Iraq’s move to rush oil bidding could deter some major companies

The Iraqi Cabinet approved a five-year development plan with a target of 6.5 million barrels a day by 2022 earlier this month. Above, a worker operates valves in Nihran Bin Omar field north of Basra. (AP)
Updated 25 April 2018
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Iraq’s move to rush oil bidding could deter some major companies

  • Last month, Oil Minister Jabar Ali Al-Luaibi unexpectedly moved the date to receive bids from late June to April
  • Fourteen companies are qualified to bid for exploration and development rights for 11 underdeveloped blocks

BAGHDAD: Iraq is opening more of its untapped oil and gas resources to foreign developers, hoping to boost revenues after its costly war with the Daesh group, but analysts say the rushed bidding process — now timed to precede national elections — could draw a lukewarm response.
Last month, Oil Minister Jabar Ali Al-Luaibi unexpectedly moved the date to receive bids from late June to April, meaning the bidding would be held before May 12 national elections. Some believe Al-Luaibi, who is campaigning for a seat in parliament, moved up the date for political reasons.
Al-Luaibi hopes to represent the oil-rich southern province of Basra as a member of the Victory Alliance, which is led by Prime Minister Haider Al-Abadi, who is running for re-election.
“Personal and partisan interests are taking priority over national interests,” said Ruba Husari, managing director of the consulting firm Iraq Insight. “The objective of the exercise is aimed doubtlessly at portraying the ministry — and the minister — as aggressive in developing the nation’s resources ahead of the (elections).”
The Associated Press placed multiple calls to Al-Luaibi’s spokesman, who did not pick up. An aide to the spokesman said Al-Luaibi’s office was too busy with the election campaign to comment on the allegations.
In one of his campaign videos, Al-Luaibi tries to reassure a group of weary Iraqis who are worried about their future.
“Past years have wreaked havoc on everything,” a man in traditional Arab clothing says in the video, referring to the devastation caused by war. “Iraq’s wealth is your responsibility,” says a woman dressed in a conservative abaya — a loose black cloak that covers the body from shoulders to feet.
“I’m confident that with your determination I can protect the wealth of the generations,” Al-Luaibi says at the end of the video.
Thursday’s auction will be the fifth since Iraq opened its vast oil and gas reserves to international energy companies in 2009 for the first time in decades.
In previous bidding rounds, officials spent months hosting conferences, road shows and discussions with companies before issuing final contracts. Last month, the minister changed the date to April 15, but when companies asked for more time it was extended to Wednesday, and then to TSwitch to plain text editorhursday.
Ian Thom, principal analyst at energy consultancy Wood Mackenzie, said the tighter deadline could work against Iraq.
“Companies may be more cautious if they have not fully evaluated the bid terms,” he said. “This may result in bids being less competitive as companies seek a greater margin of safety.”
Fourteen companies are qualified to bid for exploration and development rights for 11 underdeveloped blocks.
Seven are located near the border with Iran, and three others are located near the Kuwaiti border, while the 11th is in the Arabian Gulf, in Iraqi territorial waters.
Encouraged by an improved security situation, Iraq in 2009 began to attract international oil companies to develop its vast untapped oil and gas reserves. Top among major oil companies are the US’s Exxon Mobil, Royal Dutch Shell, the UK’s BP, China’s CNPC and Russia’s Lukoil.
Since then, Iraq has awarded a handful of oil deals to develop major fields that hold more than half of its 153.1 billion barrels of proven oil reserves. Deals to tap natural gas resources were also awarded. As a result, Iraq’s daily production and exports have jumped to levels not seen since the late 1970s and early 1980s.
The country is now producing around 4.36 million barrels a day from Baghdad-controlled oil fields, up from nearly 2.4 million a day in 2009, and its daily exports averaged 3.450 million barrels a day last month, making it OPEC’s second-largest producer behind Saudi Arabia. Oil revenues make up nearly 95 percent of the country’s budget.
An economic crisis set in over the course of 2014, when the Daesh group swept across much of northern and western Iraq and oil prices plummeted. Iraqi forces concluded major military operations against the extremists last year, but large parts of the country were reduced to rubble.
In February, Iraq secured $30 billion from international donors to help rebuild devastated areas, far from the $88.2 billion Baghdad estimates it needs.
Earlier this month, the Iraqi Cabinet approved a five-year development plan with a target of 6.5 million barrels a day by 2022.
Iraq’s 2018 budget of nearly $88 billion comes with a deficit of more than $10 billion. It is based on a projected oil price of $46 per barrel and a daily export capacity of 3.8 million barrels.


