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Iraq is about to sweeten the contract terms for its third bidding round for its three prized natural gas fields, in an attempt to entice international companies to enter the auction, according to a report in the Wall Street Journal.

Unlike oil deals for the first and second bidding rounds for oil fields last year, winning companies won't need to pay 'signature bonuses' to the Iraqi government for the three natural gas fields on offer, a company executive said on the sidelines of two-day roadshow held by the Iraqi oil ministry in Istanbul.

International oil companies have had to pay bonuses of between $100 million and $500 million for deals they won in the first and second licensing auctions.

Iraq has also delayed the bidding by a month, with it now scheduled to be held Oct. 1, according to a reporf from Reuters.

Iraq's oil minister, Hussein al-Shahristani, said that one of the incentives for interested companies would be to allow them to export 50% of the natural gas produced from these fields. The Iraqi government will commit to purchasing half of the gas produced.

However, for some companies the export clause is a "negative condition," said another company official. Iraq hasn't the infrastructure to export gas from these fields, he said. So if half of the produced natural gas would be for exports, pipelines, reservoirs and gathering stations for exports would need to be built. Companies also need to look for customers for the Iraqi gas, he added.

Bloomberg reports that developers will be paid on the basis of barrels of oil equivalent, and will not be involved in setting the prices of gas exports.

The three natural gas fields to be bid for are:

• the Akkas field in Anbar province, near the Syrian border, which the oil ministry puts at 5.6 trillion-cubic feet of gas reserves.  Discovered in 1998, Akkas already has six wells, and Iraq is interested mainly in exporting associated gas produced there along with oil. There was a single bid for this field last year, from a consortium of five companies led by Italy’s Edison, but it was rejected;
• the Mansouriya field in Diyala, with 4.5 trillion-cubic feet of reserves. There were no bids for this last year. Discovered in 1979, this would be used first for domestic consumption, then later for exports, possibly supplying the proposed Nabucco pipeline; and,
• the Siba field, located in Basra province, with 1.13 trillion-cubic-feet of reserves and three existing wells. Discovered in 1968, Siba was withdrawn from a previous auction last year.

Fifteen international companies have so far shown interest in taking part in the third bidding round, reports the Wall Street Journal. Sabah Abdulkadhem al-Saaidi, head of the legal and commercial section at the oil ministry's petroleum contracts, also said that Aug. 20 would be the last date for companies to register for the natural gas bidding round.

The roadshow in Istanbul was reportedly attended by companies including Total of France, Italy's Edison, South Korea's KOGAS, India's Oil & Natural Gas Corp Japan Oil, Gas and Metals National Corp (JOGMEC), Itochu Corp, Russia's TNK-BP (half-owned by BP), Kuwait Energy, Turkey's state-run TPAO, and Kazakh KazMunaiGaz

It is believed that companies like Total, Royal Dutch Shell, and KOGAS are favoured because of their experience; the state energy companies may also take stakes of up to 25% in the projects, similar to the earlier oil contracts.

Despite huge gas reserves estimated at 112 trillion cubic feet—the fifth highest in the region, according to U.S. Energy Information Agency data—Iraq is producing 1.65 billion cubic feet a day of gas, some 700 million cubic feet a day of which is flared due to lack of infrastructure.

The goal is to fuel turbines ordered for new power stations with gas instead of crude, and the fields on offer could start commercial production in one to two years.

(Sources: Wall Street Journal, Reuters, Bloomberg)

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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)

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Malaysia's Petronas and Japan Petroleum Exploration (Japex) are planning to award a deal shortly to drill several wells at Iraq's untapped Garraf [Gharraf] oil field in southern Iraq, a company executive said.

The  consortium is planning to drill two appraisal wells at Garraf, in Dhi Qar province, starting in November, he said.

"We have issued a tender but we haven't awarded it yet," the executive told Dow Jones Newswires.

The Petronas-Japex alliance was awarded the deal to develop Garraf, with estimated proven oil reserves of one billion barrels, during the country's second licensing auction in December last year.

The field was discovered in 1984, but has not yet been developed. It is situated 5 km northwest of Al-Refaei city, 9 km southeast of Qal’at Suker city, and 85 km north of Nasiriyah.

The executive said the consortium is in discussions with tribesmen who had allegedly refused to cede their ancestral lands peacefully without a cash payment from the two companies.

