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ExxonMobil, BP and Eni plan to spend around $100 billion to upgrade their three oilfields in southern Iraq, Thamer Ghadhban, top energy adviser to the Iraqi Prime Minister said on Wednesday.

According to the report from the Wall Street Jounal, some $50 billion would be spent to upgrade Exxon's supergiant West Qurna Phase 1 oilfield, with the remaining $50 billion being spent by BP and Eni to upgrade the Rumaila and Zubair oil fields respectively.

"The bulk (of the finance) is for West Qurna 1 because the Rumaila and Zubair fields were well advanced in terms of development, such as number of wells, oil field facilities, other infrastructure, while West Qurna phase 1 needs more," he told reporters at the Iraq Mega Projects conference in Istanbul.

The three fields are now pumping around 2 million barrels a day, which is the bulk of Iraq's total oil output of 2.9 million barrels a day.

A BP spokesman said it was too early to forecast the exact size of the group's investment in Rumaila.

"We're working with our partners and the Iraqi government on a detailed field development plan. Obviously, our plan is to invest enough to reach the production targets agreed in our contract," said the spokesman.

(Source: Wall Street Jounal)

Dow Jones reports that Iraq has agreed with oil majors to build a multi-billion-dollar oil field water injection plant in the south of the country, after disagreement over costs that suspended the project for months.

The water injection project aims to provide water to maintain reservoir pressure to fields such as Rumaila, West Qurna Phase 1 and 2, and Zubair and Majnoon in southern Iraq.

ExxonMobil was picked on behalf of foreign oil firms to lead the mega water-injection project, needed to boost crude oil production rates from Iraq's southern oil fields.

Other international oil companies (IOCs) that have expressed willingness to set up the common water injection project include UK's BP, Russia's OAO Lukoil Holding, Italy's ENI and UK-Dutch oil major Shell, which is expected to join in later.

"The two (Iraq and oil firms) have advanced toward reaching agreement and we have passed the heads of agreement (phase) into the FEED (Front End Engineering and Design) phase," Thamer Ghadhban, the top energy advisor to the Iraqi Prime Minister said on the sideline of the Iraq Mega Projects conference in Istanbul.

Foreign companies had suggested the cost would be a little more than $3 billion to build the first stage of the project, which is designed to process 4 million barrels of water a day, Iraqi oil officials had said.

The Oil Ministry's figures were much lower than those estimated by the oil companies, Ghadhban said.

To overcome differences over costs, Iraq has suggested starting a FEED study aimed at establishing an accurate costs for the project, Ghadhban said.

"It has been decided that they (Iraq and foreign companies) will work together to build the project," he said.

Last month, Nihad Mous, head of the ministry's State Company for Oil Projects, said the main issue delaying the project was that BP wanted costs of the water injection project to be reimbursed when production in these fields reached a 10% increase over their base line before the development process. The ministry wants to start paying back when 20% increase in output was reached.

"Of course an oil company wants to be paid early and of course the oil ministry thinks otherwise. I do not at all see these as stumbling blocks," Ghadhban said.

(Source: Dow Jones)

Iraq has the fourth largest oil reserves in the world exporting approximately 96% for the country’s economy, in 2010 100’s of contracts were signed to develop Iraq’s oil and gas infrastructure and increase oil production. Over the last year contract holders have implemented intense geological surveying, drilling, well rehabilitation, security tightening and planning to develop Iraq’s oil and gas fields.

Iraq Mega projects 2011 will be taking place from the 18-20 October 2011 at the Ritz Carlton, Istanbul and will bring together senior Iraqi professionals, contract holders and the service industry themselves to discuss the progress made since the signing of the contracts, the challenges they have overcome and problems faced moving forward.

The Iraqi Deputy Oil Minister stated “projects would raise Iraq’s capacity to transform crude into fuels by 900,000 barrels a day.”

Looking in-depth at case studies contract holders will provide insight into their experiences and highlight future opportunities for the service industry. Featuring project led round table discussions contract holders including Statoil, ExxonMobil, Shell, Petronas, Sonangol, ENI and Lukoil will discuss opportunities in Iraq, their progress, challenges and problems faced.

