Baghdad to auction off West Qurna field in licensing round

03 October 2008
Bid by Russia’s Lukoil to revive mid-1990s exploration deal fails.

Baghdad has rejected a bid by Russia’s Lukoil to revive a deal struck in the mid-1990s for the exploration of the West Qurna oil field after deciding to include the field, which holds some 6 billion barrels of oil, in its second-bid round to be held later this year.

The deal between the Russian firm and the Saddam Hussein regime collapsed in 2002 when the Oil Ministry cancelled the contract after Lukoil refused to breach UN trade sanctions by beginning field exploration.

When Vagit Alekperov, president of Lukoil, and Russian deputy foreign minister Alexander Sultanov met Iraqi political leaders in Baghdad in April this year, there appeared to be an outside chance that the deal would be rekindled.

However, one adviser to Iraq’s Oil Ministry tells MEED that the second phase of the West Qurna field is no longer up for negotiation.

“We expect to include it in the second licensing round, along with a number of other promising fields around the country,” says the adviser. “It has been made clear to Lukoil that its previous agreement is no longer valid.”

Lukoil had held out hope that it would be able to renegotiate the deal after China National Petroleum Corporation (CNPC) recently managed to resurrect its Al-Ahdab oil field agreement, which was first signed in 1997.

In August, the state-run CNPC agreed to invest $3bn in exchange for a 75 per cent stake in the venture, with Iraq’s North Oil Company holding the remainder (MEED 27:8:08).

The Moscow-based oil major may still decide to bid for the West Qurna-2 field as part of a consortium with the US’ ConocoPhillips, according to a London-based energy analyst.

“It is difficult to know what the reaction from Baghdad would be to Lukoil putting in a fresh bid,” he says. “Teaming up with a US major such as Conoco would not harm its chances.”

Iraq expects to tender up to 12 fields as part of its second bid round, which it will launch by the end of this year. The ministry has yet to finalise the full list of fields to be auctioned off.

The prized Majnoon and Nahr bin Umar fields in Basra province are expected to be included, as well as acreage in Missan and Diyala provinces.

Baghdad is pressing ahead with the first oil round, which covers eight oil fields and two gas fields.

A meeting is due to be held on 13 October in London between the Iraqi Oil Ministry and international oil companies, where Baghdad will outline further details of the round.

The oil licences available cover the Kirkuk and Bai Hassan fields in the north, West Qurna-1, Rumaila and Zubair in the south, and three oil fields in Missan province - Burzurgan, Fauqa and Abu Ghirab - which lies around 160 kilometres north of Basra.

The gas fields are the western Akkas and eastern Mansouria gas fields (MEED 19:9:08).

The eight oil fields included are already producing, but the round is expected to lead to an increase in their output of 1.5 million barrels a day (b/d).

The licensing rounds are part of the country’s drive to increase oil production to 4.5 million b/d by 2012, from 2.5 million b/d at the moment (MEED 30:6:08).

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