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The citizens and authorities in what is potentially Iraq’s wealthiest oil boom town are upset. They say oil companies are causing environmental problems and Baghdad is getting rich while they’re missing out, according to this article from NIQASH.

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

The southern Iraqi region of Basra is estimated to hold about two thirds of all of the country's oil reserves. It is also home to the giant oil fields of Rumaila, Zubair and West Qurna which also produce a significant amount of natural gas.

And late last year the central government in Baghdad signed new contracts for further exploitation of these resources with multi-national energy companies, Shell and Mitsubishi. Around 12 international oil companies are currently working in Basra province, including Russia's Lukoil, Italy's Eni and China’s National Petroleum Corporation.

Yet the people of Basra feel they have seen barely any benefit from the natural resources in their home region. Despite the oil and gas in the area and the region’s potential to be Iraq’s wealthiest, “citizens’ living standards are still dire, unemployment is widespread, infrastructure is missing and reconstruction is not going anywhere,” local tribal leader, Falah al-Asdi, said.

Additionally, al-Asdi said the companies involved in Basra were not addressing any of these problems. For example, Basra was beginning to experience a housing shortage because land was being reserved for oil and gas exploration and extraction.

“These companies were supposed to take the initiative and implement both construction and service projects. But up until now all we have seen them do is pay lip service to these ideas,” al-Asdi complained.

Bloomberg reports that Lukoil, Russia’s biggest non- state oil producer, will sign an agreement with Samsung this week for the development of the West Qurna-2 oilfield.

Samsung will install “a crude-gathering facility and a central processing plant for West Qurna-2,” the Iraqi Oil Ministry said on Tuesday. The deal is expected to be signed on 22nd March.

According to Dow Jones, the central processing facility, or CPF, will cost $998 million, and it is expected to take 31 months to complete.

Lukoil expects to complete the purchase of Statoil’s stake in the oilfield in May, following which it may invite new partners to join the project.

(Source: Bloomberg, Dow Jones)

Lukoil plans to boost investment at its West Qurna-2 oil field in Iraq to about $2 billion this year.

Russia’s largest non- state company plans to carry out drilling and begin construction of a pipeline as it prepares the field for the start of production.

The company invested more than $200 million in the project last year, a Moscow-based spokesman for the company’s overseas unit told Bloomberg.

Last week, Iraqi oil minister, Abdul Karim Luaibi [Elaibi], approved the sale of Statoil's 18.75% stake in the oil field to Lukoil, the project operator.

(Source: Bloomberg)

Platts reports that the Iraqi oil minister, Abdul Karim Luaibi [Elaibi], has approved the sale of Statoil's 18.75% stake in the giant West Qurna-2 oil field to the project operator, Russia's Lukoil.

Meanwhile, Reuters reports that the Norwegian oil giant has confirmed that it is in talks to sell its stake to Lukoil.

"Both Lukoil and the Iraq authorities have confirmed that we have initiated a process of transferring our interests in the West Qurna 2 project," a Statoil spokesman said.

"I can confirm the process is ongoing but cannot say anything more. We will inform the market when the process is completed," he said.

Lukoil declined to comment.

Analysts believe the move by Statoil makes sense as it would enable the company to concentrate more on projects elsewhere.

"This is positive for Statoil -- they can now focus on areas where they can utilize their core compentences of deepwater and harsh climate drilling. That's not being used in onshore Iraq," said analyst Carl Christian Bachke at brokers RS Platou.

"This is a small part of Statoil's overall asset base. What is interesting is that these service contracts in southern Iraq were done at levels which were not as prosperous as the majors had assumed when they entered Iraq. Lukoil's and Statoil's bids were the lowest, at ridiculously low levels," Bachke said.

Statoil currently holds an 18.75% stake in the field, Lukoil has 56.25% and Iraq's South Oil Company the remaining 25%.

The production target from the field is 1.8 million b/d, up from virtually nothing now, to be held for 10 years beginning in 2017.

The consortium agreed to receive costs recovered and split a $1.15/barrel remuneration fee.

Lukoil CEO Vagit Alekperov said on 22 February that the company was likely to delay again the startup of West Qurna 2 to early 2014, but initial production from the field is now expected to be at a higher level of around 300,000 bpd.

(Sources: Platts, Reuters)

Russian President Dmitry Medvedev (pictured) announced on Thursday that Russia would continue helping Iraq to become a democratic, independent country and to preserve its territorial integrity, something that meets the Iraqi people’s interests and is in line with regional stability and security.

In a letter delivered to Iraqi Prime Minister, he also signaled Russia's readiness to deepen bilateral trade and economic relations between the two countries, including in the energy and agriculture sectors.

This message was handed to Iraqi Prime Minister Nouri al-Maliki during his meeting with a Russian delegation in Baghdad.

(Source: TASS)

LUKoil, Russia's largest private oil company, may start production at the giant West Qurna-2 oilfield in early 2014, according to a report from RIA Novosti.

"We will launch [production at the oilfield] at the end of 2013 or at the beginning of 2014," company head Vagit Alekperov said on Wednesday.

The Russian company will invest about $4.5 billion in the project in the next three years.

"Oil production in Iraq will amount to 1.7 million barrels in 2017, while we will explore 600 wells [there]. Every well will give from five to six tons per day," he also said.

