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Iraq's communications minister said he expected the country's planned fourth mobile phone licence to fetch between $1 billion to $2 billion [2.4 trillion Iraqi dinars] in an auction expected by the end of this year.

According to Reuters, Mohammed Allawi said the expected cost for the licence, including installations and infrastructure costs, could be in the range from $1 to $2 billion, correcting an earlier statement he made on Wednesday.

Forty percent of the licence would go to an operator, 35 percent to the public and 25 percent to the Communications Ministry. Iraq's mobile phone market, which did not exist under Saddam Hussein, has mushroomed since the 2003 U.S.-led invasion that toppled him.

The country held an auction in 2007 in which Kuwait's Zain, AsiaCell and Korek Telecom -- based in the northern Kurdish area -- bought 15-year licences for $1.25 billion each.

Allawi said he welcomed Monday's news about a deal in which France Telecom and Kuwaiti logistics group Agility will buy a 44 percent stake in Korek, but said this did not detract from the need for a fourth mobile phone operator in Iraq.

"France Telecom is going to expand Korek, give it more cover," he said. "Regarding the fourth licence, the most important thing about it is that we are going for more advanced technology. At present we have no 3G in Iraq, we have no 4G. We have only GSM."

Eight years after the U.S. invasion, Iraq's infrastructure is still badly battered and landline and internet penetration remain low.

Third-generation (3G) technology would allow data-hungry consumers to surf the internet and download music to handsets quickly on the go.

(Source: Reuters)

The long-awaited signing of the deal to develop Iraq's Akkas gas field in Anbar province has been delayed again.

An Iraqi Oil Ministry spokesman said it was delayed because of disagreements about what the local government gets from the deal, according to Associated Press reports.

An initial agreement to develop the 5.6 trillion cubic foot Akkas gas field in Anbar province was due to have been signed on Thursday in Baghdad.

A consortium led by Korea Gas Corp. (KOGAS) along with Kazakhstan's KazMunaiGas bid in October to develop the field.

But after hours of delays as reporters waited at the Oil Ministry, spokesman Asim Jihad told The Associated Press that the signing was postponed because officials in Anbar province want more control over how the revenue is spent.

Anbar officials protested on the day of the auction, saying they wanted more jobs from the deal.

(Sources: Associated Press, Reuters)

Iraq aims to have another round of oil and gas licensing auctions during the fourth quarter of 2011, an Iraqi oil official said from Baghdad.

Iraq has had three rounds of oil and gas auctions since the U.S.-led invasion in 2003.

Increasing production at some of the fields, however, could mean overcoming some major technological hurdles in the war-torn country. Energy officials said oil production could reach 8 million barrels per day by 2018 if all goes as planned. Recent estimates by Shell put the figure somewhat lower.

Energy officials in Baghdad said the central government has started the process to hold another round of oil and gas licensing auctions at the end of 2011, The Wall Street Journal reports.

According to AFP, the fourth round will involve licences for 12 oil and gas exploration sites.

(Source: UPI, Wall Street Journal, AFP)

Syria and Iraq have reached a final agreement to build two oil pipelines and a gas pipeline between their two countries, and tender invitations will be issued soon, Syrian Oil Minister Sufian Alao [Suffian Alao] (pictured) was quoted as saying on Tuesday.

Alao was quoted by Syrian newspaper Al-Thawra as saying an existing oil pipeline from Iraq to Syria was being repaired.

Platts reports that the pipeline, linking the northern Iraqi oil region of Kirkuk to the Syrian Mediterranean port of Banias, was shut down in the 1970s when relations deteriorated between the rival Ba'ath parties in power in Damascus and Baghdad.

Iraq reopened the line in 2000 to bypass UN sanctions, shipping some 200,000 bpd of Kirkuk crude to Syria, which used the crude in its own refineries and exported an equal amount of its own oil to markets.

The leaky pipeline, which has a capacity to carry 300,000 b/d of crude oil, has been shut since the US-led invasion of Iraq in March 2003, when the main K3 pumping station along the pipeline was damaged by US air strikes.

Alao did not say when work, which has already been delayed since initial agreement was reached to repair the pipeline in 2007, would be completed.

Iraq has said it plans to build three pipelines through Syria for heavy and light oil as well as natural gas to cope with new export capacity once incremental production comes on line from fields being developed by foreign oil companies under long term service contracts.

The heavy oil pipeline would likely transport heavy crude from the northern Qayara and Najmah oil fields, which were awarded to Angola's Sonangol.

