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Iraq's choicest oilfields up for grabs

Baghdad, December 12, 2009

Iraq on Saturday offered up one of its choicest oilfields on day two of a contract auction, as the country emerges from the shadow of war and seeks to leap into the top ranks of oil producing nations.

The West Qurna Phase Two oilfield, with a massive 12.9 billion barrels of reserves, is expected to produce fierce competition among the 30-odd international oil companies that braved the threat of violence and attacks to come to Baghdad.

Two big oilfields, including the 12.6 billion barrel 'supergiant' Majnoon, were awarded on Friday, as oil majors from Asia and the West put aside concerns over security three days after car bombs killed 112 people in the Iraqi capital.

Supergiants are fields with more than 5 billion barrels in reserves. Iraq has some of the largest untapped supergiants left on earth.

'The terrorists tried to send a message to the companies through the bombings ... that Iraq is unstable and investment will be overshadowed by risks,' Oil Minister Hussain al-Shahristani told state television on Friday night.

'But this message was not delivered and never deceived them. They came and submitted competitive offers that surprised the global oil industry.'

The 10 oilfields on offer in Iraq's second contract auction since the 2003 U.S. invasion, plus deals emerging from a first auction in June, have the potential to quadruple Iraqi crude output to 10 million barrels per day in six or seven years.

That capacity would match Russia's, and depending on what companies project they can pump from West Qurna Phase Two and other fields on the block on Saturday, Iraq may even challenge No.1 producer Saudi Arabia's 12.5 million bpd capacity one day.

Only two of the five fields on offer on Friday were successfully bid for as oil firms steered clear of more dangerous or troublesome areas, including the supergiant East Baghdad oilfield that lies in part under Baghdad's Sadr City slum and fields in the north where violence is still rife.

But the fees that the companies were willing to accept for developing Majnoon and the smaller Halfaya oilfield were far more beneficial to Iraq than many oil experts had expected.

'They were astonishingly low figures. But 2009 will be remembered as the year that Iraq opened its door to the international oil companies and then shut it. It's 10 fields and that's it,' said a senior oil executive.

'So it's strategic for the oil firms, either you are here or you aren't and this is the chance. You have to think about it like that.'

Royal Dutch Shell and Malaysia's Petronas won the deal for Majnoon, proposing a fee of $1.39 per barrel and pledging to increase output to 1.8 million bpd, more than double what Iraq had expected. They outbid Total, a favourite to take the field that it had sought to develop under ousted dictator Saddam Hussein.

Halfaya, with 4.1 billion barrels of reserves, was some consolation. CNPC, Total and Petronas won it with a fee of $1.40 per barrel and a plateau production target of 535,000 bpd.

The country is beginning to emerge from the sectarian bloodshed unleashed after the US invasion, but violence has continued to keep investors at bay.

The series of car bombs in the capital on Tuesday was the third major assault on government buildings in Baghdad in four months and a bloody reminder of the fragile security as Iraq heads into a general election in March.

The two-day oil auction in an auditorium of the Oil Ministry called the 'Nationalisation Room' took place under intense security, with thousands of Iraqi police and troops deployed on the streets of Baghdad and army helicopters buzzing overhead.

Executives from around 30 top oil companies, including Exxon Mobil, BP and Chevron, had been expected.   Russia's Lukoil and U.S. major ConocoPhillips were expected to bid for West Qurna Phase Two after losing out to Exxon Mobil and Royal Dutch Shell after the first round competition for West Qurna Phase One.-Reuters




Tags: Iraq | Qurna |

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