Custom Search

By John Lee.

According to press reports, Iraq's South Oil Company (SOC) has awarded CH2M Hill a $170 million consultancy contract for the water injection project in the country's southern oil fields, replacing ExxonMobil.

Al Bawaba quotes SOC Director General, Dhia Jaafar, as saying:

"The South Oil Company has selected CH2M Hill to offer consultancy for the management of the seawater injection project ... The South Oil Company will be the leader of the project. We will send the contract to the oil ministry to approve it."

Bloomberg reports that the head of the process department at the State Company for Oil Projects (SCOP), Zahra al-Hammadi, said talks with Exxon didn’t lead to an agreement.

But when contacted by Iraq Business News on Friday evening, a spokesman for CH2M Hill said the company was still in discussions.

(Picture: CH2M Oil Pipeline operations in US)

By John Lee.

Iraq is considering replacing ExxonMobil at the supergiant West Qurna-1 oilfield with Russian companies LUKoil and Gazprom Neft, according to a report from Nefte Compass.

Iraq regards Exxon's contracts in the northern Kurdish region of the country as illegal.

But if any agreement was reached at this week's meeting between Iraqi Prime Minister Nouri al-Maliki and Russian President Vladimir Putin, it has not been made public.

Reuters cites a spokesman for LUKoil, which operates West Qurna-2, as saying the company is not planning to increase its exposure in Iraq by acquiring a stake in West Qurna-1, reiterating the company's official line that it is satisfied with its portfolio in Iraq.

Gazprom Neft, the oil arm of the world's top natural gas producer Gazprom, declined to comment.

Sources have told Reuters that Russia's top oil company Rosneft, may team up with Exxon in Iraq after the two have struck a landmark agreement to jointly tap Arctic hydrocarbon riches and oil and gas in North America.

Rosneft also declined to comment on the possibility of entering Iraq.

(Source: Reuters)

By Waheed Ghanim.

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Basra’s farmers say the oil industry is “occupying” their land – and that the one thing the Iraqi government is forgetting in its race to get oil firms in and farmers out, is the rising cost of the food Iraq can no longer grow itself.

Just over a year ago, Saleh Mohammed was farming in the Qurna area, west of the southern Iraqi city of Basra. But then the oil companies came. And today the land that Mohammed once farmed belongs to international oil giant, Exxon Mobil. And Mohammed himself works as an employee on the periphery of one of the oil production facilities.

Mohammed is 30 and his field of expertise is agriculture; he knows the ways of nature. He worked on his 2.5 hectare property planting wheat, barley and dates and everything he knew, he learned from his parents and grandparents, who had farmed the land before him. He really doesn’t know much about the oil industry. Yet, like so many others here, he too now wears the grey overalls and cap of oil facility workers.

“When the American, Russian and British oil companies started to come here, the government just wanted us to disappear,” Mohammed says. “They even offered us financial compensation to do so. Now some of us work as watchmen, some of us as gardeners and some as labourers with the oil companies for around US$600 a month. And I didn’t really have a choice in this matter – I have a wife and four children to look after.”

Mohammed is not alone. It’s estimated that there are 43 billion barrels of oil under the ground in this region. Almost all of Iraq’s oil currently comes from here. All of which clearly means big business, not only for the oil companies, but also for the Iraqi government.

By John Lee.

According to a statement on Wednesday from the office of Deputy Prime Minister for Energy, Hussain al-Shahristani, Shell has denied starting talks on possible energy deals with Iraqi Kurdistan.

"We don't have any discussions with the Kurdish regional government about working in the region," Shell's vice-president Hans Nijkamp is reported to have said.

Repeating a statement made last week, a spokesman for the company told Reuters, "over time, we want to work in all of Iraq, but for the time being we've got three mega-projects on the go (in southern Iraq)."

The Anglo-Dutch major is at work in Iraq's supergiant southern oilfields of Majnoon, where it is the operator, and West Qurna-1, where it is Exxon's junior partner. The company is also in a $17 billion gas joint venture along with Mitsubishi.

(Sources: Reuters, Bloomberg, AIN)

Around 80 executives from the world's leading companies doing business in Iraq will arrive in Baghdad this weekend as part of a major trade delegation.

