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Eni SpA and its partners, Missan Oil Company, Occidental Petroleum, and Korea Gas Corp (KOGAS), have reached a key production target at Iraq's Zubair oil field.

Production at the field near the city of Basra has increased to 201,000 barrels a day from 183,000 when Eni and its partners took over management of the field in February, the Rome-based company said in a statement.

“With this successful increase in production, the consortium’s contract cost recovery commences, with the group additionally earning a remuneration fee of $2 per barrel on incremental oil production,” Eni said.

The Eni-led group said it plans to boost production at the field to 1.2 million barrels a day within six years and maintain that level for another seven years.

Eni controls almost 33% of the group managing the project, while Iraq's Missan Oil Co. owns 25%, Occidental Petroleum Corp. has 23%and Korea Gas Corp. holds almost 19%, Eni said.

(Source: Bloomberg)

Italy's Eni SpA and its partners will raise oil production from Iraq's Zubair oil field 10% above its previous level of around 180,000 barrels a day by the end of this year, the company said on Tuesday.

Dow Jones reports that once the 10% increase is achieved, Eni will start receiving payment in the form of small crude oil shipments whose value is equivalent to $2 for each barrel of extra production.

Chief Executive Paolo Scaroni told reporters at a London press briefing:

"We will be paid next year, but it will not be big volumes" of Basra heavy crude, Iraq's export blend of oil from many fields, he said.

Earlier this year, Eni said it would drill 12 new wells and overwork five others this year to boost Zubair's output. The field, with 6.5 billion barrels of proven oil reserves, was producing 183,000 barrels a day before this work started.

Eni and partners Occidental Petroleum (OXY) and Korea Gas (Kogas) set a plateau target of 1.2 million barrels a day for Zubair to be reached in six to seven years' time.

Most of the large international oil companies have agreed to boost output from neglected Iraqi oil fields in exchange for a per-barrel fee from the government, which retains ownership of all the country's oil resources.

(Source: Dow Jones)

The balance of risk and reward for investing in Iraq's vast oil reserves is changing, according to a report by Turner Investments.

The report, called Oil in Iraq: A Profitable Gamble?  considers safety risk for oil company employees and their families, risks to operations from bombs and landmines, and political risks ranging from a line of officials seeking bribes to sectarian wars between Sunni, Shia and Kurd factions.

For all the problems, the authors believe there is one big reason why oil companies will seek to profit from Iraq:

"Iraq could hold the greatest potential for growth in global oil production. With 115 billion barrels of oil, Iraq has the world’s third-largest proven reserves, behind only Saudi Arabia and Iran. Some geologists believe that Iraq’s reserves are even greater than that, as many oil fields have yet to be fully explored. There are few, if any, places that have as much oil that’s untapped and close to the surface (and thus relatively economical to extract) as Iraq does."

Iraq has clearly not been an instant success. As the report states, "energy companies have in fact balked at getting entangled in Iraq’s spider web of domestic problems." It goes on to say that in a major auction in June 2009, "only a single deal was struck in that auction; other energy companies considered the risks of a long-term investment in Iraq too formidable to overcome." This year, Iraq has seen four major gas deals and many more oil investment projects announced.

The authors say: "Our own sense is that companies have become decidedly more optimistic about their prospects in Iraq over the past 12 months. Their optimism evidently has been stoked by the 12 development contracts to increase oil production that have been awarded to international companies such as BP, ExxonMobil, Occidental Petroleum, and Royal Dutch Shell."

The authors concurred with Morgan Stanley's forecast that "Iraq can roughly double its oil production by 2016, to 4.2 million barrels per day." That would represent one of the biggest increases in oil capacity in history. They continued: "Doing that would likely require a fourfold increase in capital investment, with $50 billion being spent between now and 2016. The money would fund the drilling of more than 1,700 new wells and upgrading 1,000 existing wells that have been decaying for years. BP alone plans to spend some $15 billion in a joint venture with China National Petroleum Corporation to boost production at the Rumaila field."