The light crude oil pipeline would carry Kirkuk crude oil to Banias.

Iraq currently exports its Kirkuk blend crude oil to the Turkish port of Ceyhan, which lies to the north of Banias. There are plans to rehabilitate the existing Kirkuk-Ceyhan twin pipeline system, which has a design capacity of 1.6 million bpd, following a deal with Ankara to extend the transit agreement.

A senior Iraqi official said recently that while the Syrian pipeline option had been discussed for years, there was now movement on the issue with Baghdad seeking foreign investors for the projects.

One of the Iraqi gas fields awarded in last year's gas auction, Akkas, lies in the north near the border with Syria. The field, which is slated to produce 400,000 Mcf/d of gas when developed, has been earmarked as a potential source of exports in the future to the European market, possibly through the Arab Gas Pipeline that carries Egyptian Gas through Jordan, Syria and Lebanon and is being extended to the Turkish border.

Alao referred to plans to build a 56-inch pipeline with capacity to transport 110 million cu m/d of natural gas from Iran's South Pars gas field through Iraq and Syria, where it would link up with the Arab Gas Pipeline.

The agreement with Iran was reached during talks January 20 in Damascus last week with Iranian Oil Minister Masoud Mirkazemi. The two sides signed a cooperation agreement allowing Iranian gas exports through Syria and then on to Europe with the proposed pipeline.

Syria has been ramping up its gas production in recent years to meet high domestic demand. Alao said total gas output last year rose to 10.07 Bcm, up from around 9.1 Bcm/year in 2009. Syria produced an average 27.5 million cu m/d last year.

Because Syria cannot produce sufficient gas domestically, it has to rely on imports to meet rising demand for power generation as it phases out reliance on fuel oil. At present Syria is importing around 1.45 Bcm/year from Egypt but is seeking additional supplies.

Alao said that the electricity sector accounted for 87% of total gas usage, taking 6.704 million cu m/d of the 8.9 million cu m/d of clean gas supplied by gas processing plants.

Oil production rose marginally to a total 140.931 million barrels in 2010, an average of 386,000 b/d, a slight increase over 383,000 b/d produced the previous year, he said.

(Source: Platts)

By Stan Harbison, Vice President of Research and Analysis at energy consultants EPRINC.

In the past week, the ministry announced that two fields won at Iraq’s 2009 oil auctions had achieved their first significant benchmark. Production at Rumaila and Zubair each met the 10% production increase which allows them to begin to earn their per barrel profit on each barrel of oil they produce. It also allows them to begin collecting the money each has spent on their respective fields.

Both of these elements are critical to the ability of the companies to earn a return on their investment. We expect a third field, the West Qurna 1 consortium to achieve its 10% benchmark within the next several months. These three fields hold roughly half of the prospective production and half of the current reserves of the ten oil fields won at Iraq’s 2009 oil auctions. They lead the other auctioned field because they are the only fields of the ten that have significant current production and installed infrastructure.

Informal news about production at both Rumaila and Zubair was quite a bit more positive than the implied 10% increases. At Rumaila, production increased nearly 20%, or 200 tbd (thousands of barrels/day) and at Zubair production was up by 80 instead of the 20 tbd that was needed to achieve the 10% target. This led an oil ministry spokesman to state the Iraq’s production was at 2.7 mm b/d and would rise to 3 mm bd in 2011.

How are the companies doing so well? Our conversations with oil company executives who have spent time in Iraq testify to the prolific nature of Iraq’s oil. Re-working old wells has the potential to dramatically increase production. We believe some of the initial production gains have been achieved in this way. The companies are not chasing volume by drilling as many wells as possible. We believe that their first priority is to carefully lay the groundwork needed to achieve and manage much higher production levels. They are spending time mapping each reservoir, measuring the pressures, volumes and temperatures of each well and preparing infrastructure to be capable of handling much greater volumes. Activity will accelerate as initial steps are completed.

To date the progress in the oilfields and in the infrastructure efforts by the government have moved forward well. The news this week is a good report. It supports the notion that the contracts are being carefully followed, that no major failures have interfered with achieving the 10% production increases and that further positive news from the fields should be expected.