Indonesia’s Go-Jek close to profits in all segments

Updated 18 August 2018
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Indonesia’s Go-Jek close to profits in all segments

  • Go-Jek is Indonesia's first billio-dollar startup
  • Ride haling app evolves into online payment platform

JAKARTA: Go-Jek, Indonesia’s first billion-dollar startup, is “extremely close” to achieving profitability in all its segments, except transportation, its founder and CEO Nadiem Makarim told Reuters.

Launched in 2011 in Jakarta, Go-Jek — a play on the local word for motorbike taxis — has evolved from a ride-hailing service to a one-stop app allowing clients in Southeast Asia’s largest economy to make online payments and order everything from food, groceries to massages.

“We’re seeing enormous online to offline traction for all of our businesses and are close to being profitable, outside of transportation,” said the 34-year old CEO.
The startup is expected to be fully profitable “probably” within the next few years, Makarim added.

Already a market leader in Indonesia, where it processes more than 100 million transactions for its 20-25 million monthly users, Go-Jek is now looking to expand in Southeast Asia.

Ride hailing services in Southeast Asia are expected to surge to $20.1 billion in gross merchandise value by 2025 from $5.1 billion in 2017, according to a Google-Temasek report.

Go-Jek said in May it would invest $500 million to enter Vietnam, Singapore, Thailand and the Philippines, after Uber struck a deal to sell its Southeast Asian operations to Grab — the bigger player in the region.

Go-Jek is seeing strong funding interest from its backers as it targets an aggressive expansion, Makarim said.

“Since its Aug. 1 launch, the app has already grabbed 15 percent of market share in Ho Chi Minh,” Makarim said. The firm this week opened recruitment for motorcycle drivers in Thailand.

The startup expects anti-monopoly concerns swirling around the Grab-Uber deal, which Singapore said had substantially hurt competition, to help clear a path for its expansion.

“We’re bringing back choice. The Singapore government is particularly eager to bring back competition,” Makarim said, adding that the order of overseas rollouts had not been set.

Go-Jek’s offshore push comes at a time when Singapore-based Grab is stepping up funding to expand in Indonesia and transform itself into a consumer technology company, starting with a partnership with online grocer HappyFresh.

“Mimicking Go-Jek’s strategy is the highest form of flattery,” laughed Makarim.

Grab told Reuters in a statement, “The super app strategy has been around for a while now and no Southeast Asian player can claim to have pioneered it.” The company also said Grab has not lost market share in Ho Chi Minh since August, but declined to provide market share data.

Makarim believes Go-Jek’s understanding of food merchants will give it an edge over Grab, which counts investors such as Chinese ride-hailing firm Didi Chuxing and Japan’s SoftBank Group Corp. among its backers.

Makarim, who sees food delivery as Go-Jek’s core business, said he was not concerned about funding, without giving details.

Go-Jek was reported in June as being in talks to raise $1.5 billion in a new funding round and was valued at about $5 billion in a prior fundraising, sources have told Reuters. The firm had said in March it was considering a domestic IPO.

Makarim noted Go-Jek’s backers were sharing both capital and expertise. The company is collaborating with Alphabet Inc’s Google on platform mobility, Tencent on payments strategy, JD.com on logistics operations, and Meituan Dianping on merchant transactions and deliveries.

Go-Jek has set up a venture capital arm, Go-Ventures, to invest in startups in Southeast Asia “with strategic importance to our business,” the CEO said.