A post conference Seminar will follow the main programme with a focus on the concepts and views of developing the value chain for the first time on Iraq including the Iraq Energy Strategy.

Iraq Mega Projects 2011 industry support to date Includes: Caterpillar, Iratrac, Unatrac, Emerson, Lakeshore TolTest, Olive Group, ExxonMobil, Statoil, Total, Oxy, Techint, OIEC, ACT, Exterran, Unaoil Group and Petronas.

For further information visit: http://www.cwcimp.com/index.aspx

According to U.S Energy Information Administration data, Iraq generates the majority of its revenue by exporting oil and importing about 30% of the gasoline it uses. The country is now seeking $30 billion in foreign investment to build refineries and develop oil and gas fields to avoid importing gasoline and diesel.

Iraq Mega Projects 2011 taking place from the 18-20 October 2011, at the Ritz Carlton, Istanbul, Turkey, will look in-depth at case studies showcasing the challenges, progress and solutions faced in the development and investment of Iraq’s oil and gas fields, while bringing together operators, local governors, service providers and experts.

The Iraqi Deputy Oil Minister stated “projects would raise Iraq’s capacity to transform crude into fuels by 900,000 barrels a day.”

“Four refineries currently in design and engineering stages are planned for Kirkuk, Maysan, Nassiriyah and will add 750, 000 barrels a day to capacity. In addition, a proposed 150,000 barrel a day facility in Nineveh is in the provisional phase and will refine heavy crude once production starts in nearby fields.”

Conference sessions will be led by field contract holders and service companies who will give their opinion on capacity and showcase both their experiences in Iraq and the expertise they have brought to the region.

Sponsors to date Include: Caterpillar, Iratrac, Unatrac, Emerson, Lakeshore TolTest, Olive Group, ExxonMobil, Statoil, Total, Oxy, Techint, OIEC, ACT, Exterran and Unaoil Group.

For further information visit: http://www.cwcimp.com/index.aspx

The FMG Iraq Fund continues to outperform world stock markets. The fund was up some +2.0% in the month of August and it has risen by +25% since its launch in May 2010. The current size of the fund is now $20 million under management.

FMG offers a retail share class for a minimum investment in the three share classes of US $10,000, (CHF) Swiss Francs 9,000 or GBP Sterling £6,000. Investment into the Iraq Fund is an attractive proposition for UK investors, as gains will be taxed as capital gains at 28% and not as income tax rate at 50% as the fund has H.M. Revenue & Customs “Reporting Status”.

Henrik Kahm, fund manager of the Iraq Fund, said: “FMG’s Iraq fund is sensibly positioned to benefit from the Iraqi growth story and fuelled by a growing confidence in the country's stability”.

Iraq has the third largest oil reserves in the world. The country is one of the least explored in the region and oil experts say the country probably has 200-300 bn bbl of oil i.e. at par with Saudi Arabia. Iraqi oil is easy to access and costs only a few dollars per barrel to extract. The Iraqi government signed 11 oil contracts in 2009 with IOCs such as SINOPEC, Petronas, Shell, Exxon, ENI, Sonagol with the aim to explore and develop oil fields. Over 90% of oil revenues go to the Iraqi government, one of the highest royalty rates in the world. Value of the oil in the ground can be estimated to $10 trillion. World market capitalization is around $50 trillion. Iraq Stock Exchange market capitalization is $4bn. FMG thinks this is the most undervalued stock market in the world.

The proceeds from oil will be used by the Iraqi government to improve infrastructure and other related projects. FMG’s Iraq fund is carefully positioned to benefit from that new money coming into government and consumer spending, with exposure to a diverse range of Iraqi quoted stocks.

The amount of new foreign investment deals is on track to double this year, according to a report by Dunia Frontier Consultants. In just the first half of this year, Iraq attracted $45.6 billion in foreign investment, $3 billion greater than the total for the whole of 2010. On the macro side FMG has noticed that Iraq's oil revenues surged by 62 percent to $41.3bn in the first six months of 2011 compared with $25.4bn in the first half of 2010, according to a report published by Arab Oil and Gas. The massive revenue increase was attributed to both higher oil prices and a significant increase in volumes.

