13 May 2008
Five oil majors have wrapped up talks with Iraqi oil ministry negotiators on short-term technical support contracts for five oil-producing fields and are now expected to submit their final proposals to the ministry by June, Iraqi oil sources told International Oil Daily Monday.
The Iraqi oil ministry is keen to finalize the deals before it launches its first licensing round for long-term development contracts early this summer. The bidding round, the first since the US-led war on Iraq in 2003, will include the five fields subject to the technical support contracts, in addition to up to five more oil and gas fields in northern and western Iraq, sources in Baghdad told International Oil Daily separately Monday.
“There are no further meetings scheduled in Amman. We are done with the negotiations. The ball is now in the oil companies’ court,” one official involved in the Amman talks said.
BP, Chevron with partner Total, Exxon Mobil and Royal Dutch Shell have been negotiating since last year the two-year contracts under which they will offer the ministry help with procurement and field-related services. Those contracts are supposed to offer Iraq a speedy interim solution to the problem of reversing declining output at the four major producing fields in southern Iraq, plus the Kirkuk field in the north, until the country is in a position to sign long-term agreements.
The target is 100,000 barrel per day increments at each of the Rumaila, West Qurna Phase 1, Zubair, Missan and Kirkuk fields within a year of contract signing, sustained for a second year.
“All major issues have been agreed and only procedural matters need to be sorted. Both sides understand where the other stands and it’s up to the companies now to come up with the final draft, including the annexes for approval,” the sources added.
Iraqi Oil Minister Hussein al-Shahristani, who is keen to show that Baghdad — and not only Kurdistan — is open for business with international oil companies, last month urged the companies involved in the talks to wrap them up quickly before the contracts lose their relevance. He said Iraq might drop the technical support contracts if they are not signed by June.
Al-Shahristani is under pressure by the government to boost output quickly by introducing adequate investment and reservoir management techniques at producing fields, especially the mature Rumaila and Kirkuk oil fields, where output has been declining steadily.
Iraq is currently exporting about 1.5 million b/d from the south and some 350,000 b/d from the north, with total production averaging close to 2.5 million b/d.
The ministry is in the process of finalizing the list of oil and gas fields it is planning to tender for long-term development which could be launched as early as July, an Iraqi official in Baghdad said.
The planned tender is currently taking shape as ministry officials prepare data to be disclosed to bidding companies. Ministry officials are also setting up parameters and criteria for international oil companies who have qualified to participate in the first round.
The list now includes almost all major oil-producing fields in northern and southern Iraq, as well as two new gas fields. These are Rumaila north and south, Zubair, West Qurna, and Missan, all in southern Iraq, as well as Kikruk and Qaiyarah oil fields in northern Iraq. Two other oil-producing fields in the north — Jambour and Bai Hasan — are also being considered. The two gas fields on the list are Akkas in western Iraq near the Syrian border and Mansouria northeast of Baghdad.
In April, Iraq announced a list of 35 international oil companies qualified to bid in the first round that includes all the majors but does not set criteria for deciding which companies would be invited to bid for which fields. The fields will be offered on service contracts running for at least 20 years.
A consortium led by US Anadarko with partners UAE-based Dome and Swiss-based Vitol has also wrapped up negotiations for a technical support contract for the Luhais field. Iraqi sources said Luhais, which is currently producing some 40,000 b/d, will not be tendered for long-term development, nor would Subba, another oil field pursued by the same consortium.
By Ruba Husari, Dubai
(Published in International Oil Daily May 13, 2008)