"We are in discussions with them," the executive said.

The alleged extortion drew condemnation from the Iraqi oil ministry, and the tribal sheiks have since denied any threat of violence, saying that they merely approached the two companies with a request.

Local leaders appear to have helped mitigate the tribal pressures, an Iraqi oil industry source said.

The companies pledged to boost crude oil production from Garraf to 230,000 barrels a day in 2016 and accepted $1.49 for each barrel produced.

Petronas holds 45% stake in the venture, Japex owns 30%, while the remaining 25% sake is owned by Iraq's state oil company.

(Sources: Upstreamonline.com, Dow Jones, Iraqi Ministry ofOil)

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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)

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British oil major BP, along with its partner China National Petroleum Corp, plans to increase production from Iraq's Rumaila oil field by more than 100,000 barrels a day at the beginning of next year, a BP executive said Sunday, according to a report in the Wall Street Journal.

"Initial production will go up by 10% (at the) beginning of 2011," Michael Townshend, president of BP Iraq, told a two-day symposium held by the Iraqi oil ministry in Baghdad to discuss the co-ordination and implementation of the country's oil expansion plans.

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.

The Rumaila field, with some 17 billion barrels of proven oil reserves, is currently producing 1.07 million barrels a day.

The BP-led consortium has pledged to almost triple production at the field to 2.85 million barrels a day in six years.

BP holds a 38% stake in the venture, while CNPC has 37% and Iraq's state-run South Oil Co. the remaining 25%. The three contractors will receive a fixed fee of $2 for each additional barrel of oil produced from Rumaila.

Rumaila also has the potential to produce 1 billion cubic feet of gas a day, Townshend said.

(Source: Wall Street Journal)

(Picture: BP Rumaila)

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Iraq's oil ministry is holding an international symposium beginning on Sunday to discuss the best ways for the government to co-ordinate and implement the country's oil expansion plans, a senior Iraqi oil official said Thursday.

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.

"We will discuss the pace of implementation of the signed deals," Sabah Abdulkadhim al-Saaidi, head of legal and commercial office at the petroleum contracts and licensing directorate, told Dow Jones Newswires.

Saaidi said that the ministry has invited all the firms involved in the oil field projects to discuss their plans for development and the requirements and obstacles that lie ahead.

The symposium is expected to come out with recommendations that will be referred to the cabinet to be approved as guidelines for all ministries and relevant authorities to back the implementation of these oil field deals, Saaidi said.

"This intensive two-day program will issue recommendations to be referred to the cabinet to be approved as guidelines for all the ministries and relevant authorities to support the implementation [of the expansion]," Abdul Mahdy al-Ameedi, head of the Petroleum Contracts and Licensing Directorate, previously told International Oil Daily.

The two-day meeting is organized by the ministry of oil in co-operation with the cabinet's energy committee. The ministries of industry, trade, interior, finance and environment will send representatives to outline how they will support the oil ministry's efforts in implementing these strategic projects. In addition, officials from the local governments of Basra, Missan, Wasit and Dhi Qar and Nineveh will be also attending.

Iraq holds the world's third largest proven reserves of crude oil, with more than 115 billion barrels, but its oil infrastructure is creaking after decades of sanctions, war and neglect, and in dire need of boosting its oil production to help rebuild its war-torn infrastructure.

Baghdad signed late last year and early this year some 11 deals with international oil companies, including the majors such as BP PLC (BP), Royal Dutch Shell PLC (RDSA), Exxon Mobil Corp.(XOM), Total S.A. (TOT), Eni SpA (E) and Lukoil Holdings (LKOH.RS) among others.

(Source: Dow Jones, International Oil Daily)

By end of June 2010, 26 out of 55 operators licensed to offer WiMAX offered the service. WiMAX is commercially available in Algeria, Bahrain, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Saudi Arabia, Tunisia and the UAE. Moreover, Yemen and Oman are slated to WiMAX services in the second half of 2010.

WiMAX stands for World Interoperability for Microwave Access. WiMAX/IEEE 802.16 is a global standard-based technology for Broadband Wireless Access. WiMAX is a broadband wireless technology that is largely supported by the computer and the telecom industry. Its guarantee is that it is engineered to deliver ever-present fixed and mobile services such as VoIP, Information Technology and Video at relatively low cost. Furthermore, WiMAX vendors state that WiMAX systems are able to cover a large geographical area (up to 50 km) and to deliver significant bandwidth to end-users at up to 40 Mbps. WiMAX technology can be deployed as a Point Multi-Point in last mile connection and as part of the backhaul to the PSTN and Internet access points.

