Caspian firms migrate southwest in winter

25 February 2003

Oil and gas companies from Russia and former Soviet Union states are continuing to establish strong strategic positions in Iraq and Syria, building on close ties with Moscow and increasing co-ordination between Baghdad and Damascus in the energy sector.

A series of contracts signed in early February indicate that, despite a recent Iraqi rebuff to Moscow-based Lukoil, Baghdad is giving priority to Russian oil firms on new contracts. 'The door is still open,' acting Iraqi Oil Minister Samir al-Najem said on 10 February. Iraq is hoping to sign an agreement with Moscow guaranteeing Russian investment in 67 projects, 17 of which are in the oil sector. 'There is a long-term agreement being considered and it is in its final stages,' Al-Najem said. 'These projects are worth billions of dollars.'

Russian firm Zarubezhneft has entered negotiations with the Iraqi government for one of these projects, the estimated 450,000-barrel-a-day Bin Umar field in Iraq. The company is also understood to be strengthening its position in the region by exploiting cross-border links between Baghdad and Damascus. The two countries have been bolstering existing industry ties in the run-up to a possible US-led war in Iraq.

State-owned Syrian Petroleum Company (SPC)announced in early February that it is in negotiations with Baghdad to fill the vacuum left by Lukoil in Iraq's West Qurna oil field. Iraq already exports considerable quantities of crude through Syria to the Mediterranean port of Banias, despite complaints from the international community that this violates UN sanctions.

The announcement coincided with reports in the Syrian press that SPC has signed an agreement to form a joint venture, known as Amrit, with Zarubezhneft to carry out oil and gas exploration in Syria.Zarubezhneft has no previous experience of working in Syria, butwith its compatriot Machinoimportretains a stake in the West Qurna field that has attracted the interest of SPC.

The spate of new contracts follows the December cancellation of Lukoil's contract in West Qurna, after company representatives allegedly held discussions with Iraqi opposition leaders. Baghdad has also signed oil exploration and production agreements with Russian firms Stroytransgaz, Tatneftand Soyuzneftgaz, in moves widely seen as signalling a diplomatic rapprochement between Baghdad and Moscow (MEED 24:1:03).

A number of other foreign firms with interests in the former Soviet Union have made inroads into the Iraqi and Syrian oil and gas sector since the beginning of the year. UK-based CanArgo, which holds exploration rights in Georgia, the Ukraine and the Caspian sea, announced in early February that it has been awarded exclusive rights to negotiate a production sharing agreement for a 6,000-square-kilometre block near the Jordanian border. 'We are reviewing seismic data from the block before looking for a suitable foreign partner,' says a representative of CanArgo. 'We do not have previous experience of this region, but this is part of a long-term plan to move into new territory.'

Western European and US oil companies present relatively little competition in Iraq and Syria, and a number of firms have withdrawn from the region in the last year. France's TotalFinaElfhas announced that it is planning to scale back operations in Syria, citing difficulties over negotiations with the government over the development of gas fields in the Palmyra region. The company also appears to have been edged out of a promised concession in Iraq, the Majnoon field, which Baghdad started developing under its own steam in January (MEED 20:9:02).

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