BUILDING CAPACITY AT THE MINISTRY OF OIL

UNCLAS SECTION 01 OF 07 BAGHDAD 003837 SIPDIS SIPDIS STATE FOR NEA/I AND EEB/ESC STATE ALSO PASS DOE FOR IA ¶E. O. 12958: N/A TAGS: PREL PGOV ECON EPET IZ SUBJECT: BUILDING CAPACITY AT THE MINISTRY OF OIL BAGHDAD 00003837 001.4 OF 007 ¶1. Summary and Comment: Capacity building at the Ministry of Oil is a high mission priority. A modern, capable ministry would be better able to make the sound investment decisions that will affect the future economic and political viability of the Iraqi state. Alternatively, a dysfunctional central-planning style ministry would be vulnerable to corrupt actors and to misallocation of resources. As a result the U.S., as well as other countries, has lavished attention on the ministry, providing training on a wide range of technical and organizational topics. Major oil companies have also been active, with the goal of building the relationships with MoO officials that will serve them well in the (hopefully) not too distant period when Iraq invites foreign technical and financial participation in the development of its hydrocarbons sector. This message catalogs U.S. Mission and other bilateral and multilateral training and ministerial capacity building programs underway as well as those of international oil companies (that we have heard about). One conclusion is that the MoO is no longer the isolated backwater that it once was. But nevertheless MoO still represents an especially "hard target" for engagement and capacity building, given the poor security at ministry buildings, losses of trained staff to third country jobs and in-country assassinations; and long-ingrained reflexive nationalism of Iraqis when it comes to their oil resources. As an epilogue, we have discovered that the great majority of oil sector employees who travel to the U.S. for training return to Iraq. End Summary and Comment. -------------- MINISTERIAL ENGAGEMENT AT THE MINISTRY OF OIL -------------- ¶2. A wide range of Mission elements provide training and advice in a variety of technical and policy fields. The core on-board Embassy/MNF-I Ministry of Oil engagement team consists of an oil section chief and three specialists in the Economic Section; the DoE section (2); USAID (5); ITAO (3); Energy Fusion Cell (5 with more enroute); Army Corps of Engineers (GRD) (4); MND-N (2); MNF-I (4). This core staff meets weekly to compare notes and to plan trips to Ministry facilities. -------------- EXAMPLES OF TRAINING COURSES AND SEMINARS -------------- ¶3. Cross-Border Oilfield Unitization: Embassy ECON staff geologist conducted a two-session Seminar and Roundtable discussion on Oil field Unitization to the Ministry of Oil Staff with participation by other experts. The lectures and discussions were divided into field and reservoir issues, commercial and economic consideration and national and international legal concerns. The goal was to provide a general understanding of unitization and unit operating agreements and to recommend that the Ministry seek additional professional guidance in the process. Iraq is currently discussing unitization of fields crossing both the Iranian and Kuwaiti borders. The Director General of the Reservoir & Fields Development Directorate requested the seminar. The session was attended by the Director and the Director Generals from the Oil Exploration Company and the Planning Directorate as well as staff from all three Directorates. ¶4. Seminars on Interpreting Geologic Structures: Embassy ECON staff geologist presented a series of lectures and workshops on Structural Geology at the Ministry of Oil. The lecture series was designed to introduce participants to new concepts and interpretation techniques. The workshops were structured to move from classroom examples to actual project problems. The initial plan was to focus on concepts and techniques in interpreting structures in compressive and transpressional regimes. This focus was chosen because these are the types of structures that occur in central and northern Iraq and because these classes of structures are difficult to image with seismic data. The classes were modified from seminars previously presented to international oil companies. Participants were selected from the staffs of the Reservoir & Fields Development Directorate and the Oil Exploration Company. The class was planned to accommodate ten persons. However, the first class was attended by sixteen people, indicating a significant interest by Ministry of Oil staff. ¶5. Lectures on Geographic Information Systems and the application to geoscience: Embassy ECON staff geologist gave a series of three BAGHDAD 00003837 002.6 OF 007 lectures to about ten members the Oil Exploration Company staff on Geographic