They will attend a two day conference on Sunday September 30th and October 1st at the Al Rashid Hotel, Baghdad, to hear speeches from Deputy Prime Ministers Sharistani and Shaways and Dr Sami al-Araji, chairman of Iraq's National Investment Commission. Other Iraqi ministers and Mrs Hamdiyah al-Jaf, Chairman, Trade Bank of Iraq, will also attend along with trade groups including Basrah Chamber of Commerce.

Western companies represented will include: Shell, ExxonMobil, AMEC, DWC, Kier, Foster Wheeler, Fluor, Ernst and Young, Mott MacDonald, Kuwait Energy, Weir and major security companies including Olive Group , Control Risks and Aegis.

Baroness Nicholson of Winterbourne (pictured), the IBBC's Executive Chairman, will lead the trade delegation. She said:

"I am delighted the conference is being held under the patronage of His Excellency the Prime Minister of Iraq, Mr al-Maliki. The trade delegation will be one of highest level groups to travel to Iraq in recent years."

(Source: IBBC)

As senior politicians in Baghdad get more enraged about oil majors circumventing them to make "illegal" oil deals with Kurdistan in the north of the country, Iraqi newspaper Azzaman believes the oil majors have finally got the message, or have at least started to take it seriously.

Just 50 companies have attended an oil expo in Erbil, Kurdistan, which was meant to draw lots of attention to the oil-rich region. Mohammed Sharif, one of the organizers, said: "The reason for the unexpected low attendance is due to the current differences between the (Kurdish) region and Baghdad."

In comparison, 500 companies are attending the broader construction and environmental technology expo in Erbil, starting on 17th September, and a similar number are due to attend the oil expo in Basra, in southern Iraq, towards the end of the year.

The central government in Baghdad has been playing a tough game to prevent oil companies investing in the autonomous region of Kurdistan in northern Iraq until it has resolved its dispute with the regional government on oil and oil revenues.

Last year it prohibited Exxon from an exploration tender after it circumvented Baghdad to do business directly in Kurdistan. This July it banned Chevron from signing deals in the rest of Iraq after the oil giant bought stakes in oil businesses in Kurdistan.

But Total and Gazprom quickly followed suit, and Norway's Statoil has also been widely reported to be looking to sign deals with the Kurdistan Regional Government.

The companies are being drawn to the more lucrative profit-sharing agreements being drawn up by the regional government in the north, and analysts believe they are deliberately playing the central and regional powers off each other to get better deals. We reported last week: Iraq To Make Gas Exploration Deals More Attractive.

Royal Dutch Shell pulled out of talks with the Kurdistan Regional Government last November to protect its considerable interests in the south but, of the oil majors scorning the central government, only Exxon has any significant investment in southern Iraq, and the government needs the revenues being generated from it.

However, this summer, deputy prime minister for energy, Hussain al-Shahristani, had an incensed meeting with Exxon. Baghdad has also warned oil companies that they face having all oil contracts made throughout Iraq rescinded if they do business directly with the north.

Sources: Azzaman; Reuters; Bloomberg

Our Expert Blogger Ahmed Mousa Jiyad talks to Robert Tollast about Iraq’s energy revolution.

RT: The involvement of major US IOC’s such as Exxon and Chevron in Iraqi Kurdistan has sparked a war of words between Baghdad and Erbil. Possibly concerned about a breakdown in relations between the KRG and Baghdad, the US State Department has warned US IOC’s to be cautious, as a US State Department spokesperson recently said:

We speak about it in Iraq. With regard to our own companies, we continue to tell them that signing contracts for oil exploration or production with any region of Iraq without approval from the federal Iraqi authorities exposes them to potential legal risk, and we continue to tell them – obviously, they’ll make their own business decisions, but unless and until we have federal legislation in Iraq governing these things, something that we’ve been urging, that there are risks for them. So that’s our message to our companies.

This has provoked a furious response from Kurdistan’s Minister for Natural Resources, Ashti Hawrami. Is it correct to say that US IOC’s should pay more attention to Iraqi politics and be a lot more careful?

AMJ- This question covers a plethora of issues.Firstly, it is my humble view that all IOCs should be careful and refrain from getting involved in the internal politics of any country, especially Iraq, and this is particularly true for IOCs with an unfavourable image in the national memory of Iraqis. They are oil companies and they should work as operators to develop the upstream petroleum sector as stipulated in their related service contracts, and thus should not assume any political or diplomatic function- it is not their job to do so. Politics should not be their preoccupation especially when their involvement in domestic politics will add more “fuel on the fire,” to borrow the title of an excellent book by Greg Muttitt.