Stan Harbison has been an oil and gas analyst since 1982. He has worked as a research investment analyst for a prominent US investment firm for BP, Louis Dreyfus Commodities Energy Trading and for the US. Department of Energy. He has met regularly with top managers in the world’s largest oil companies, key officials in more than ten of the world’s largest National Oil Companies and has attended many OPEC meetings. In the past year, he has devoted all of his time on Iraq’s oil development with EPRINC, (www.eprinc.org), an independent oil analysis firm in Washington DC, which provides analysis on critical emerging issues in the oil industry. Its work is read by the public, the US Congress and key US government officials.

Iraq is considering holding a fourth bidding round for international energy firms interested in gas exploration contracts, government officials said on Sunday.

Iraq will initially offer 12 exploration blocs, Oil Minister Abdul Kareem Luaibi [Elaibi] told reporters.

According to both Reuters and Associated Press, the minister did not give further details, but Abdul-Mahdy al-Ameedi, head of the ministry's licensing and contracting office, told Reuters it will be only for gas blocs as Iraq does not need to auction more oilfields following two oil bidding rounds in 2009.

"The fourth bidding round which Iraq is preparing for will be for the exploration of gas blocs," Ameedi said.

Baghdad signed a series of deals with global oil firms to develop some of its largest oilfields and boost its crude output potential to 12 million bpd in six to seven years.

Current oil production is more than 2.7 million barrels per day, Luaibi said, the first time it has reached that level in 20 years. "This was achieved through Iraq's national effort and the work of the international oil companies."

(Sources: Reuters, Associated Press)

Basra will be Emirates' first Iraqi destination since the airline postponed the launch of flights to Baghdad earlier this year citing "operational reasons", according to Reuters.

"The city's recent growth has paved the way for numerous multinational companies and industries to invest in infrastructure and we have seen strong potential from a number of our markets," Chairman and Chief Executive Sheikh Ahmed bin Saeed Al-Maktoum said in a statement.

"Since the 2009 oilfield [auctions], traffic from the U.S. and Europe into Basra has increased significantly and we are ready to capitalise on this growth," he added.

Iraq's Shi'ite south, where Basra is located, has been relatively peaceful in recent months in comparison to Baghdad and the north where devastating assaults and bombings by Sunni Islamist insurgents remain common.

Emirates expects its outbound traffic from Basra to be skewed towards local Iraqis, who are expected to travel more as the economy recovers.

The flights are set to commence on 2nd February, 2011, with a four-times weekly service on Wednesday, Thursday, Saturday (operated by three-class Airbus A330 aircraft), and Monday (in a two-class configuration).

Flight EK945 will depart Dubai at 1345, arriving in Basra at 1445, with the return leg EK946 leaving Iraq at 1615 and landing back in Dubai at 1910. Emirates says the service “connects seamlessly with key industry hubs in the US and Europe”.

The airline expects to handle around 10-12 tonnes of cargo per flight.

(Sources: Reuters, Business Traveller)

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)

Russia's Lukoil announced on Friday that it has it awarded a 3D seismic contract at Iraq's West Qurna Phase 2 oil field to Terra Seis Trading Ltd. [Terraseis] (TSTL).

TSTL has been conducting seismic exploration in Iraq since 2005 and "possesses vast operational economic and legal experience, and is well aware of the country’s natural and climatic conditions".

The contract is set to run 9 months with a 3D seismic exploration scope of 540 square kilometers, but the value of the contract has not been revealed.

The pilot survey is scheduled for the beginning of December, while the seismic convoys will enter the contract area in the middle of December.

The data obtained will allow the Company to clarify the geological structure of the area under exploration and to develop a comprehensive seismic-facial field model.

The Russian company along with Norway's Statoil won the right to develop the 13-billion barrel West Qurna Phase 2 in Iraq's second postwar licensing auction held in Baghdad in December of last year.

Under the terms of the 20-year-long service contract, Lukoil and Statoil are required to pump at a rate of 1.8 million barrels a day for payment of $1.15 a barrel. That production target needs to be reached in 2017.

Lukoil holds a 56.25% stake in the project, Statoil 18.75% and the Iraqi state company holds the remaining 25%.

(Sources: Lukoil, Wall Street Journal)

Iraq may earn $4.2 trillion in revenue from oil fields being developed by international companies after rights for production from the deposits were auctioned last year, Oil Minister Hussain al-Shahristani said.

Reuters quotes the minister as saying that the fields, whose development rights were assigned after two bid rounds held last year, will produce 60 billion barrels of oil, he said.

The Iraqi government will get 99 percent of the revenue from those deposits, al-Shahristani said.

(Source: Bloomberg)