Information Systems and the use of ArcView software. The course was designed to establish the familiarity with the software and data sets developed for Iraq. These data sets that provide the basis for a countrywide map of oilfields and prospective structures were delivered to the Ministry as part of the course. ¶6. Use of Letters of Credit: The Treasury Attache will soon be presenting seminars on Letters of Credit execution for the Ministry of Oil and its operating companies. The projected attendance is expected to be approximately 30 or more individuals. ¶7. Management and Engineer Training under IRRF: Under the Iraqi Relief and Reconstruction Act, ITAO experts and the Army Corps of Engineers provided middle management and engineer/operator training to the various offices within the Ministry of Oil. This program utilized $5.47 million of the approved IRRF II appropriations. Courses offered included training in bidding and procurement, service contracts, lease sales, supply chain improvement for petroleum depots, reservoir engineering, software suites and operational effectiveness. Training was also provided in ethics, information, records and knowledge management. -------------- --- INFRASTRUCTURE SECURITY PROTECTION (ISP) PROGRAM -------------- --- ¶8. In 2006, ITAO established the Infrastructure Security Protection (ISP) program, to coordinate the programs, policies and strategy for infrastructure security protection for oil, electricity and water. Via the FY 2006 Supplemental Economic Support Funds (ESF) appropriation of $277M the ISP program is developing, coordinating, and executing programs (through GRD) such as security barrier construction, hardening of structures, implementing controlled access to facilities, maintaining standoff distances/exclusion zones, constructing observation facilities, support protection force training, etc... ¶9. Included in this program as Capacity Development is the Support Program for which approximately $26 million has been allocated. The ISP Support Program is designed to develop the MoO's internal capacity to develop and implement infrastructure security and protection programs. Key projects include Identity Management, Vetting Programs, and Support Programs. Classroom and training facilities have been constructed to provide training for the Oil Protection Force (OPF) and Electrical Protection Security Service (EPSS) recruits. Identity Management and Vetting programs are being implemented with the OPF and EPSS as well as with the Ministry of Interior (MOI) to ensure integrity, identity and accountability of security forces responsible for protection of critical energy infrastructure. The programs are planned, executed and administered through a collaborative and engagement-intensive process that includes ITAO, the Energy Fusion Cell (EFC- MNF-I),USACE Gulf Region Division, the Ministry of Oil, the Ministry of Defense, MNC-I (specifically MND-N),and the individual Ministry of Oil Operating Companies, including the North Oil company (NOC),South Oil Company (SOC),and the Petroleum Pipeline Company (PPC). -------------- ARMY CORPS OF ENGINEERS (GRD) -------------- ¶10. Under the Iraqi Relief and Reconstruction Act (IRRF),the USACE executed as part of the approved projects contracts for training of the various Ministry of Oil operating company's personnel in the operation of equipment and facilities. This training was both in Iraq and outside Iraq. Newly constructed or renovated systems and facilities were completed and turned over to the Iraqis for operation. This turnover required that the Iraqis be trained, as necessary, in operation, maintenance, and repair of the constructed facilities, equipment and systems to lay the groundwork for sustainability. This type of training is fundamental to success and is a cornerstone of Capacity Development. ¶11. The US Government had two primary Design Build Contractors. The D/B Contractors' Capacity Development role was to accomplish technology transfer and training as part of the facility construction start-up and operational testing, commissioning, and BAGHDAD 00003837 003.6 OF 007 turn-over activities on each construction project. Each contractor was expected to assess the existing knowledge, skills and abilities of the Iraqi people, and develop an approach to training, transferring knowledge, skills and abilities to them. ¶12. These Design Build contractors executed 200 separate training programs designed to provide the required knowledge transfer for the sustainment of the facilities provided under US Government funding. As the cost of these programs was included within the overall project cost, it is estimated that for the $1.6 billion spent for the IRRF II program, approximately 2 percent or $3.2 million was spent on this training. (Engineers and Operators trained: 1,575. Number of Courses: Heavy Equipment Training 55, Operation & Maintenance 38, Maintenance 2, and Equipment Operation 102.) -------------- DEPARTMENT OF ENERGY - USTDA -------------- ¶13. Under IRRF, the Department of State transferred $2 million to the Department of Energy, which also provided $500,000, to execute two contracts for training to the various organizations within the Ministry of Oil. The program was developed at the request of the Iraqi Interim Government in 2004. The IOTP was the result of extended and close discussions between Iraqi and U.S. government officials to: develop a training program that addresses the immediate term training needs of the Ministry of Oil; provide a road map for longer-term training that could be instituted by the Ministry as part of its human resources management and development strategy; and provide a foundation for continued linkage between the Ministry and U.S. organizations in the areas of knowledge and expertise in oil sector management and operations. A variety of training programs and study tours were conducted over the succeeding two years, with the last study tour just completed in September ¶2007. -------------- USAID/TATWEER ACTIVITIES -------------- ¶14. Through its National Capacity Development Program for public management (Tatweer),USAID works closely with the Government of Iraq (GOI) to strengthen and expand the professional skills, qualifications, and capabilities of public servants. Tatweer established a scholarship fund to encourage advanced studies in public administration. The program awards scholarships for Master's or certificate-level studies in public management. Within the Ministry of oil, Tatweer's accomplishments include: Regular Courses in Public Management -------------- Civil Servants Trained in Public Management: 103 Course Enrollees: 164 (126 Male, 38 Female) Courses Completed: Project Management: 41 Fiscal Management (Budget, Procurement): 51 Human Resource Management: 15 IT Management: 8 Leadership and Communication: 51 Special Courses and Projects -------------- Beiji Oil Refinery: USAID/Tatweer's core advisor in Project Management provided a special set of back to back Introductory and Advanced Project Management courses to 10 managers. North Oil Company: USAID/Tatweer recently traveled to Kirkuk and reached agreements to provide public administration training, especially in Project Management, Procurement, and Negotiation Skills to as many as 1,200 company employees, through a system of cascading training that will also create a cadre of trainers for the company, via the Oil Training Institute in Kirkuk. South Oil Company: USAID/Tatweer and South Oil Company have agreed on a special training program combining Project Management and Procurement, to be delivered by an international short-term BAGHDAD 00003837 004.8 OF 007 consultant, beginning on December 1. Directorate of Administrative and Legal Affairs: USAID/ Tatweer conducted a Change Management Workshop for 22 senior managers (number included in total trainees table above). State Company for Oil Projects (SCOP): USAID/Tatweer and the National Center for Consultancy and Management Development (Ministry of Planning) have agreed to conduct a structured "Organizational Self-Assessment Process" led by a Ministry of Oil team of 15 mid-level managers. A Change Management Workshop is also scheduled to be delivered to SCOP managers in early December. Procurement: USAID/Tatweer is working closely with the Deputy Minister of Oil to design and implement a major international procurement for steel pipe. Metering Information: Tatweer is advising the Manager for Metering on a comprehensive metering system, including IT management, financial accountability, and fluid flow accountability (crude oil and refined products). Scholarships: A total of 8 civil servants in the Ministry of Oil or Oil Companies received USAID/Tatweer scholarships for two-year post-graduate study in Public Administration at Universities in the Middle East Region. 