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Reuters reports that the Iraqi government has approved the exploration, development and production contract for Block 10 in the south of the country.

Russia's LUKoil, which already has an interest in the giant West Qurna-2 oilfield, won the deal for the 5,500-square-kilometer Block 10 in Muthanna and Dhi Qar provinces in Iraq's 4th round energy auction, along with partner Inpex Corp of Japan.

Lukoil has 60 percent of Block 10, while Inpex holds the remaining 40 percent. The group will be paid $5.99 for each barrel of oil equivalent it finds.

The company said the development of Block 10 will result in a synergistic effect due to the block's location a mere 100 kilometres away from the West Qurna-2 field.

(Source: Reuters)

By John Lee.

Russia's Pravda reports that Iraq may be about to buy $5 billion worth of MiG fighter jets, Russian helicopters, anti-aircraft missile systems, armored vehicles and other weapons.

Between 2008 and 2011 Baghdad purchased Russian weapons worth $246 million dollars, most of which were helicopters.

In the same period, deliveries of weapons and military equipment from the US totaled $6.56 billion dollars, according to the director of the Center for Analysis of World Arms Trade (TSAMTO), Igor Korotchenko.

The deal, if it goes through, would put Iraq among the five largest importers of Russian arms.

But Korotchenko was sceptical:

"Personally, I have serious doubts that Iraq will buy billions of dollars' worth of our weapons. They will not be allowed to do it. Iraq's foreign policy is tightly controlled by the US ... I do not expect very large contracts. Even if Iraq wants to buy a large quantity of Russian weapons, America will be opposed to it."

(Source: Pravda)

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.

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)

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!

By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Iraqi Ministry of Oil confirmed in late July that Russia’s Bashneft had accepted the ministry’s maximum acceptable remuneration fee (MARF) for exploration Block 12, which was offered in the fourth bid round that took place at the end of May (MEES, 4 June). This is in line with what I anticipated in my assessment of the results of the fourth bid round.

This ‘newcomer’ to Iraq post-2003 upstream petroleum would consolidate further the position of the Russian companies and strengthen their presence and role in the country’s oil production. This also manifests clearly a petroleum asset seeking strategy and demonstrates that there has been a learning curve from previous bid rounds.

The Russian position could be consolidated even further if the speculation about the possible entry of another Russian company, Rosneft, materializes – but Gazprom might rock the boat.

Please click here to read Ahmed Mousa Jiyad's report.

Mr Jiyad is an independent development consultant, scholar and Associate with Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: [email protected]).

By John Lee.

The China National Petroleum Corporation (CNPC) is reported to be in talks with Russia's OAO Lukoil about joining the company’s West Qurna-2 project in Iraq.

Lukoil is seeking a partner for a 30 percent stake in the project following the exit of Norway's Statoil’s, Nefte Compass said, citing Andrei Kuzyaev (pictured), head of Lukoil Overseas.

(Source: Bloomberg)

By John Lee.

A Russian business delegation has visited the city of Ramadi to investigate investment opportunities in Anbar province.

Saadoun Obeid al-Shaalan, head of the provincial council, told NINA news agency:

"The delegation represents a group of leading Russian companies specialized in the manufacture of large power stations, the production and distribution of electricity, and the construction of vertical housing units."

The group promised to submit an action plan to the Investment Commission.

(Source: NINA)

By John Lee.

Reuters reports that Iraq's acting Minister for Defence,  Sadoun al-Dulaimi (Sadun al-Dulaymi) (pictured), has been in Russia to negotiate the purchase of air surveillance equipment.

Hakim al-Zamili, a member of the parlimantary security and defence committee, told the news agency:

"There is a delegation, headed by the minister of defence and the commander of the air force, that went to Russia to negotiate the supply of early warning systems, radars and some other civil defence apparatuses."

Iraqi officials say it will take years before they are able to defend their airspace again and the military has started building a new air force almost from scratch.

Iraq expects to take delivery of the first 24 of 36 F-16 fighter jets from the United States at the beginning of 2014.

(Source: Reuters)

By John Lee.

Heritage Oil, which has operations in Iraqi Kurdistan, has published its interim results for the six months ended 30 June 2012:

Operational Highlights

· Execution of an agreement to acquire a transformational major interest in OML 30 in Nigeria ("Proposed Acquisition"), which is subject to shareholder approval, and is expected to complete in the second half of this year

• Active work programme in the Kurdistan Region of Iraq ("Kurdistan") with two rigs operating:

-- The Miran West-3 well reached the primary target of the Jurassic gas reservoir and was successfully tested in May 2012

-- The Miran West-4 well commenced drilling on 22 June 2012 to further appraise the Upper Cretaceous oil reservoir

-- The Miran East-1 well is drilling ahead on prognosis and is currently evaluating the Lower Cretaceous reservoir before drilling ahead to the main Jurassic targets

• Planning and development studies on the Miran Field and conceptual design studies on a gas export pipeline are ongoing

• Tanzania work programme continues on the Kyela and Rukwa licences with the reprocessing of legacy 2D seismic data and completion of a high resolution gravity survey

• Net average daily production of 567 bopd in the first half 2012, an increase of 35% on the same period in the prior year. Production for the month of July 2012 averaged 711 bopd