The first commercial deployment of WiMAX in the Arab World was in Algeria in 2007. Moreover, by end of June 2010, a total of 26 service providers in 11 countries (including Algeria) in the MENA region offered WiMAX. The Arab Advisors Group expects an increase of 3 operators, at least, by end of 2010. A new report, “WiMAX in the Arab World 2010” was released to the Arab Advisors Group’s Telecoms Strategic Research Service subscribers on June 19^th, 2010. This report can be purchased from the Arab Advisors Group for only US$ 950. The 37-page report, which has 51 detailed exhibits, investigates the availability of WiMAX regulations in 18 Arab countries, the frequencies used, entities that have tested WiMAX or pre-WiMAX services, and vendors for equipment. The report covers the following Arab countries: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Syria, Tunisia, UAE, and Yemen. Any investment in this report will count towards an annual Strategic Research Service subscription should the service be acquired within three months from purchasing the report.  Please contact the Arab Advisors Group to get a copy of the report’s Table of Contents. “There are still no detailed regulations specific to WiMAX in some Arab countries. Still, a few have specified the type of license that needs to be obtained to provide WiMAX service. For example, in Algeria, the company should have a VoIP authorization and the regulator’s specified band for WiMAX. In Jordan, the company should have an individual license needed to use the frequency (a scarce resource) as well as win the spectrum auction for WiMAX.” Alaa Numair, Research Analyst at Arab Advisors Group noted in the report.

The top three frequencies allocated to operators in the Arab world are 3.5 GHz, 3.6 GHz and 2.6 MHz. The 3.5 GHz band, allocated to 19 out of 55 licensed operators to provide WiMAX, is the most common allocated frequency in the Arab countries. 3.6 MHz and 2.6 MHz followed with 8 and 7 licensed operators, respectively. Tareq Masarweh, Research Analyst at Arab Advisors Group added. The Arab Advisors Group’s team of analysts in the region has already produced over close to 1,920 reports on the Arab World’s communications and media markets. The reports can be purchased individually or received through an annual subscription to Arab Advisors Group’s (www.arabadvisors.com) Strategic Research Services (Media and Telecom).  To date, Arab Advisors Group has served over 600 global and regional companies by providing reliable research analysis and forecasts of Arab communications markets to these clients.

Revenues from oil sales account for 95 percent of Iraq's income, Oil Minister Hussein al-Shahristani said on Tuesday, underlining the war-battered nation's reliance on crude to rebuild its economy.

Shahristani said Iraq raised 171 billion dollars from sales between 2006-2009, which accounted for all but five percent of the government's income during those years.

Shahristani said the following amounts were raised from oil:

• $30bn in 2006;
• $40bn in 2007;
• $60bn in 2008; and,
• $41bn in 2009.

The decline in revenues in 2009 was likely attributed to a fall in global crude prices in the second half of the year.

Iraq produces about 2.5 million barrels per day (bpd) of crude, of which it exports 1.85 million, according to Shahristani.

Last year, Iraq held two auctions of its oil fields for development, the first time foreign energy firms have had the opportunity to plant a foot firmly in the country since its energy sector was nationalised in 1972.

Some 10 deals were agreed at the auctions, and one more signed since will, if fully realised, ramp up Iraq's oil output five-fold to 12 million bpd, putting it on a par with the world's top producer Saudi Arabia.

At 115 billion barrels, Iraq has the world's third-largest proven oil reserves, behind only Saudi Arabia and Iran.

However, there has been little exploration or development of fields in the past three decades because of wars and a UN embargo imposed on Iraq in 1990 following now executed dictator Saddam Hussein's invasion of Kuwait.

(Source: AFP)

Iraq's cabinet has approved a multi-billion dollar deal with Royal Dutch Shell and Japan's Mitsubishi Corp. The deal, signed on Tuesday, will provide much needed electricity from natural gas that is currently being burned off.

The State-owned South Gas and Basra Gas companies in southern Iraq will take a 51 percent stake in the contract, with Shell taking 44 percent, and Mitsubishi taking a 5 percent share.

