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By John Lee.

In an interview with Reuters, the chief executive of Kuwait Energy says the company is committed to pumping gas and finding oil in southern Iraq, and will not risk aggravating Baghdad by pursuing deals in Iraqi Kurdistan.

Sara Akbar (pictured) said strong ties with Baghdad are core to its strategic investment in southern Iraq.

"It's very simple. From the beginning, our ambition was to be able to develop gas in Iraq and to export some of that gas to Kuwait. The time is not right now [for exporting gas to Kuwait], because Iraq needs gas for itself.

"In the future, we hope to be able to do so. And for that, we need our relationship to strengthen and develop with Baghdad. And that will achieve our objective rather than working against them and being in Kurdistan."

Iraq briefly exported gas to Kuwait from the mid-1980s until it invaded in 1990. The export of Iraq's gas is still sensitive today because Baghdad still can supply only a few hours of power each day.

Kuwait Energy, along with Turkish state-owned TPAO, won a contract to develop the Siba gas field, near the Kuwaiti border; it also secured a stake in the Mansuriyah gas field in Diyala, near the Iranian border, where TPAO is operator; and exploration Block 9, which straddles the border with Iran, and in which Dragon Oil is its minority partner.

Akbar sees Siba as "a very logical project that will tie the two countries together". Production from Siba and Mansuriyah is on track to start up in the first half of 2014. The company plans "heavy expenditure for Iraq this year and next", she said.

About $400 million will be spent over the next two years to drill wells and build pipelines and surface facilities at the gas fields. A further $125 million is targeted for fast track exploration at Block 9.

As Iraq's diplomatic ties soured with Turkey, it asked Kuwait Energy to acquire the shares in Block 9 from TPAO, which the cabinet decided to expel. Akbar said she did not expect Baghdad to force TPAO out of fields such as Mansuriyah and Siba where it's already at work.

(Source: Reuters)

By John Lee.

Iraq has approved the deal under which Kuwait Energy would replace Turkey's state-owned Turkiye Petrolleri AO (TPAO) on the Block-9 exploration contract.

Abdul-Mahdy al-Ameedi, director of the ministry's contracts directorate, told Reuters:

"Kuwait Energy has acquired the stake of the Turkish company TPAO, and now it's holding 70 percent of the contract, and Dragon Oil PLC will hold 30 percent."

A consortium of companies, comprising Dragon Oil (30%), TPAO (30%) and Kuwait Energy (40% and operator), was awarded the exploration, development and production service contract for the 900-square-kilometer (350-square-mile) Block 9 in Iraq’s fourth bidding round in May. The bid for Block 9 was awarded on the basis of a remuneration fee of US$6.24 per barrel of oil equivalent.

As a result of the deteriorating relations with Turkey, caused by the closer links between Turkey and Iraqi Kurdistan, and not helped by the situation in Syria, Iraq asked Kuwait Energy last year to acquire TPAO's shares in the block.

The oil ministry plans to sign the final deal on 27th January.

(Source: Reuters)

By John Lee.

The Iraqi cabinet has expelled Turkey's state-owned Turkiye Petrolleri AO (TPAO) from the consortium that was granted the rights to explore energy block 9, and has asked Kuwait Energy to take over the shareholding.

Abdul Mahdi Al Ameedi, director of the oil ministry’s Petroleum Contracts and Licensing Directorate (PCLD), said:

"For reasons to do with non-technical issues and outside the responsibility of my office and me personally ... the Turkish company TPAO was excluded from the consortium ... This decision is final, there is no approval to sign the contract for Block 9 ... The decision (to expel TPAO) is from the cabinet."

A consortium of companies, comprising Dragon Oil (30%), TPAO (30%) and Kuwait Energy (40% and operator), was awarded the exploration, development and production service contract for the 900-square-kilometer (350-square-mile) Block 9 in Iraq’s fourth bidding round in May. The bid for Block 9 was awarded on the basis of a remuneration fee of US$6.24 per barrel of oil equivalent.

The change would mean Kuwait Energy's holding would increase to 70 percent.

TPAO also has a 7.5 percent holding in the Badra oil field development, and along with Kuwait Energy, was awarded the contract for the Siba gas field in October 2010.

The explusion comes at a time of political tensions between Baghdad and Ankara, with Turkey refusing to extradite Deputy Prime Minister Hashemi to Iraq where he has received four death sentences, and with the two sides taking opposing views on the crisis in Syria.

Earlier this week it was reported that Turkey had signed a major contract to drill oil wells in Iraq.

(Sources: AFP, Reuters)

By John Lee.

Iraq's cabinet has approved three oil and gas contracts awarded to foreign firms in the 4th round energy auction in May.

Government spokesman Ali al-Dabbagh (pictured) said cabinet approved an initial gas exploration contract with Pakistan Petroleum for gas Block 8, another deal led by Russia's Lukoil along with Inpex of Japan to develop oil Block 10, and the deal with Russia's Bashneft to develop oil Block 12.