The authors conclude: "In short, we think Iraq represents too big of a prospective bonanza for Western oil exploration-and-production companies and energy-services companies to pass up. In truth, the companies are increasingly concluding that the pluses of doing business in Iraq outweigh the undeniably large number of minuses."

(Source: Turner Investments)

Abu Dhabi's Invest AD has launched an Iraq Investment Fund to channel investment into high-growth companies in a country where improving stability and increased oil production should fuel strong economic expansion in coming years.

Invest AD is seeding the fund and is marketing it alongside its other equities and private equity funds that invest in the Middle East and Africa.

"As Iraq stabilise, it should take its place as one of the major economies in this vibrant region," said Invest AD Chief Executive Officer Nazem Fawwaz Al Kudsi. "The country is overcoming difficult circumstances to make real progress towards an open economy, and we see tremendous opportunities in the long term. By entering the market early, we hope to capitalize fully."

The new fund, which is open to institutional and high-net-worth investors early in October, will make investments primarily in listed equities, but also in unlisted opportunities.

Iraq is widely considered one of the last frontiers in emerging markets, although the stock market is tipped to grow rapidly in coming years as the country recovers from conflict.

Invest AD, established by the Abu Dhabi government in 1977, is among a handful of companies to offer global investors access to Iraqi equities, and the only one based in the Middle East.

Mr Al Kudsi says that Invest AD is seeing growing regional and international investor interest in Iraq. "They see the growth potential, whether through fixed or portfolio investments. The Iraqi equity market is still quite small by regional standards, but from small beginnings come big opportunities. We expect our fund to grow in line with this."

Iraq's economy will grow by over 7 percent annually in the next couple of years, according to the International Monetary Fund (IMF), with the country's current account and fiscal deficits turning to surplus as oil production increases.

Iraq has the world's third-largest proven oil reserves and the country has signed 11 oilfield development deals with major oil firms including Royal Dutch Shell, Italy's Eni, Exxon Mobil, Occidental Petroleum Corp and South Korea's KOGAS. These deals are projected to lift the country's capacity within seven years to just under Saudi Arabian levels of 12 million barrels per day, from 2.5 million now.

Business Monitor International (BMI) has published a new report on business in Iraq.

Summary:

The oil sector contracts signed between Iraq and international energy companies in 2009 reflect the first stirrings of what the oil and gas industry hopes will be the reestablishment of a strong working relationship. Following years of underinvestment as a result of the economic sanctions imposed on Iraq following the 1991 Gulf War, Iraq is hoping to tap the expertise and capital of international oil companies (IOCs), their state-run national oil company (NOC) competitors and service companies in order to boost the technical capabilities of its infrastructure as well as the production and export capacities of the country’s crude oil, natural gas and refined products.

Owing to the 1991 Gulf War and subsequent UN sanctions Iraqi production suffered during the 1990s. The country was granted an exemption from OPEC production quotas while it operated under the auspices of the UN Oil-for-Food program, which allowed Iraq to export limited amounts of crude oil in exchange for the purchase of food and essential medical supplies.

Although the Oil-for-Food program was disbanded after 2003, Iraq still benefits from the OPEC quota exemption. BMI forecasts Iraq’s 2010 production at 2.47mn b/d, of which 1.62mn b/d will be exported, and the government plans to boost production to 12mn b/d by 2020-a production increase of 485% over the 10-year period. BMI sees this target as ambitious, forecasting 2020 output of 4.5mn b/d, but our projections still see 82% growth over the period.

While our outlook is sanguine, there are manifold risks to investment in the Iraqi oil and gas industry. In the long term, crude production growth will mean that Iraq will come under increasing pressure to rejoin the OPEC quota regime, presenting a potential cap on further output gains. In the short and medium term, Iraq’s large investment needs, political instability and security risks will all contribute negatively to the country’s energy sector aims. Furthermore, the role of ‘resource nationalism,’ particularly in a country with an insecure polity wary of foreign intervention, cannot be discounted in the upstream segment.

