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Total Seeks Iraqi Oil Fields in Return to Roots

Source: Bloomberg 12/2/2009, Location: Middle East

Total SA, which has so far failed to win contracts to develop Iraqi oil reserves, is interested in at least three fields as it seeks to return to a country the French producer first helped explore back in 1927.

“There are a number of fields we are interested in and have worked on in the past,” Yves-Louis Darricarrere, Total’s head of exploration and production, said in an interview. “This doesn’t mean others don’t interest us.” He declined to give details on the French company’s strategy for winning licenses because the contest is “highly competitive.”

Sitting atop the world’s third-largest oil reserves, Iraq is allocating licenses to international companies as it seeks to boost output from its oil and gas industry after years of neglect. It failed to award most contracts in the first post-war licensing round in June, when Total was among bidders for West Qurna, and 45 companies are qualified to bid in this month’s second auction for work on 10 oilfields.

“The fact that Total wasn’t represented in the first round doesn’t mean anything,” Mark Gilman, an analyst at The Benchmark Company in New York, said by telephone. The French company still stands a strong chance due to its historic presence in the country, he said.

Total, Europe’s third-largest oil company, may bid for Majnoon and a second phase of the development of West Qurna in the Dec. 11 and 12 licensing round and is also “interested” in Bin Umr, which isn’t included in the process, Darricarrere said.

Exxon, Shell
Iraq awarded its largest field, Rumaila, to London-based BP Plc and China National Petroleum Corp. in June. The West Qurna license was subsequently awarded to Exxon Mobil Corp. and Royal Dutch Shell Plc after the companies held direct talks with the ministry. Similarly, Zubair was awarded to Italy’s Eni SpA.

In addition to Exxon and Shell, Iraq had also been in discussions with Russia’s OAO Lukoil, Total and CNPC for West Qurna, Abdul Mahdy al-Ameedi, deputy director general of Iraq’s Petroleum Contracts and Licensing Directorate, said in October.

“We are not absent,” Darricarrere said, declining to comment on whether direct talks are under way with Iraq on the Bin Umr field. He noted diplomatic channels have been busy over the past months as Total executives have traveled often to the country and government representatives “at all levels” have come to France.

Encourage Total
Iraqi President Jalal Talabani said on Nov. 18 that he would encourage Total to help develop the country’s assets. “We want to see Total work in our oil fields,” he told a meeting of a French employers’ association in Paris.

“The potential of the country is essential for oil companies and for the planet,” Darricarrere said yesterday. “We are clearly counting on it for the medium-term.”

Total’s history in Iraq stretches back 82 years to 1927, when the Iraq Petroleum Co. discovered a producing field near Kirkuk, according to the French company’s Web site. Compagnie Francaise des Petroles, the forerunner of today’s Total, was one of IPC’s original shareholders.

“Total was born in Iraq,” Darricarrere said. “We have a long history.”

The company, based at La Defense in western Paris, last year agreed to survey Bin Umr, also known as Nahr Bin Umar, and Majnoon in southern Iraq and share results with the country’s oil ministry.

Estimated Reserves
Majnoon, which straddles the Basra and Maysan provinces, has crude reserves of 12 billion barrels and 9.5 trillion cubic feet of gas, according to a presentation by Banc of America Securities-Merrill Lynch. Nahr Bin Umar, in Basra, holds 6.6 billion barrels of crude and 12 billion cubic feet of gas, according to the same presentation.

The fields to be auctioned in the second round include Majnoon, West Qurna Phase 2, Badra, East Baghdad, Garraf, Halfaya, Najmah and Qaiyarah. Projects in the eastern and central Furat areas will also be put up for development.

The government aims to increase oil production capacity to between 10 million and 12 million barrels a day after the fields on offer in the second round are developed, Oil Minister Hussain al-Shahristani said Oct. 13. The country pumped 2.45 million barrels a day in October, according to Bloomberg estimates.

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