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Azzaman reports that Russian energy giant Lukoil is discussing with local officials in Basra the details of implementing its contract to develop the West Qurna-2 oil field.

Governor Shaltah Aboud is reported to have promised the Russians “to engage in full cooperation and do his best to remove all obstacles.”

“We have discussed with Russia’s Lukoil and its partner Norway’s StatoilHydro, which have won the contract to develop the giant field of West Qurna-2, ways to solve the problems they might face,” Aboud said.

One important issue is employment – Aboud wants to see Lukoil and StatoilHydro employing as many Iraqis as possible.

“Lukoil expressed readiness to accommodate (certain) numbers of Iraqis and work for their career development,” the governor said. “We are planning more meetings with Lukoil and StatoilHydro on the nature of the services they intend to offer the province’s population.”

The Iraqi government ratified the agreement last month; it will last 20 years with a possible extension of five years. Lukoil has a 56.25% share, StatoilHydro 18.75%, and Iraq’s North Oil Company 25%.

The Qurna oilfield, just 65 kilometers from the port of Basra, has proven reserves of around 13 billion barrels. Under the deal the firms are to substantially raise the field’s output to 1.8 million barrels a day.

Production is expected to start by the end of 2011 and will involve drilling more than 500 wells, but it will take several more years to hit the 1.8 million bpd target. A meeting also took place on Friday between the consortium and the Iraqi Ports Company, to discuss methods of getting the oil to Basra port.

Iraq has the world’s third largest oil reserves, behind Saudi Arabia and Iran, with an estimated 115 billion barrels of proven reserves.

(Sources: Azzaman, Oil & Gas Financial Journal, Aswat Al Iraq)

Iraq has finalized deals to buy at least 700,000 tons of Canadian, U.S, German, Russian, and Australian wheat from major suppliers in one of the bigger purchases in recent years, trade sources said on Wednesday.

The purchase, which still requires the cabinet's approval, involved at least 300,000 tons of Canadian wheat from two suppliers, one undisclosed and the other Louis Dreyfus, along with 100,000 tons of U.S. wheat from Archer Daniels Midland (ADM.N) at prices hovering around $225 per ton FOB, Middle East trade sources told Reuters.

The rest were 100,000 tones consignment of Russian wheat believed to have been bought from Exam at around $267 per ton CIF (cost, insurance and freight).

Two 100,000 tones each of possibly Australian or German origin wheat were awarded to undisclosed suppliers at around $215 per ton FOB, the sources familiar with the tender said.

The deals were a result of a tender for a nominal 100,000 tons that closed on Jan. 26 with offers that were extended to Feb. 4.

Volumes in Iraq's wheat and rice tenders are viewed as nominal and the country regularly buys more than originally sought.

The prices for the latest deals are close to Iraq's last major purchase of 300,000 tons of U.S. Russian and Australian wheat in a tender that closed last Oct. 26, traders said.

Traders said at the time a total of 100,000 tons of U.S. wheat was bought at about $234 FOB while a similar amount of Russian wheat was secured at about $209 per ton FOB.

Iraq has moved towards diversifying new wheat supply sources in the last two years after making major U.S. wheat purchases.

Iraq is one of the largest importers of wheat, with yearly wheat import requirements of nearly 4 million tones and rice at around one million tones. (Reporting by Suleiman al-Khalidi; Editing by Marguerite Choy)

By Suleiman al-Khalidi

Russian state energy monopoly Lukoil will invest 30 billion U.S. dollars with its foreign partners in the development of the West Qurna-2 oil field in Iraq, said the company's CEO Monday.

First phase of investment to the oil field, whose annual output is estimated at 95 million metric tons, will reach 4.5 billion dollars, said Vagit Alekperov when meeting with Prime Minister Vladimir Putin.

Russia has canceled more than 10 billion dollars, or 90 percent of the debt owed to it by Iraq, said Putin, adding that the Iraqi government has welcomed Lukoil's move.

It was also "a pleasure" for Lukoil and Norwegian Norsk Statoil to win the tender for the West Qurna-2 in last December, he said.

An agreement signed on Sunday between Lukoil, Norsk Statoil and the Iraqi government stipulated a 56.25 percent share for Lukoil, 18.75 percent for Norsk Statoil, and 25 percent for Iraqi North Oil Company.

