Friday, June 26, 2009

Iraq opens fields; Exxon, Shell seek foothold

IRAQ is set to welcome back foreign oil companies into the war-torn nation to develop the world's third-largest crude reserves three decades after expelling them.

Eight of the world's top 10 nonstate oil producers, including Exxon Mobil Corp. and Royal Dutch Shell Plc, are vying for the right to help Iraq develop six oilfields and two natural-gas deposits. More than 30 companies in total are bidding for $16 billion worth of technical service contracts for producing fields that will be awarded in Baghdad on June 29 and 30.

"Iraq is the big prize in the region," said Raja Kiwan, a Dubai-based analyst at consultants PFC Energy. "It is one of the only remaining areas that provide the level of upside for companies who want to access reserves."

The Opec producer is struggling to increase output and revenue from crude sales after six years of conflict and prior sanctions destroyed the country's economy and infrastructure.

The government, also running a second bidding round for 11 oil and gas fields, aims to boost production to about 6 million barrels a day by 2015, from 2.4 million barrels in May. Saudi Arabia, the world's biggest oil exporter, produces 8 million barrels a day.

Companies investing in Iraq are looking to take a stake in the long-term potential that the country's 115 billion barrels of reserves hold after gaining a foothold through the service contracts for operational fields. Iraq may offer foreign companies direct stakes in deposits and allow them to sign production-sharing agreements for future fields, according to Oil Minister Hussain al-Shahristani.

Iraq will earn 100 times more than the foreign companies it hires to develop the deposits, the minister told parliament in Baghdad on June 23. The deposits being offered in the first licensing round may yield $1.7 trillion in profit for the country, based on an oil price of $50 a barrel, while oil companies seeking service contracts will gain $16 billion over the 20-year life of the contracts, he said.
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