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Norway firm to invest $1.4bn in Iraq oilfield

Oslo, January 9, 2010

Norway's Statoil will invest $1.4 billion in Iraq's West Qurna Phase Two over the next four to five years and hopes to book some reserves from the field, its head of international operations said.

Statoil and Russian partner Lukoil have said they will make money out of one of the world's largest untapped supergiant fields with the remuneration fee of $1.15 per barrel, the lowest agreed in Iraqi bidding rounds last year.

"The Iraqis have come up with a fair concept where the level of compensation is determined by the bidders," Peter Mellbye, Statoil's head of international exploration and production, was quoted as saying by our sister publication, the Gulf Daily News.

Analysts say the terms for Iraq's oil deals are tight, but could give oil companies better access to as-yet undeveloped reserves and other oil deals in the future.

"We are not looking at margins like on a conventional project, but then again, we are not talking about the same type of risks," Mellbye said, pointing to limited exploration risk and not having to commit to a specific investment level.

Statoil and Lukoil have pledged to boost field output to a plateau target of 1.8 million barrels per day (bpd). Lukoil has said investments will be in the billions of dollars.

Mellbye said Statoil would invest $1.4 billion in the field over the first four to five years, based on its 25 per cent stake, aiming to quickly boost production.

"Part of the trick is to get revenues going in just a few years," he said.

West Qurna Phase Two has estimated reserves of 12.9 billion barrels of oil. Mellbye said Statoil had an entitlement of around 200 million.

"I don't want to get into a debate about US securities rules ... but I wouldn't be very surprised if it will be possible to book this," he said.

Statoil has said it is interested in developing its business in Venezuela, where the bidding round for the massive Carabobo project in the Orinoco oil belt has been delayed several times.

Venezula slightly softened conditions for the auction in November and is due to accept offers this month according to the latest deadline.

"We made it clear what we feel needs to be done to the terms to make it attractive," Mellbye said. "Venezuelan authorities have done something, but not enough."

In the last three months state oil company PDVSA has been forced to stop three of the projects nationalised in 2007 which upgrade the tar-like oil from fields adjoining the northern edge of the Orinoco River into exportable crude.

Statoil holds a stake in the 165,000 bpd Petrocedeno oil upgrader in the Orinoco extra-heavy oil region.

"Things are not moving ahead as fast as we would like to see," Mellbye said about maintenance work on the upgrader.

Statoil bought 257,000 acres of oil sands leases in Canada in 2007 and plans to pilot technologies late this year to coax the heavy crude to the surface, such as injection of steam.

The techniques might in future also work to improve Venezula's crude resource potential, Mellbye said.

Statoil has a 24 per cent stake in the development company for Russia's giant Shtokman gas field in the Barents sea, which is majority-owned by Gazprom.

Last month, project member Total said a final investment decision was impossible before the end of this year, nine months later than planned, due to problems with financing. – TradeArabia News Service




Tags: Iraq | Statoil | oilfield | Oslo | West Qurna Phase Two |

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