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Iraq, Iran to sign deal on shared oilfield-Shahristani

(Reuters) / 12 September 2006

VIENNA - Iraq and Iran plan to develop oilfields that straddle their border and Iraq will pump crude to its neighbour’s refineries, deepening commercial ties between the two oil producers, Iraq’s oil minister said on Tuesday.

Iraqi Oil Minister Hussain al-Shahristani told Reuters in an interview that an agreement between Iraq and Iran will be signed in a few months after technicians mark out the common oilfields.

The deal, first explored by Iran and Iraq in the 1970s, entails both countries defining their reserves in the cross-border field and then pumping the crude jointly.

“We have already agreed to the unitisation principles. As soon as the technical people meet and mark the shared field (with Iran) then we will sign the agreement,” he said.

Shahristani said Iraq would also forge similar deals involving oilfields straddling borders with Syria and Kuwait.

The impending deal comes as Iraq’s Prime Minister Nuri al-Maliki visits Tehran for the first time since he came to office five months ago.

After the deal is struck with Iran, Shahristani said the two sides would build a pipeline to carry Iraqi crude to Iran’s southern refineries.

“The Iranians said they are even ready to take all their needs for the Abadan refinery from us which is about half a million (barrels a day),” he said.

“They want to buy it according to the market price.”

Iranian companies were prepared to build the pipeline in as little as nine months, he said.

Shahristani said Iran also wanted to secure 100,000 bpd of Kirkuk crude from Iraq’s north and more than 100,000 bpd of additional Basra Light crude in the future.

The two predominantly Shia Muslim countries have been looking to strengthen ties, prompting concern among Iraq’s once dominant Sunni minority and other Arab states, as well as in the United States, which has 145,000 troops in Iraq.

Washington, which considers Iran part of an “axis of evil”, accuses Tehran of meddling in Iraq.

Shahristani also said Iraq plans to invest in new port facilities at its Basra oil terminal.

National oil company

Shahristani, in Vienna for a meeting of the Organization of Petroleum Exports Countries, was also briefing international oil companies about the latest developments in his country.

“We will only tell the companies about the situation in Iraq, that is what we are going to talk to them about, it is not negotiations,” he said.

Iraq needs to attract investment from international oil companies to develop its oilfields and increase production.

Oil multinationals are waiting until a new investment code is in place before pumping cash into Iraq. International oil firms are eyeing its giant and largely underdeveloped oilfields.

Shahristani reiterated that a hydrocarbon law, which will set oil policy, is likely to be passed by the end of the year.

After the law passes the National Oil Company will be formed immediately.

“We have agreed on the formation of the National Oil Company, it will be a holding company and will begin work right after the hydrocarbon law passes the parliament,” he said.

“It will be regulatory and supervisory, it will set the oil policies which the operating companies will implement,” he added.

Oil is the country’s main source of the hard currency needed to rebuild its economy, and the energy sector is struggling to recover from years of mismanagement and sanctions.

Shahristani said oil exports in August were 1.65 million bpd and expected higher levels this month. He said production in Iraq’s southern oilfields had increased to 2.1 million bpd in the past two weeks.

Iraq’s state oil marketer SOMO will hold talks with customers in November or December to discuss contracts for the first half of 2007.

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