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Exxon follows China lead in clinching Iraq oil deal
Baghdad (AFP) Nov 5, 2009 Exxon Mobil on Thursday became the first US company to win a contract since Iraq's oil industry was nationalised almost 40 years ago, further expanding the role of foreign nations in the industry. The contract to develop West Qurna 1, the war-torn country's second largest field, will boost its production more than eight-fold to 2.325 million barrels per day (bpd), said Oil Minister Hussein al-Shahristani. "The companies will spend 50 billion dollars -- 25 billion on operations and a further 25 billion in development," he said, referring to the winning bid, in which Exxon holds an 80-percent share and Anglo-Dutch firm Shell the balance. The contract was announced 48 hours after Baghdad completed a deal with Britain's BP and China National Petroleum Corp (CNPC) to near-triple production at the giant Rumaila oilfield -- Iraq's biggest -- in what is also a 50-billion-dollar investment. Both fields are in southern Iraq, home to most of the nation's oil. West Qurna 1 currently produces about 279,000 bpd and has reserves of around 8.5 billion barrels, according to oil ministry figures. Rival consortiums led by Exxon and by Russia's Lukoil had submitted bids which both met Iraq's conditions. The offers came ahead of a second round of international bidding for contracts in mid-December. "We look forward to signing the final agreement in the near future, and to many, many years of cooperation with our colleagues in the Southern Oil company and here in the (oil) ministry," Exxon's president of upstream activities Richard Vierbuchen told reporters at a preliminary signing ceremony in Baghdad. Iraq's bidding process has been marked by an aggressive strategy adopted by oil firms from China, for which securing long-term energy supplies for its massive economy is a national security issue. "What is striking is the strong showing of Chinese companies in a sector which, up until its total nationalisation in 1975, had been the preserve of the British," said Ruba Husari, founder of the Iraq Oil Forum website. CNPC is already operating near the central city of Kut, having sealed the first energy deal by a foreign company since the US-led invasion that ousted Saddam Hussein in 2003. Underlining the Asian economic powerhouse's role, four Chinese firms -- CNPC, CNOOC, SINOCHEM and SINOPEC -- were in the consortiums selected for the first round of open bidding since nationalisation. "These companies don't have the same constraints as their Western rivals, which have to make profits that satisfy their shareholders," said Husari. "Chinese public companies operate within the framework of state interests." They also accept a lower level of return "if that guarantees Chinese dealers and 'made in China' products a share of the Iraqi market," she added. Six oil and two gas fields were up for grabs in late June but only the contract for Rumaila was sealed. In return for their investment, BP and CNPC agreed to payment of two dollars per additional barrel produced at Rumaila. Initially, foreign firms snubbed Iraq in what had been the first such opportunity for outside investment in the sector in almost 40 years, amid concerns over the perceived low level of return on huge investments. The service contracts offered by Baghdad are based on companies accepting a fixed fee per barrel of oil extracted rather than an equity stake. Iraq has the world's third-largest proven oil reserves of 115 billion barrels, behind only Saudi Arabia and Iran. Oil sales, especially exports of 2.4 million barrels a day, provide 85 percent of government revenues. However, there has been little exploration or development of fields in the past three decades because of wars and an international embargo imposed on Iraq in 1990 following Saddam's invasion of Kuwait. Investment in aging energy infrastructure, meanwhile, has been hampered by delays to a key hydrocarbons law despite the urgent need for funding of the country's post-war reconstruction. Iraq aims to boost output to seven million bpd within six years by developing the Zubair, Rumaila, West Qurna 1, Kirkuk and Maysan fields. Longer term, Shahristani's sights are set on between 10 and 12 million bpd. Share This Article With Planet Earth
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China gets its first grip on Arab oil suppliesBaghdad (UPI) Nov 4, 2009 Baghdad's deal Tuesday with BP and the China National Petroleum Corp. to invest $15 billion in the giant Rumaila oil field to help rebuild Iraq's ramshackle oil industry gives energy-hungry China its first real grip on Middle Eastern oil. But the 20-year contract carries immense risk as another bout of sectarian savagery looms in Iraq. Still, China has demonstrated that it's ... read more |
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