Invest in Iraq?

Shell and Mitsubishi Corp to start $12 billion gas deal:

From Bloomberg:

Royal Dutch Shell Plc (RDSA) and partner Mitsubishi Corp. (8058) are preparing to begin a delayed $12.5 billion natural-gas project in Iraq, said Hans Nijkamp, vice president and country chairman.

“Shell and Mitsubishi are now ready for execution of the project,” he said in an interview published on the website of Energy Exchange, organizer of an Iraqi energy conference to be held in Istanbul in September. “We are working with our Iraq partners to reach final agreements as soon as possible.”

Regarding delays since the contract was signed last year, Nijkamp said: “A number of external reviews have been carried out by international firms on behalf of the Ministry of Oil and it has also taken Shell 250,000 engineering man-hours on site to assess the scope of work.”

The Iraqi government is eager to develop gas resources to supply fuel to generate electricity. The nation’s power plants have failed to meet domestic demand and ending blackouts has become a political priority. The government, which hopes eventually to produce enough gas to export, awarded three licenses last November in the nation’s first auction of gas concessions since the U.S.-led invasion in 2003.
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The project with Shell and Mitsubishi involves developing and capturing gas that is being flared, or burned off, in southern Iraq. Some 700 million cubic feet are flared daily in the south of Iraq and the quantity is sufficient to generate an estimated 4,500 megawatts, Nijkamp said.

http://www.bloomberg.com/news/2011-06-19/shell-mitsubishi-ready-to-start-12-5-billion-iraq-gas-deal.html

As everyone is well aware, Iraq has been to hell and back in recent years. The war wrecked the economy as well as millions of lives. Eventually, the war came to an end as all wars do. I believe Iraq will see much better days in the future ahead. While American bases will probably remain for the foreseeable future, US involvement in the country, on a military combat basis, is over. In addition, the country is awash in crude oil and natural gas: two vital products in huge demand that will be in much less supply in the not so distant future. Absent a world war 3 type of event breaking out across the middle east such as Iran vs Saudi Arabia going at it, Iraq has nowhere to go but up.

Just take a look at the Iraq Stock Exchange as it was trading at 25 points in 2006 and has jumped to 141, a 600% gain.

http://www.isx-iq.net/isxportal/portal/homePage.html?currLanguage=en

Look at the 6 year performance of Bank of Baghdad,



Bank of Baghdad (BBOB) dropped from $25 a share in 2005 to $1.5 at the lows in 2006. Most recently it is trading at $3.75 a share. I will be keeping an eye on this bad boy.

Now 2006 included some of the darkest days in the country's recent history. But ever since the pullout of US troops, the deal with the Sunni fighters, and other concessions to Kurdistan, violence has plummeted. The country still suffers from bomb attacks, terrorism, rampant corruption and a plethora of other problems, but that hasn't stopped the bull market. The smartest money gets in while there is blood in the streets. In addition, as stability continues to improve in the country, the more confident the oil majors will be in getting production on line and on to market. While full of risk, imagine the incredible upside. Current stock market capitalization is at $3.2 billion while GDP is at $111 billion.

Here is an excerpt from wikipedia re oil contracts:

Between June 2009 and February 2010 the Iraqi Oil Ministry tendered for the award of Service Contracts to develop Iraq's existing oil fields. The results of the tender, which was broadcast live on Iraqi television, are as follows for all major fields awarded but excluding the Kurdish controlled areas where Production Sharing Contracts have been awarded which are currently being disputed by the Baghdad government. All contracts are awaiting final ratification of the awards by the Iraqi government. Company shares are subject to change as a result of commercial negotiations between parties.

If all contracts awarded reach their stated target plateau production then this will increase Iraqi production from today's 2.5 mb/d by 9.4 mb/d to a total of 11.9 mb/d, comparable to current Saudi declared capacity of 12.5 mb/d.

I can bet you top dollar that Goldman and all the other wall street vultures are already taking first dibs on this potential gold mine. I'm talking to some contacts in Dubai to see how to get in the game. Lets see, invest 5k in the Dow Jones or 5k in the Iraq Stock Exchange? Who knows, maybe that 5k can turn into a much bigger number a decade from now.

Subprime, always thinking outside of the box. I just wish I applied the same skills before I went to law school lol.