6 of these awards are for study at English Language programs (American University in Cairo) and 2 are for Arabic language institutions. Embedded Staff: USAID/Tatweer is finalizing the contracts for 3 Iraqi Nationals to be embedded in Ministry of Oil institutions. -------------- IRAQ - MINISTRY OF OIL'S TRAINING AGREEMENTS -------------- ¶15. Iraq's Ministry of Oil (MoO) has signed agreements with international oil companies to train Mid-Level Iraqi managers on different aspects of technology developments, foreign languages, and management training. The MoO officials have shown extreme interest in training its Mid-Level staff on modern technology since sanctions and wars hindered development in the oil sector. Companies such as Norway's Statoil, Japan's Japex, France's Total, Russia's LUKOIL, US' Chevron-Texaco and ExxonMobil, UK's BP and Royal Dutch Shell-NL, China's CNPC, Italy's ENI, Indonesia's Pertamina, and South Korea have shown an interest in training the Iraqi MoO personnel as a first step to get modernize Iraq's oil and gas industry and market. The European Union (EU) and the USG, both US-DoE and US-DoS, are also assisting the MoO. Agreements are usually memoranda of understanding or technical service agreements to train mid-level staff. Finally, the Minister of Oil has told us that he is in conversations on a training agreement with the University of Oklahoma. In it, OU would build capacity at the Ministry's own hydrocarbons engineering training center. -------------- NORWAY -------------- ¶16. Norway has been interested in training the MoO. The Norwegian government allocated USD 4.3 million to fund this assistance effort. A memorandum of understanding between the two governments on the assistance program was concluded. The Norwegians are interested in helping Iraq build up its oil industry in data collection, management training, enhanced oil recovery techniques and "developing national competence." High-level MoO officials have expressed a deep respect for Norway's state-owned company and have a keen interest to implement most of Norway's methods in Iraq. -------------- JAPAN -------------- ¶17. Japex will mainly provide technical assistance including analysis work for data gathered through the 3-D seismic surveys in the four onshore areas: the East Baghdad Field, the northeastern part of Iraq, the western desert along the Syria-Iraq border, and the al-Gharaf oil field in the south. The company will also conduct a training program for Iraqi petroleum engineers for oil BAGHDAD 00003837 005.6 OF 007 exploration, drilling and exploitation. Japex and the Iraqi oil ministry have formed a steering committee to jointly conduct analytical work for data gathered through these geological surveys in tapped and untapped fields. In addition Japex has a training program underway with the Ministry of Oil that has currently trained approximately 1,000 middle management and supervisory personnel. -------------- FRANCE -------------- ¶18. Total, the French oil company, had an agreement with the MoO to train geologists in two rounds of 60 days courses each. 8 geologists attended the first round. -------------- RUSSIA -------------- ¶19. The first group of Iraqi experts arrived in Volgograd and Kogalym on May 25th for internships at LUKOIL-Nizhnevolzhskneft and LUKOIL-West Siberia, News outlet Portal Iraq reported. ¶20. The Russians are interested in gaining a foothold in Iraq's oil sector. While the former regime cancelled a contract with LUKOIL over the West Qurnah field, this has not deterred the Russians from engaging Iraq. LUKOIL and MoO established a Joint Technical Committee on the coordination of activities and joint cooperation in oil and gas. The first meeting was held on June 22, 2004. The third meeting of this committee occurred from March 21 to 22, 2005 in Dubai. Abdulila Al-Amir, consultant of the Iraqi Ministry of Oil, Alexander Kolomatsky, Regional Director of LUKOIL Overseas for Middle East, as well as oil production, planning and HR training experts of the parties took part in the meeting. ¶21. This Committee acts in pursuance of the Memorandum of Understanding and Cooperation signed by LUKOIL and the MoO on March 10, 2004 in Baghdad. The meeting's participants considered a number of issues regarding the cooperation in the oil and gas industry of Iraq. According to the Memorandum, in 2005 120 of oil technical workers and engineers from Iraq underwent traineeship on facilities of LUKOIL-Western Siberia and 71 oilmen on facilities of LUKOIL-Nizhnevolzhskneft. ¶22. LUKOIL also organized academic education for 100 Iraqi students. In addition to 29 students hosted in 2004, 71 more students have completed studies. In particular, Gubkin State Russian Oil and Gas University enrolled 6 new students from Iraq, Ufa State Oil and Gas Technology University hosted 41 students and 24 students went to the State Petroleum Academy of Azerbaijan. The Ministry of Oil of Iraq addressed LUKOIL requesting possible expansion of the training and professional development program for the national oil industry. In accordance with the Memorandum, LUKOIL provides internships for Iraqis at the Company training centers and production facilities. In 2004, 100 people were trained; 150 Iraqis will hold LUKOIL internship positions and for the next four years. ¶23. The one-month internship program provided for theoretical and practical