Approval of a contract with a consortium led by Kuwait Energy, along with Dragon Oil and Turkiye Petrolleri, to develop oil Block 9 on the Iranian border has been delayed until the oil ministry "completes some of its procedures," added Dabbagh.

(Sources: Bloomberg, Reuters)

By John Lee.

In its interim results for the period ended 30th June 2012, Dragon Oil today issued the following update on its business in Iraq:

A consortium of companies, comprising Dragon Oil (30%), the Turkish Petroleum Corporation (TPAO) (30%) and Kuwait Energy (40% and operator), has been awarded an exploration, development and production service contract for Block 9 in Iraq's fourth bidding round.

On 16 July 2012, the Iraqi Ministry of Oil and the consortium initialled the contract for this block. This is the first step in a formal process before the signing of the final contract, which is anticipated later this year.

The consortium's bid for Block 9 was awarded on the basis of a remuneration fee of US$6.24 per barrel of oil equivalent. If Block 9 is found to be commercial during the five-year exploration period, the consortium may make an application to the Iraqi Government to develop the block over a 20-year development period.

Block 9 is located in the Basra province. The block spans over 900 km². The work commitment on the block within the initial five-year exploration period will include de-mining of the area in the first instance, followed by seismic acquisition and interpretation.

Based on this seismic analysis, a location for an exploration well will be selected and drilling performed. The capital expenditure will be incurred in proportion to each partner's share in the consortium and given the exploration nature of the block the cash outflow is not expected to be significant.

(Source: Dragon Oil)

By John Lee.

Iraq signed the gas exploration contract with Pakistan Petroleum Ltd. (PPL) on Sunday for gas Block 8, which lies in the Diyala and Wassit provinces in the East of the country.

Meanwhile on Monday, a consortium led by Kuwait Energy signed the contract for oil Block 9, having bid fee of $6.24 a barrel in the fourth round energy auction at the end of May. Kuwait Energy will be the project’s operator, with a 40 percent share, while Turkiye Petrolleri and Dragon Oil will each have 30 percent.

Russia’s Lukoil and Japan's Inpex Corp. are due to sign an agreement on Tuesday for crude exploration rights in Block 10 in southern Iraq, for a fee of $5.99 a barrel. Lukoil will hold 60 percent, and Inpex the rest.

(Sources: Reuters, Bloomberg)

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• 4th Round Auction fails to impress: Will failure lead to convergence or divergence between Kurdish and central government approaches to oil and gas?
• WesternZagros mulling London listing: Critical mass of Kurdish plays may be emerging in London.

Headlines:

• Sadr invites Maliki to Najaf, only to be rejected: No-confidence rhetoric takes on fevered pitch.
• Barzani: Peshmerga to be unified by end of the year: Long time coming, but timely now, given debate with Baghdad.
• Turkish consulate protesters dissipate: Potential indicator of Baghdad's, and possibly Erbil's, relations with Ankara.

Calendar Events Discussed:

• June 15 - Parliament returns from 6 week break

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The first day of Iraq's fourth energy auction resulted in just one successful bid, with four of the today's six exploration fields receiving no bids from the 47 pre-qualified bidders. The six blocks offered today were numbers 2, 9, 6, 12, 1 and 11.

A consortium of Kuwait Energy (40%), Turkey's TPAO (Turkiye Petrolleri AO) (30%) and the UAE's Dragon Oil (30%) won the rights to explore a 900-square-kilometer (350-square-mile) Block 9, near the Iranian border in the oil-rich southern Basra province. It will be paid $6.24 for each barrel of oil equivalent it finds.

An unsuccessful bid was made for the rights to the 8,000-square-kilometer (3,100-square-mile) Block-6 in the southern Anbar and Najaf provinces. A consortium led by UK's Premier, along with Vietnam's PetroVietnam and Russia's Bashneft, sought $9.85 for each barrel of oil equivalent, but the government offered to pay only $5 per barrel and withdrew the lot.

Four other blocks attracted no bidders. The bidding will continue on Thursday for the other six blocks, and for blocks 2 and 6 which will be offered again to give companies that weren’t present today a chance to bid. Seven of the 12 exploration blocks are believed to hold natural gas, and the rest both natural gas and oil.

The oil minister said that if Thursday's auction also attracts little interest, Iraqi companies would explore those lots, ruling out the possibility that contract terms would be revised.

(Sources: AKnews, AFP, Associated Press, Bloomberg)

Exxon Mobil is conspicuously absent from the finalized list of 47 pre-qualified bidders for the Iraq's fourth round of energy exploration rights.

The Petroleum Contracts and Licensing Directorate (PCLD) at the Ministry of Oil has confirmed that the auction will take place as scheduled on May 30-31.

The full list of pre-qualified companies is shown below:

Dubai-based Dragon Oil is considering expanding into Iraq.

In its management statement on Monday, the company said that it was pre-qualified for Iraq’s fourth oil licensing round, which is currently scheduled to take place at the end of May.

“We are looking at partnering opportunities ahead of this bidding round,” the company said in its statement.

Dragon Oil's production level in the first quarter was up 22% on the same period last year.