In 2009, a consortium of LUKoil and Norway's Statoil won a tender to develop West Qurna-2, but recent reports suggest that Statoil wants to sell its share to LUKoil.

(Source: RIA Novosti)

Reuters reports that Iraq's cabinet has approved a $329.8 million tender with British oil service firm Petrofac for the country's Badra oilfield.

Petrofac plans to build a major crude processing facility to help production at the field to reach 170,000 barrels of oil per day (bpd) in 2017, a target which was set by Iraq's oil ministry.

Russia's Gazprom Neft, Turkey's TPAO, South Korea's KOGAS and Malaysia's Petronas, are teaming up to develop the field near the Iran border, which has estimated reserves of 100 million barrels.

Gazprom Neft, expects to start commercial production of 15,000 bpd of oil at the Badra field in August 2013.

(Source: Reuters)

Iraq has postponed its next energy licensing round by more than a month to May 30, a senior government official has said.

Speaking to Reuters on January 31, Abdul Mahdy al-Ameedi, the Oil Ministry’s Director-General, said the decision to move the date back had been made to allow potential bidders more time to study the contracts following a number of alterations by the department.

“We have made major changes and amendments on the initial contract that concern the economic and contractual terms, and the result was a new model contract,” he said.

“The changes and amendments on the exploration contract were mainly touching the pricing formula and profits of the companies, and how to determine their shares in the contract.”

The two-day round had been scheduled for April 11.

This was the second postponement, with the original auction date delayed last month after a number of requests from international oil companies (IOCs).

“The [existing] technical service contracts are very tight, [as] the Iraqis managed to squeeze companies quite heavily on the terms,” Sam Ciszuk, an analyst with KBC Energy Economics, told The National.

“IOCs were still moving forward with this because of potential future opportunities. Now it seems like those opportunities look fairly unattractive and the Iraqis have seen that they need to do something about that.”

More than 40 operators have qualified to take part in the round, which is expected to add 29 trillion cubic feet (812 bcm) of gas and 10 billion barrels of oil to Iraq’s reserves once exploration work begins.

These include major names such as BP, Shell, ExxonMobil, Lukoil, Total, China National Petroleum Corp (CNPC), Eni, Occidental Petroleum and Chevron.

In total, 12 exploration blocks are being made available, ranging in size from 5,500 to 9,000 square kilometres.

According to the ministry, seven of these are believed to contain natural gas, and five are thought to contain crude oil.

The blocks are located in the provinces of Basra, Najaf, Babil, Muthanna, Diwaniyah and Dhi Qar, south of Baghdad, Nineveh and Diyala to the north and Anbar to the west.

(Source: NewsBase)

NewsBase was founded in Edinburgh, Scotland, in 1995. Its weekly publications cover oil and gas, unconventional resources, LNG, power, petrochemicals, renewable energy and the carbon market. They provide high-level commentary and analysis on developments in Africa, Asia, Europe, the Middle East, Latin America, North America, Russia and the rest of the CIS.

The Nabucco gas pipeline project is facing collapse, reports AFP.

The scheme to ship more than 30 billion cubic meters of gas per year from the Caspian and beyond to Europe, bolstering Europe's energy security, may founder following Turkey's decision to allow Russia's rival South Stream project to run through its Black Sea waters. Construction of the 63 billion cubic meters (bcm) per year pipeline is planned to start by the end of this year.

Turkey also signed a deal with Azerbaijan to build the Trans-Anatolia Pipeline (TANAP) to carry 10 bcm per year of Azeri gas to European markets, plus 6 bcm for itself, casting further doubt on Nabucco which is having difficulty getting commitments of gas supplies.

Nabucco was to run some 3,900 kilometres (2,400 miles) across Turkey then up through Bulgaria, Romania and Hungary to reach Austria where it would link up with a major distribution network.

Necdet Pamir, a former deputy director of Turkey's TPAO oil company, told AFP:

"The Nabucco project was in a coma long before the South Stream agreement, but nobody dares to say Nabucco is already dead."

"Turkey was not completely onboard on Nabucco," said Andrew Neff, senior energy analyst at IHS Global Insight, adding: "Turkey sees itself as a power arbitrator."

"Nabucco has been an incomplete project since the very beginning," said Mete Goknel, former director of Turkey's state-owned pipeline company, Botas, which is one of the Nabucco consortium partners. "Who will ship the gas through the pipeline?"

Central Asia is Moscow's backyard and Russia's Gazprom has most supply tied up, while sourcing from Iraq's northern Kurdistan region is fraught given the political frictions with the central government in Baghdad.

The main shareholders of Vienna-based Nabucco include Austrian energy company OMV, German utility RWE , Hungary's MOL, Romania's Transgaz , Bulgaria's Bulgargaz, and Turkey's Botas.

(Sources: AFP, Reuters)

Russia’s LUKoil is set to become the only foreign operator of the West Qurna-2 oil project in Iraq after its partner, the Norwegian company Statoil, asked Iraq's oil ministry for permission to sell its stake, according to The Voice of Russia.

The Iraqi Oil Ministry has reportedly approved the deal, which would give LUKoil a 75% stake in the oilfield, with the remaining 25% belonging to the Iraqi state.

(Sources: Voice of Russia, Reuters)