Second, there is nothing new in the above position of the American administration on the issue under discussion. This citation reconfirms the content of a letter from the American President to Mr. al-Maliki answering the request of the latter for intervention in the ExxonMobil case with the KRG. However, misquotation, misinterpretation and different interpretations become probable depending on who reads this statement, how and why; and this applies to both sides of the isle. Nevertheless, this does not change the fact that production sharing contracts signed by IOCs with the KRG carry serious and daunting legal risks and face very serious uncertainties.

Third, with regards to ExxonMobil I believe the company might have made a grave error of judgement. The views expressed by my contacts among many Iraqi and non-Iraqi professionals suggest that ExxonMobil acted probably out of arrogance, short-sightedness, a misreading of Iraqi national memory and a disrespect for sovereignty with a covert and overt agenda.

We have to remember that ExxonMobil (along with Shell) did not win West Qurna 1 (giant Iraqi oil field- WQ1) during the first bidding round held in June 2009. It did so only after its competitor (Russia’s Lukoil) announced its decision to accept the ministry of oil’s remuneration fees of $1.9/barrel in October 2009. Then and only then ExxonMobil acted quickly by accepting the same term, which it refused in June, and proposed a higher production plateau target or PPT of 2.350 million barrels a day (mbd.) The ministry favoured ExxonMobil over Lukoil!

“Erbil Oil & Gas Exhibition”, the most exlusive and utmost industry fair in Kurdistan inspires and guides prospective investors in Kurdish oil.

Being the first and only oil and gas sector exhibition in the region, the exhibition provides unparalleled opportunities for the investors. The Northern Iraq Kurdish Administration produces 150.000 bpd; however, the administration is dedicated to increase this amount to an impressive 1.000.000 only in 5 years, offering significant investment prospects.

Holding 40 billion barrel of oil and 60 trillion cubic feet of gas with low geological exploration risk and comparatively high stability, Kurdistan has already distinguished itself as a key oil and gas source in the region, promising further positive momentum in the coming years and beyond.

Prominent global energy companies, including, but not limited to, Exxon Mobil, Total, Gazprom and Chevron have already rushed to the region. We invite you to kindly join us in “2nd Erbil Oil & Gas Exhibition” organised in Erbil International Fair Ground between 03-06 September, 2012, to assume an influential and leading position in the reshaping of the energy business in Kurdistan and the wider Middle East.

Submissions can be made by filling out the online form on the Erbil Oil & Gas exhibition official website: www.erbiloilgas.com

By Padraig O'Hannelly.

Tensions between Iraqi Kurdistan and the central government in Baghdad have increased significantly in recent times, both politically and commercially.

On the political front, the "difference of opinion" about the sending of Iraqi troops to the border between Iraqi Kurdistan and Syria was eclipsed by reports that the Kurdistan Regional Government has been secretly buying weapons.

Commercially, we've seen two more major oil companies declare their hands, with both Chevron and Total taking stakes in Kurdistan in defiance of warnings from Baghdad. The Oil Ministry used some strong language in its condemnation of the Chevron deal, and is reportedly in the process of removing Total from the Halfaya field.

Attempts to put political pressure on ExxonMobil, the first of the majors to enter Kurdistan, also appear to have failed.

Taken together with the disappointing response to the fourth energy bidding round, these deals challenge any assumption that Baghdad can simply pull rank on Erbil when it comes to securing the involvement of top-tier oil companies; given a choice between poorly-paying service contracts in the South and potentially lucrative production sharing contracts in the North, it's increasingly clear which they prefer.

By John Lee.

An Iraqi oil ministry statement on Tuesday said that Chevron, the second largest U.S. energy company, will be barred from contracts in central and southern Iraq as a result of buying stakes in two oil-exploration blocks in Iraqi Kurdistan.

“Chevron is barred from any agreement or contract with the federal ministry of oil and its companies …unless it retreats from the contract it signed in Kurdistan region,” the oil ministry statement said.

Chevron purchased 80% stakes in the Sarta and Rovi blocks in Iraqi Kurdistan from India's Reliance Industries; Austria's OMV holds the remaining 20 percent.

Baghdad has already blacklisted companies that maintain deals with the Kurds, excluding them from working elsewhere in Iraq. Among those is New York-based Hess, which was barred last year from competing in the fourth energy auction. Exxon Mobil was also banned from the same auction.

(Sources: Reuters, Wall Street Journal, AKnews)