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Iraq offers up giant oilfields to foreign firms

In a second bid round, following on from one earlier this year, Iraq has put forward 11 oil and gas fields, including super giants.

“Under service contracts prepared by the oil ministry, 11 oil and gas fields will undergo complete development,” Oil Minister Hussain al-Shahristani told a Baghdad news conference.

Two of the oilfields—Majnoon and West Qurna Phase II—are classed as super giants and between them could produce 1.2 million barrels per day (bpd) when fully developed.

Shahristani named the other fields as Halfaya, East Baghdad, Gharrafa, Qayara, Najmah, Badrah, Kifil/West Kifil/Mirjan and a group in Diyala province, as well as the Siba gas field in Basra province.

He said the 11 fields could increase production by up to 2.5 million bpd within three to four years of the contracts being completed at the end of 2009. That increase is roughly equivalent to what Iraq produces today.

Three of the fields are jointly owned with neighbours Iran and Kuwait. Developing them would require bilateral deals with those states, which were not opposed, Shahristani said.

In June, Iraq announced a first bidding round for long-term contracts for eight big oil and gas fields, which could add a total of 1.5 million barrels per day to the nation’s output.

The oil ministry is expected to announce the results of that round by the middle of next year. When all the new fields are fully operational, in theory within six years’ time, Iraq’s output could be more than 6 million bpd.

International investment vital

Iraq has the world’s third largest oil reserves, but its infrastructure has been shattered by decades of war and sanctions and it is in need of massive investment.

Under the rule of Saddam Hussein, some foriegn oil firms were on the brink of gaining access but potential deals never came to fruition.

A Russian consortium headed by LUKOIL had even signed a deal to develop West Qurna, but it was cancelled by Iraq in 2002.

France’s Total had initialled a deal for Majnoon and Bin Umar, another major field.

By now allowing international firms to help raise output at its key fields, the Iraqi government is breaking with the policy of neighbours such as Saudi Arabia and Kuwait, where state firms keep tight control of oil.

However, the proposed Iraqi deals take the form of service contracts, in which Iraq owns the oil and foreign firms are paid for their work, rather than the production-sharing deals foreign firms prefer because they give them a share of the output.

In September, Iraq’s cabinet approved a $3 billion oil service contract with the Chinese National Petroleum Company (CNPC), restoring a deal originally signed in 1997.

Royal Dutch Shell is finalising details of a multibillion-dollar joint venture with an Iraqi state-run firm to capture gas produced as a by-product of oil production in southern Iraq, for export and domestic power generation.

Oil is Iraq’s main source of income and boosting output is vital to earning the cash needed for reconstruction, especially as plummeting oil prices have shrunk existing revenues.