training for power, oil and gas production engineers; oilfield and power equipment maintenance technicians; and water separation and desalting unit operators. Western Siberia hosted 52 interns with 30 staying in Volgograd Region. The interns are representatives of Iraqi oil, gas and service companies: South Oil, South Gas, North Oil, North Gas, Oil Projects, Iraqi Drilling, Oil Pipeline, Oil Products Distribution, Oil Exploration, Gas Filling, South Refineries and Midland Refineries. ¶24. In addition, the Ministry of Oil has signed two contracts with LUKOIL, as part of the humanitarian aid program for restoration of the Iraqi Ministry assets in petroleum and state oil companies, for the supply of ambulance vehicles, excavators and a forklift. -------------- UNITED STATES OIL COMPANIES -------------- ¶25. Chevron-Texaco and ExxonMobil have signed technical service agreements and memoranda of understanding with the MoO. BAGHDAD 00003837 006.4 OF 007 Chevron-Texaco brought several MoO officials to facilities in the US and UK. Chevron-Texaco training will include English and IT courses. In addition, Chevron-Texaco has provided funding for 3 English language labs in Kirkuk, Basrah, and Baghdad. Moreover, this included 20 computers each along with instructors for mentoring. The Language training was completed end June 2005. -------------- UNITED KINGDOM -------------- ¶26. The UK has an agreement with MoO for training in Petroleum Technology and English Language. 18 refinery Engineers were trained in London October of 2004. Training engineers will be on refinery optimization and Oil and Gas Technology development over the past 20 years. The training took place in London October of 2004, and in Dubai June 2004. The program completed delivery of training courses to 3000 employees at the end of 2006. -------------- CHINA -------------- ¶27. The Chinese oil company, CNPC, has trained MoO technical staff. The MoO had five training sessions/seminars in various specialties where 40 plus employees participated. The training session included on the job training in the fields and getting to know the modern technologies of the petroleum industry. China has been requested to emphasize the importance of Chinese presence in Iraq to develop its oil industry and also for training MoO employees on the latest technologies. -------------- ITALY -------------- ¶28. ENI is enabling MoO employees to complete postgraduate studies in 6 different disciplines in compliance with Ministry requirements, including maximum age limit of 45, and to be within the first quarter of graduates in graduation year with an average mark of 70 percent. Italian language courses are part of the training program. The training program has been active since the fall of 2004 where 10 Iraqi employees has completed their studies. More are on their way to Italy. -------------- INDONESIA -------------- ¶29. Indonesia's Pertamina signed a memorandum of understanding for cooperation in the field of training, exchanging experience and providing oil equipment for Iraq's oil sector. This agreement was signed in April of 2002. -------------- SOUTH KOREA -------------- ¶30. The South Korean government allocated $5 million to train 100 Iraqis for 32 weeks in Seoul. -------------- EUROPEAN UNION -------------- ¶31. The EU promised technical assistance for capacity building in Energy and Trade for a project value of 15 million Euros. -------------- EPILOGUE -------------- ¶32. Embassy Baghdad's consular section, noting the high numbers of Iraqis traveling to the US in the oil field, recently conducted a 'mini-validation' study of travelers to the US from the Ministry of Oil. Looking at the period November 2004 - October 2007, Consular selected application records which listed the applicants' employer as the Ministry of Oil. An Arabic speaking section employee then BAGHDAD 00003837 007.4 OF 007 called the contact phone numbers for this group. Eliminating cases that were refused, or that were issued but the visa recipients never traveled, the following results were found: Total applicants who were issued visas and traveled: 106 Number of returned applicants: 78 (73.58 percent) Number of applicants who did not answer phone: 10 (9.44 percent) Number of applicants whose phone cannot be reached: 18 (16.98 percent) ¶33. Even more notable, thirty of thirty applicants (100 percent) have returned since June 2007. (Consular is working to resolve the remaining cases -- there's no proof of any 'overstays' in the U.S.) ¶34. This is heartening data, demonstrating that Iraqis are not only anxious to gain the knowledge they need to rebuild their oil sector, but that they are also coming home again to apply that knowledge for the benefit of their nation. CROCKER