(Source: FMG)

Dow Jones reports that Iraq and BP have not yet reached agreement on reimbursement of costs to build a multi-billion-dollar oil field water injection scheme in southern Iraq.

ExxonMobil was chosen to lead the project on behalf of foreign oil companies rehabilitating Iraqi oil fields.

Nihad A. Moosa, head of the State Company for Oil Projects (SCOP) told Dow Jones Newswires that international oil companies (IOCs) interested in the common water injection project include Lukoil and Shell, which is expected to join later.

"BP wants to start reimbursing the costs of the project when foreign firms increase output from these fields by 10%, while the ministry wants to pay back costs when they boost output by 20%," Moosa said.

But a BP spokesman said that it "strongly supports the common seawater project, the terms for which are defined in the Rumaila Technical Service Contract", and that it is "working with ExxonMobil and the government of Iraq to move it forward."

BP is developing Rumaila oil field, Iraq's largest, which is producing around 1.3 million barrels a day. Under the service contract it signed with Baghdad in 2009, BP would start reimbursing its costs when it increases output from the field by 10%.

ExxonMobil, Shell, Eni and Lukoil have no problem with agreeing to the payment terms of the project, Moosa said.

Foreign companies had suggested the cost would be a little more than $3 billion to build the first stage of the project which is designed to produce 4 million barrels of water a day, she said.

"We rejected the proposed cost of the project as the ministry can build the project at half that price," she added.

The oil ministry is also considering another solution, namely hiring a separate company to build the project, Moosa said. The ministry has approached a company that has built similar projects in Saudi Arabia, she added, without naming the company.

The foreign firms are, however, "adjusting and reviewing their position" in order to address all these concerns and they reassured the ministry that they are still committed to the project, she added.

The water injection project aims to provide water to maintain reservoir pressure to fields such as, Rumaila, West Qurna Phase 1 and 2, Zubair and Majnoon in southern Iraq.

(S0urce: Dow Jones)

Iraq's fourth auction for exploration rights will offer international energy companies a revised remuneration fee formula designed to benefit bidders while encouraging them to minimise costs, according to Reuters.

Abdul-Mahdy al-Ameedi, head of the oil ministry's contracts and licensing directorate, told the oil ministry's roadshow in Amman, Jordan, that the ministry has made some alterations in the new service agreement from contracts signed with oil companies after the three previous bidding rounds in 2009 and 2010.

"There are not many differences from the previous contracts. But we recognised that there are some minor mistakes in the previous contracts, not substantial," he told Reuters. "So we were able to overcome this in our current contract."

One of the main changes was the way the remuneration fee is calculated in the new contract, Ameedi said.

"If the total production is 1 million barrels per day and the cost recovery is (the value of) 300,000 bpd, then we will deduct the 300,000 from the net production and the remainder is 700,000 bpd, so we will pay remuneration for the 700,000 only, not for the 1 million," Ameedi said.

"The remuneration will be higher so it is in our interest and I think it is in the interest of the contractor."

The calculation change is aimed at cutting the cost of subcontracts, which was inflated by some oil companies under the current deals signed with Iraq, Ameedi said.

"We will deduct the cost of subcontracts from the total production and the remaining production will pay remuneration for it," he told reporters on the sidelines of the roadshow.

"If that share of production is less, remuneration of the contract will be affected negatively, and if it is high, they will get more remuneration," he said.

"It coincides with the idea of production sharing in this sense only: That there would be 'cost oil' but there would not be 'profit oil'."

The contract length will be a maximum of 30 years including four years for exploration and 20 for development, Ameedi said.

The model contract was not final and could be changed.

Any new oil reserves discovered will be used to maintain and boost reserves, while companies who make gas discoveries will be allowed to produce it.

"We may or may not develop and produce (from) the oilfields, if any," Ameedi said.

The holding period will be up to seven years for oil discoveries.

46 pre-qualified oil and gas explorers showed for the 4th oil licensing roadshow in Amman.

More than 100 executives from oil majors such as ExxonMobil , Chevron, Total , BP and Lukoil attended the show, where Iraqi officials presented the service contract and licensing process for the auction, scheduled for Jan. 25-26.