This can be discerned from the development contracts signed between Iraq and the various international companies jostling for position in the country’s energy investment plans. The final awardees originate from a broad spectrum of European and Asian countries, and only two US companies-ExxonMobil and Occidental Petroleum-were awarded contracts. Furthermore, the Iraqi government was keen to be seen as negotiating hard to obtain the best possible terms for the state, and the government has shown no hesitation in changing deal terms for its financial benefit. Earlier changes to contractual structures included a 5% decline rate provision for output above the applicable production targets, as well as changes in ownership structures to the benefit of the IOCs. Nonetheless, BMI believes that Iraq’s ambitious plans for its oil and gas sector present significant investment opportunities for foreign companies. Specifically, we have identified the country’s oil services sector, refining segment and natural gas industry as particularly attractive opportunities. We have highlighted below not only the nature of these opportunities, but the three most important risks that foreign investors will face in the Iraqi energy sector in the coming years.

The full report runs to 43pages, and is available at a price of £525 directly from Business Monitor International.

Energy companies from the UAE are interested in investing as Iraq’s oil and natural-gas industries, a government official said.

“There are indications that the UAE will have a place in the petroleum and energy sector,” Abdullah Ibrahim Al Shehi, the country’s ambassador to Iraq, said on Monday at a gathering of diplomatic officials in Abu Dhabi.

Mubadala Development Co, the Abu Dhabi government-owned investor, is among companies that may be interested in expanding to Iraq, Al Shehi said. There is about $5 billion worth of bilateral trade between the UAE and Iraq, and that value is expected to increase to $7 billion next year, he said.

UAE property companies and airlines are looking to Iraq as a market for expansion. Ethidad Airways of Abu Dhabi started flights to Baghdad in April, and Dubai-based Emirates, the Middle East’s largest airline, plans to start flights to Baghdad this Year. Budget carrier FlyDubai travels to northern Iraq.

Abu Dhabi property developer Bloom signed a $12.5 billion [14.6 trillion Iraqi dinars] contract in March for a housing project west of Baghdad. Dana Gas, based in the UAE emirate of Sharjah, produces fuel in northern Iraq’s semi-autonomous Kurdish region.

Iraq, seeking to boost oil and gas output, held two bidding rounds last year to auction rights to develop hydrocarbon deposits. The country is planning a third round for three gas areas this year.

UAE companies previously wanted to invest in Iraq’s oil industry and lost out as other international firms won development rights, Al Shehi said. No U.A.E. companies qualified to bid in Iraq’s first two auctions last year, according to data from the Iraqi government.

Mubadala, which has exploration and production assets in Kazakhstan and Thailand, has joint ventures in the U.A.E. and Bahrain with U.S. producer Occidental Petroleum Corp., a partner to develop the Zubair oil field in Iraq. The Los Angeles-based company may sell part of its stake in the deposit to the Abu Dhabi investment arm, Chief Executive Officer Ray Irani said in October.

Petromal, an oil and gas explorer funded by members of Abu Dhabi’s ruling family, aimed to bid for Iraqi assets in auctions last year along with partner Premier Oil, the U.A.E. company’s CEO Radhwan Al Saadi said in an interview in Feb. 2009. Neither company qualified to bid in the auctions last year.

(Source: Arabian Business)

The managing director of the Italian national oil company, ENI, confirmed on Monday that the company aims to increase oil production by 15 percent in southern Iraq’s Zubair oil fields by the end of this year.

AKnews reports that the remarks by Gino Jianoa came during a visit to Basra to discuss the Zubair contract with local officials.

Salem Al-Taqi, the official spokesman for Basra's governor, said the company’s delegation met with Basra's governor, Sheltag Abboud, to discuss the development of the Zubair oil field with ENI.

ENI will coordinate with other companies in the area, such as BP, Shell and the Russian Lukoil to increase the economic growth in the city

(Source: AKnews)

Related articles:

• Occidental to Build Water Desalination Plant
• Eni to Award Oilfield Drilling Contracts
• Italy and ENI to finance sports facilities in Iraq

Occidental Petroleum is planning to build a water desalination plant in Umm Qasr, Basra, an oil expert said on Monday.