Lacking the technology needed to capture the gas for power generation, Iraq produces a negligible quantity of gas compared with the size of its reserves, and currently flares off most of what is produced as a by-product of its crude oil production.

The joint deal with Shell and Mitsubishi will exploit gas in the Rumaila, Zubair, West Qurna and Majnoon fields near Basra.

At the time said the deal was first proposed in 2008, the government expected it to be worth around $4bn, but no specific financial figures were given on Tuesday.

As we reported recently, Iraq has invited international energy firms to submit bids in an auction for three gas fields, in a third major tender aimed at developing the war-torn state's oil and gas sectors.

Existing power plants in Iraq have proved incapable of generating sufficient electricity to meet peak summer demand, forcing draconian rationing that sees consumers receive supply for one hour in five, or less.

Iraq's LNG reserves are estimated at 110 trillion cubic feet.

(Sources: AFP, WSJ)

22 June 2010 (Source: PressReleaseNetwork.com)

For the first time in more than three decades, two oil and gas exploration license bidding rounds took place in Iraq in 2009. The first round saw a consortium consisting of the UK's BP and China's CNPC spearheading IOC activities as they won the first 20 year service contract to develop Iraq's Rumaila oil field, which holding 17.8 billion barrels in crude reserves, is Iraq's largest oilfield and one of the largest in the world.

The Energy Exchange catches up with Michael Towshend, BP President of Iraq ahead of the Iraq 2010: Future Energy conference.

The Energy Exchange: It has been sometime now since BP and CNPC were first awarded the 20 year service contract for Rumaila, can you briefly tell us, how are thing progressing? What in your opinion would you say were the main obstacles that you faced being the first IOC to enter Iraq from such an auction?

Michael Townshend: It is now six months since the contract became effective and much work has been achieved. The Joint Management Committee has been formed and is meeting regularly with partners of South Oil Company (SOC), PetroChina and SOMO. Along with the initial production rate, the annual work programme and budget was approved early on. Key contracts have been awarded and plans are in place to double the activity in the field towards the end of the year. Key appointments have been made at the senior and team leader level and from July the Rumaila Operating Organisation will be established which will run the Rumaila field.

It's been a great opportunity for BP and our partners. We have worked on Rumaila for a long time in the past and know the field well, plus over this last six months we have spent time working closely with SOC and PetroChina to develop plans to increase the field production over time.

The Energy Exchange: You teamed up with CNPC (PetroChina) for the consortium. Were there any major factors that they brought to the table which complimented BP and will help in the development of the field?

Michael Townshend: BP, SOC and PetroChina have complementary strengths. All world class companies, with SOC having deep expertise in running Rumaila, Petrochina with an already established presence in Iraq and access to a diverse and competitive supply chain.

The Energy Exchange: An important role of the IOC working in Iraq today is that of information and knowledge transfer through employment opportunities, training and best practice knowledge sharing. On Rumaila, are BP actively working with local companies and actively encouraging the local workforce to work in the oil and gas sector?

Michael Townshend: One of the largest direct employment and training opportunities will come through the 3,000 plus SOC staff that are transferred into the Rumaila Operating Organisation which will run the field. In addition and from the start Iraqi companies will have the opportunity to participate. Recently the Iraq Drilling Company won the tender for the supply of rigs and associated services for the field. In addition the Base camp being constructed is mostly through Iraqi companies.

In terms of training we have already started working with the British Council, undertaking preliminary English language needs assessment for staff working on Rumaila. Its still early days though and over the course of the next year we will start to develop more comprehensive programmes.

The Energy Exchange: In terms of getting to grips with production from Rumaila, what role are both the local and international technology and service providers playing in helping you to increase oilfield performance? Are you finding the technology needed locally or is there a requirement for international support?

Michael Townshend: It's not a question of either/or. The point about the contracts was to bring the best of local experience and knowledge with expertise from around the world. The recently awarded drilling contracts are an example of this where we have a mixture of international and local companies.

The Energy Exchange: Through the Rumaila field, do you envisage further opportunities to diversify within Iraq? Will BP become involved in downstream operations focusing upon refinery and petrochemical mega projects or do you see your efforts remaining mainly in upstream projects?

Michael Townshend: Our priority is Rumaila. This is a giant field and worthy of our full attention. We are a long term partner of Iraq and although we have other activities in the country, and will always look for other opportunities, the Rumaila field rightly deserves our foremost focus.