently mixes its
excess HFO with Iraq's crude oil exports, thereby solving the
immediate problem (disposing of the HFO),but lowering the
value of crude exports by as much as $2 million/day (the
crude sale price is downgraded $.40/Bbl per degree of API
gravity lower). According to al-Amiry, Bayji refinery cannot
move excess HFO by often-interdicted pipelines and can only
truck no more than 100 tons/day, re-injects HFO into the
Kirkuk oil fields or dumps it into a mountain area reservoir
with negative environmental effects.
3. (C) Al-Amiry plans to refurbish platform 12, thereby
allowing Basrah to export excess HFO and as much as an
additional 2,000 tons over and above the HFO loaded from
existing facilities at platform 11. At SOMO's current
contract price of $313/ton (FOB Khor al-Zubayr),this would
bring in another $19 million/month, as well as increasing the
quality (and hence selling price) of Iraqi crude. Al-Amiry
said that the Iraqi Tanker Company had already allocated the
necessary $150,000 to cover the initial set-up to make the
platform functional, adding that he was prepared to authorize
the additional $1 million from SOMO's budget to complete a
full refurbishment. He has been thwarted in these efforts,
however, by what he called "criminal elements of the Basrah
lobby," who he claims threatened him and blocked the project.
The Ministry of Transportation, who controls the port, also
opposes the plan, al-Amiry said, but supplied no specific
reasons.
--------------
Problems at Bayji
--------------
4. (C) Calling Bayji his biggest problem, al-Amiry asserted
that Bayji was under the influence of terrorist groups who
run things "their own way." Contracts are useless, he
continued, as MoO-sanctioned trucks are deliberately delayed
in favor of those who pay bribes. He suggested stationing
troops from other parts of Iraq at Bayji to bring the
refinery and its environs under control.
5. (C) Al-Amiry said it was not cost effective to truck HFO
from Bayji to Basrah for export. Bayji HFO is exported to
Turkey in exchange for electricity imports at reduced rates;
but the terms (the equivalent of $27/ton) are disadvantageous
to Iraq. Al-Amiry said that when he directed his staff to
renegotiate the Turkish HFO-electricity countertrade, he was
advised to leave the deal as is, given delicate relations
with Turkey on fuel imports (septel). In light of security
concerns on and the limited capacity of the railways, he was
skeptical about moving HFO south by rail for export via
Basrah, but agreed to consider the idea.
--------------
Bio Note
--------------
6. (C) A fluent English speaker, al-Amiry received his PhD
BAGHDAD 00001216 002 OF 002
from Dundee University in the UK. His family still lives in
the UK and he travels back and forth regularly. A part of
the "returnee group" (those who returned to Iraq from abroad
in 2003) at MoO, al-Amiry came to SOMO from his previous
position as DG of the largely defunct (as it has no ships)
Iraqi Tanker Company, after the ouster of former SOMO DG Dr.
Musab al-Dujayli one month ago. We found al-Amiry to be
organized, energetic and knowledgeable. Based on first
impressions, we find his style of concrete ideas and active
follow-through promising.
KHALILZAD