Located in southern Iraq, the West Qurna-2 oil field has a known deposit of 12.9 billion barrels.

The decision by Iraq , to allow international companies to support the development of productive oil fields, is the most important economic decision taken by the government since 2003. The importance of this step is in increasing the production capacity from 2.5 million bpd currently, to 11 million by the year 2017, an increase of nine million bpd. If the price per barrel ranged between 70 and 100 $, additional income for Iraq would increase to 200 $ billion annually by mid decade, compared to about 45 billion currently.

These contracts established through a system of tenders were won by Asian state-owned companies, especially Chinese and Malaysian with a majority shareholding, followed by the two European companies «Shell» and «BP» and the American companies «Exxon Mobil» and «occidental», and Russian, «Lukoil».

If Iraqi achieves the predicted new production level of about 20 million barrels in 2020 it will be producing about 10 % of global oil production per year, putting it in the top three producing countries in the world.

This ambitious project raises an important question: Can Iraq implement this massive program, even in cooperation with international companies? What about the geopolitical risks that surround the country, and the failure of the administrative government to provide security, and more importantly, the absence of a social contract between the ruling classes and the people, and between the people themselves? Is it possible to implement this program card in the estimated dates

In summary the answer is that Iraq will face serious difficulties in implementing the program as planned, according to the assumed timetable. Can Iraq be expected to increase production to about six or seven million bpd by mid-decade? The most important thing, however is that Iraq has launched finally, after much hesitation and difficulties, into the development of its huge reserves.

What are the risks and challenges anticipated? First, there is the inability and corruption of government institutions. Secondly, there is the risk arising from operations by militias and terrorist organizations against oil installations. Government has undertaken to protect the fields, but the security of foreign employees in their offices in Baghdad and Basrah and public roads is the responsibility of the companies themselves who rely on notorious private security companies. In the current circumstances an increase in operations against enterprises and individuals is expected with the presence of thousands of foreigners in Iraq.

And thirdly there is the legitimacy of the agreements itself. The oil ministry has insisted that cabinet approval is enough to pass the agreements, thus avoiding the approval of Parliament. The reason for this is clear, because it's difficult to obtain legislative approval, which would delay the ratification of the contracts. However, the procedure opens the way for future governments to change the contracts or even cancel them. The Chairman of the oil committee in parliament, a coalition of Kurdistan and an ally of the government, threatened actions of this kind in the future.

The fourth economic challenge to the country in the future is in the absence of a clear vision on how to exploit new oil revenues. This lies in the absence of a decision to transfer funds to infrastructure projects or investment projects. There is fear that future governments will continue to expand unproductive bureaucracy, it is noteworthy that the number of employees and retirees of the state apparatus in Iraq exceed some of the major industrialized countries.

Finally, there is the problem of mass production. Companies will try to produce the highest amount possible in the shortest period available to them so as to increase their profits, nor could Iraqi authorities prevent it. This means a flooding of market and declining prices, and an imbalance with the neighboring oil producing countries. Concentrating on a rapidly increased level of production within a short period has its dangers, not only on oil prices, but also Iraq's relations with neighboring countries in cirumstances  that involve multiple and complex problems. Some of these countries can block the construction of new export terminals necessary for this expansion, not to mention aggression and harassment at the border.

Therefore the foreign policy of the country must be linked with oil policy. This is unlikely in the light of anarchy prevailing in the country and government institutions.

In spite of the oil fields allocated to international companies, some 50 additional fields still await development. These are not expected to be delivered to international companies, at least in the foreseeable future. Any new agreements will focus on exploration and drilling in new areas.

Basra Governor, Shaltagh Aboud al-Mayah, held talks on Monday with Russia’s giant oil company Lukoil and its Norwegian ally Statoil on facilitating their work in the development of al-Qarna oilfield.

“Talks were also centered on the need to use Iraqi workers in Basra, and especially in al-Qarna region,” al-Mayah told Aswat al-Iraq news agency.

The Governor asserted that other meetings with the two companies will be held to discuss their needs and plans for the city’s residents.

