The UAE oil company Dome International and Swiss oil trader Vitol Holding are to hold talks with several oil majors in early September to resurrect a short-term service deal with Iraq, after the US’ Anadarko Petroleum Corporation pulled out of the consortium earlier this month.
An industry executive with knowledge of the group’s ongoing talks with Baghdad’s Oil Ministry says that while the previous joint venture has now been broken up, Vitol and Dome intend to continue working together with a different oil major.
“There is a round of discussions expected to take place in early September once people have returned from holiday and a number of oil majors have already indicated preliminary interest,” he says.
The consortium, which is slated to develop the Luhais field in southern Iraq, is the only one of six groups which is likely to be allowed to carry out work in the original two-year timeframe.
Earlier this year, Baghdad formally requested that oil majors complete the other five planned service contracts over just 12 months, rather than the initial two-year timeframe that had been expected (MEED 11:7:08).
However, Baghdad has reassured the consortium that the Luhais field is exempt from the change in the timetable because it is the only field not to be included in the first bidding round for longer-term oil contracts.
The executive says that the consortium should be able to triple oil production at Luhais, from just 50,000-barrels-a-day (b/d) currently to 150,000 b/d over the 24-month period of a contract.
“It is a field which the consortium has done plenty of studies on now and it is confident of hitting that mark and possibly even reaching 200,000 b/d,” he says.
Anadarko is thought to have pulled out of the negotiations over the field due to a number of changes in the terms of the contract offered by Baghdad. This included the removal of an expected guarantee that the consortium would be offered preferential treatment for future field contracts in Iraq, which made the deal less attractive to the US firm.
“Anadarko’s board had given it full support to proceed but in the last 12 months the executives involved in hammering out the details became increasingly disillusioned about what was in it for the company,” says the executive.
Anadarko will only say that it does “not intend to pursue additional interests [in Iraq] at this time”.
Vitol and Dome both declined to comment on the status of the possible two-year agreement.
The five other groups who are expected to sign short-term service deals with Baghdad are the UK/Dutch Shell Group, both by itself and as part of a partnership with BHP Billiton, the UK’s BP, the US’ ExxonMobil Corporation and the US’ Chevron in partnership with France’s Total.
Several of these oil majors have refuted the recent suggestion made by Charles Ries, US co-ordinator for Iraq’s economic transition, that the short-term contracts were unlikely to go through due to political bickering between ministries in Baghdad.
Another industry executive tells MEED that the five groups have all provisionally agreed to sign renewed one-year deals, although it is still unclear if firm contracts have yet been signed.
A senior executive from BP adds that talks on the technical service contracts are continuing, but declines to confirm whether it has signed a new deal yet.