“The oil company seeks to implement the project as the South Oil Company refused to provide it with the water it requires to inject into wells to develop oilfields,” Dr. Jabar al-Halfi told Aswat al-Iraq news agency, pointing out that the company uses a special method of extracting oil by injecting water into wells.

Occidental is part of an Eni-led consortium that has been awarded the license for development of the giant Zubair oil field

(Sources: Aswat al-Iraq, Occidental)

Related articles:

• Eni to Award Oilfield Drilling Contracts
• Occidental, Pertamina Consider Sonangol’s Iraq Deals
• Did Big Oil Win the War in Iraq?

Italian oil major Eni is expected to award a tender to drill more than 100 new oil wells at its Zubair oil field in southern Iraq in August, according to a report from Dow Jones.

"We received the bids and we are in the process of assessing them," an executive told the news agency.

Several well-known oil services companies submitted offers, including Weatherford International Ltd (WFT), Schlumberger AS (SLBS.VI) and Egyptian General Petroleum Corp. among others, the executive said. The wells will be drilled over three years.

On Tuesday ENI reported that it will be "[reinforcing] the cooperation between Eni, the [Egyptian] Ministry of Petroleum, and the two Egyptian state oil and gas companies, EGPC and EGAS".

Earlier in June, Eni said it would drill 12 new wells and 'overwork' five others this year to boost output by 10%, according to its initial plan. The field, with 6.5 billion barrels of proven oil reserves, is currently producing 183,000 barrels a day.

Eni, in partnership with Occidental Petroleum Corp. and Korea Gas Corp. (Kogas), set a plateau target of 1.2 million bpd for Zubair to be reached in 2016.

The consortium won the right to develop the field at Iraq's first postwar licensing auction last year. The license for the field wasn't awarded at the auction in June, but a deal was reached in January this year following subsequent negotiations.

Eni has a 32.81% stake in the venture, while Occidental holds a 23.44% stake, Kogas 18.75% and Iraq's state-run Missan Oil Co. holds the remaining 25%.

(Sources: Dow Jones, ENI)

Related articles:

• Italy and ENI to finance sports facilities in Iraq
• Iraq Announces New Gas Tenders
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US oil major Occidental Petroleum Corp and Indonesian state oil firm Pertamina have shown an interest in taking a stake in Sonangol's two Iraqi oilfield development projects, a company official said on Sunday.

"Our proposal will be for Sonangol to have 45 per cent in Najmah and Qayara [Qaiyarah]," Sonangol executive J. da Graca Luis told Reuters in Baghdad, on the sidelines of a meeting between oil companies and the Oil Ministry.

"The rest will be for Occidental or Pertamina or whoever," Luis said. Sonangol currently has a 75 per cent stake in the oilfield projects, with the state oil company holding 25 per cent.

Dow Jones reports that the companies will meet in August to discuss co-operation.

According to the plan, Sonangol would boost production from the two fields to 50,000 barrels a day in 2013, of which 20,000 barrels a day will come from Najmah and 30,000 barrels a day from Qaiyarah oil fields. Four to five rigs are needed to drill these wells, according to the Dow Jones report.

The two fields, each holding some 800 million barrels of proven oil reserves, are located near the volatile city of Mosul, 400 kilometers north of Baghdad.

The company will drill up to 40 wells in both fields next year, but this depends on the availability of rigs, Luis said. It will also start building camps this year, he added.

Two oil licensing auctions last year awarded 11 deals to international oil companies that promise to add nearly 10 million barrels a day of capacity to Iraq's existing 2.5 million barrels a day by 2017.

Sonangol was awarded the two fields last year. According to the 20-year contracts, the firm needs to boost production from the Qaiyarah and Najmah oil fields to 120,000 barrels a day and 110,000 barrels a day at a fee of $5 and $6 a barrel, respectively.

(Sources: Reuters, Dow Jones)

Related articles:

• Iraq – An Overview
• Angola’s Sonangol Finalizes Oilfield Deals
• Did Big Oil Win the War in Iraq?