Rental start-up planned for southern Iraq

Start-up company Northern Gulf Rentals will begin renting in southern Iraq before the end of the year using funds from US government development sources and private equity backers.

Northern Gulf Partners (NGP), a venture managed by New York-based private equity specialist Christopher Ruth and Zaab Sethna, a former advisor to the Iraqi oil and finance ministries, is initially raising around US$31 million and has a five year $150 million investment plan for the business. Mr Sethna, who has dual UK/US citizenship, is based at NGP's office in Baghdad.

Mr Sethna, speaking to IRN at the International Rental Exhibition in Amsterdam where he and Mr Ruth were meeting potential equipment suppliers, said that Iraq had signed 15 oil and gas concessions with major companies that will see $200 billion investment in the next six years.

"Beyond that $200 billion, there is an infrastructure boom, both for the local population and to support the oil and gas sector", said Mr Sethna. He added that the investment would dwarf the spending by the US that took place in the aftermath of the invasion.

Two thirds of the start-up investment will comprise low interest loans from the Overseas Private Investment Corp (OPIC), the US government's development finance institution, with the remainder from private equity sources.

The company is being advised by Charles Miller, the ex-Sunbelt Rentals executive who now runs CLMiller Consulting. Mr Miller is the start-up chief executive officer, with Northern Gulf Partners looking to appoint a full-time leader within the first six months of operations. The company will also be recruiting where possible from the local population.

Mr Sethna told IRN that much of the existing equipment in Iraq is old and not run by well-organised rental companies, a fact that presents a good opportunity for a new business. The intention is to start with mainly new equipment, including pumps, compressors, generators, earthmoving equipment and road building machinery.

The investment will be "towards the heavy end" of equipment, said Charles Miller, and aerial platforms are unlikely to feature significantly in the initial fleet investment. Northern Gulf is not yet ready to say what brands of equipment it will buy.

The longer term plan to invest $150 million in the business will depend on the demand in Iraq. "They are crying out for new cranes, for high pressure pumps, air, general equipment", said Mr Miller, "We will tailor the fleet to meet the demands of the international oil and gas contractors as well as the reconstruction and infrastructure work that is now beginning in earnest."

Although the oil and gas investments will include many new facilities, much of the initial work will be on maintaining, repairing and upgrading existing facilities.

Mr Sethna said the security situation was not an overriding concern; "There is risk in Iraq, but it is manageable risk. We will be working in areas that are reasonably stable - in the south." Northern Partners will be employing local security companies.

Northern Gulf Partners is already operating in Iraq in other business areas, including property and logistics, such as the Basra Logistics City, a former US military base that is now being adapted for commercial use.