"The remuneration fee is going to be much bigger, there is no question about that. But that does not necessarily automatically make it more economically interesting because the risks are high," an oil executive attending the workshop said.

"Access to the crude is far more important than the economics for some, which could make this fourth bidding round, most probably, a success."

(Source: Reuters)

Iraq's oil ministry has issued a list of the 41 companies qualified to participate in its fourth energy bidding round in January:

ATPECO  - Japan

Bashneft - Russia

BP - UK

Chevron Corp - United States

CNOOC - China

CNPC - China

Edison - Italy

Egyptian General Petroleum Corp - Egypt

Eni Iraq - Italy

ExxonMobil - United States

Gazprom - Russia

Hess Corporation - United States

INA-Industrja Nafte - Croatia

Inpex Corp - Japan

ITOCHU Corp - Japan

Japex - Japan

JOGMEC - Japan

JX Nippon Oil and Gas - Japan

Kogas - South Korea

Kuwait Energy - Kuwait

Lukoil - Russia

Mitsubishi Corp - Japan

Mitsui Oil - Japan

Mubadala Oil - United Arab Emirates

Occidental Petroleum - United States

OJSC Oil Company Rosneft - Russia

OJSC TNK-BP Holding - Russia

ONGC Videsh Ltd - India

Pakistan Petroleum - Pakistan

Petro Vietnam - Vietnam

PetroChina - China

Petronas - Malaysia

Premier Oil - UK

PT Pertamina - Indonesia

PTTEP International Holding - Thailand

Royal Dutch Shell - UK/Netherlands

Sonangol - Angola

Statoil - Norway

Sumitomo Corp - Japan

Total - France

TPAO - Turkey

Due to the lack of investment in developing Iraq’s oil sector during the old regime, pipelines lack capacity and are corroded, ports need redeveloping, refineries need to be upgraded to increase supply, mines cleared, power supply is irregular and an increase in water supply is crucial.

Iraq has the fourth largest oil reserves in the world and oil exports account for 96% of the country’s economy. Since the signing of the twelve oilfields and three gas field contracts, work has begun on rebuilding Iraq’s oil and gas field infrastructure to increase oil production. Contract holders have implemented intense geological surveying, drilling, well rehabilitation, security tightening and planning to develop Iraq’s infrastructure.

Iraq Mega Projects 2011 taking place from the 18-20 October 2011, at the Ritz Carlton, Istanbul, Turkey, will focus on the progress, challenges and solutions in the production of the oil and gas fields.  Contract holders will offer insight into their experiences since the signing of the oil and gas filed contacts, discussions around the issues they have overcome, and updates on recent developments will be heard.

Key industry support has already been confirmed for Iraq Mega Projects 2011; sponsors to date include: Caterpillar, Emerson Process Management, Olive Group, ExxonMobil, Techint, OIEC, Oxy, Statoil, Total and ACT.

Iraq has qualified 41 companies to participate in its 4th energy bidding round, which is scheduled to take place in late January, Abdul-Mahdy al-Ameedi, director of the oil ministry's contracts and licensing directorate, told Reuters on Sunday.

The 4th bidding round for the 12 new exploration blocs is expected to add 29 trillion cubic feet of gas and 10 billion barrels of oil to Iraqi reserves from the auction.

Ameedi said the next step would be inviting the 41 companies to a roadshow on Sept 11 in Amman, Jordan and presenting a data package with initial tender protocol to companies on Sept 12.

Iraq was scheduled to make an announcement of pre-qualified companies on June 30, but some issues relating to company documentation forced further delay.

"Some companies posted required documentation to places like Iran by mistake and others asked for more time to sort out bank issues, so we had to delay announcement," Amedi said.

Iraq's oil ministry also excluded companies which have contracts with the Kurdish Regional Government (KRG) from the qualification process, Amedi said.

According to the Reuters report, companies qualified range from oil majors, including BP Plc, ExxonMobil and Italy's ENI, to state-run firms like Turkish Petroleum Corporation (TPAO) and India's Oil & Natural Gas Corp.

The announcement of the qualifications may also lead to a clash with an Iraqi parliament energy panel chief who said in May he wanted the bidding delayed until lawmakers approve a long-stalled new hydrocarbons law.

(Source: Reuters)