Lukoil is Russia’s largest oil company and its largest producer of oil. In 2007, the company produced 96.645 million tons of oil; 1.953 million barrels per day. Its international upstream subsidiary is called Lukoil Overseas Holding. Headquartered in Moscow, Lukoil is the second largest public company (next to ExxonMobil) in terms of proven oil and gas reserves. In 2008, the company had 19.3 billion barrels of oil equivalent per SPE standards. This accounts to some 1.3% of global oil reserves.

Basra is 590 km south of Baghdad.

Iraq's oil ministry on Monday completed a major deal with US major Exxon Mobil and Anglo-Dutch giant Shell to develop production at West Qurna-1, the war-torn country's second biggest field.

"The oil ministry signed the contract for West Qurna-1 with Exxon Mobil and Shell," ministry spokesman Assem Jihad said in a statement.

"This contract will increase production from 285,000 barrels-per-day to 2,325,000 barrels-per-day."

West Qurna-1 has reserves of around 8.5 billion barrels, according to oil ministry figures.

A deal with a consortium led by Russian energy giant Lukoil to develop the neighboring West Qurna-2 field is expected to be signed on Saturday, Jihad added.

US super major ExxonMobil and its Anglo-Dutch peer Shell, today signed a final contract for the development of Iraq's 8.7-billion-barrel West Qurna Phase One oilfield

The partners, who will work with an Iraqi state-run oil company, won the right to develop the super giant field in negotiations with the Oil Ministry last year following Iraq's June oilfield auction, the first since the 2003 US invasion, a Reuters report said.

ExxonMobil's regional vice president Richard Vierbuchen and Shell Gas & Power vice president Mounir Bouaziz signed the deal in the presence of Iraqi Oil Minister Hussain Shahristani in Baghdad.

The companies plan to increase output from the oilfield to 2.325 million barrels per day from its current level of 279,000 bpd.

It is one of several deals following two oil contract auctions last year that have the potential to take Iraqi capacity to 12 million bpd - rivaling top producers Saudi Arabia and Russia - from 2.5 million bpd now.

The Ministry of Finance in Iraq signed a bilateral agreement with Denmark to write- off the debt owed by Iraq by one 100%, and affirmed that States which will reduce debts on Iraq would have a priority in the implementation of investment projects in it.

The Finance Minister Bayan Jabr said in a statement issued by the ministry that Iraq was able to reduce 120 $ billion of the debt owed in its trust, amounting of to 140 billion dollars, adding that this reduction comes as a continuation of the process of debt cancellation promised by the creditor nations of Iraq.

Al-Zubaidi , said the signing of the agreement with Denmark will reduce the remaining debt amounting about 20% after he signed with them earlier the convention for reduction of 80% of the debt of 55 $ million, noting that Iraq has begun negotiating States extinguished 80 % of the debt to extinguish the remaining amount . The minister pointed out that Iraq will give priority to investment companies of the States which will reduce debts on Iraq, 100 % for work in Iraq, noting in this regard that Iraq had managed to write- off debt for some foreign countries like the United States and Cyprus and Malta and the United Arab Emirates, and reduced its debt by 80% for a number of countries, including Russia, Germany and France. "

Al-Zubaidi pointed out that debts owed by Iraq to Saudi Arabia and Kuwait, which he refused to reveal their size has not been resolved, stressing that Iraq is seeking to sign a number of agreements to reduce debts, with some Arab countries like Egypt and Morocco. For his part, said Danish Ambassador Michael winder, "Denmark is continuing to support Iraq in all fields of economic, agricultural and industrial as well as support for human rights situation and provide support to Iraqi universities, pointing out that Danish companies looking out for work in Iraq as soon as possible.

Three delegations of Arab and foreign companies have visited Karbala to implement investment projects in it, a media spokesman for Karbala investment commission said on Wednesday.

“The delegations visited the city to be acquainted with the investment opportunities and its needs,” Raed al-Asali told Aswat al-Iraq news agency.

“The companies are; a Bahraini interested in implementing housing and industrial projects and a German company, specialized in agricultural projects, while the third is a Russian company which is specialized in hotel, agricultural and industrial projects,” he added.

Karbala is 110 km southwest of Baghdad.