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Iraq Approves Shell, Petronas and Sonangol Oilfield Contracts

Kadhim Ajrash And Ayesha Daya (Bloomberg)
Filed on January 7, 2010

BAGHDAD - Iraq’s Council of Ministers approved service contracts for Royal Dutch Shell Plc, Petroliam Nasional Bhd., Japan Petroleum Exploration Co. and Sonangol SA to develop four oilfields, a government spokesman said.

Shell and Malaysia’s Petronas received the go-ahead to develop the Majnoon field, Petronas and Japex will develop Gharraf, and Angola’s Sonangol won service contracts for Qaiyarah and Najma fields, Ali Al Dabbagh said in a statement received yesterday.

Iraq, holder of the world’s third-largest oil reserves, approved these service contracts for fields offered in its second licensing round held last month as it seeks foreign investment to rebuild infrastructure and boost crude sales.

Shell and Petronas, who paid a signature bonus of $150 million and will receive a fee of $1.39 a barrel according to a contract signed on December 20, are required to attain peak production of 1.8 million barrels a day from Majnoon, the statement said. Petronas and Japex will boost output from Gharraf to 230,000 barrels a day for a fee of $1.49 a barrel, in line with a contract signed with the oil ministry on December 21, it said.

Angola’s state oil producer Sonangol will increase output at Qaiyarah to 120,000 barrels a day for a fee of $5 a barrel, and Najma to 110,000 barrels a day for a fee of $6 a barrel, and paid a signing bonus of $100 million for each contract signed on December 30, Al Dabbagh said. The contracts are subject to Iraqi law and the duration is 20 years, extendable for a further 5 years, the statement said. The agreements can be cancelled if the companies fail to reach peak production after seven years from the contract date or if they are unable to sustain output levels for ten years, according to the statement.

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