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Iraq Cabinet Ratifies Four Major Oilfield Deals

Source: Reuters 1/5/2010, Location: Middle East

Iraq's cabinet has ratified contracts with foreign firms to develop four oilfields, pushing Iraq a step closer toward finalizing deals that may make it a leading world oil producer, the government said. "The cabinet has ratified four oilfields: Majnoon, Gharaf, and in Nineveh province Qayara and al-Najmah," government spokesman Ali al-Dabbagh said.

Last month, the Iraqi Oil Ministry initialled service contracts with seven foreign consortia to develop fields including supergiant Majnoon, which was awarded to Royal Dutch Shell and Malaysia's Petronas [PETR.UL] in a December energy auction.

The firms, part of a long-awaited wave of foreign investment in Iraq's promising oil sector, must now sign final deals before they can begin work.

The deals represent a mainstay of Iraq's ambitions to transform its under performing oil sector and bring output capacity to 12 million barrels per day (bpd), a huge increase from output now of around 2.5 million bpd.

The deals ratified on Tuesday were offered to foreign firms at a Dec. 11-12 energy auction, Iraq's second this year. Royal Dutch Shell, Europe's largest oil company, and Petronas won the rights to Majnoon, a major field near the southern oil hub of Basra.

Majnoon, whose reserves of 12.6 billion barrels make it one of the world's largest untapped fields, was one of the prizes on the block in that auction.

Major Success
After a more tepid showing in an initial auction in June, Iraqi oil officials hailed the December auction as a major success. Gharaf, a smaller oilfield with 900 million in reserves, went to Petronas and the Japan Petroleum Exploration Co.

Qayara and Najmah, located in Iraq's restive north, were both won by Angolan state oil firm Sonangol. The 800-million-barrel Qayara field is south of Nineveh province's capital Mosul, while nearby Najmah has around 900 million barrels.

There are three deals from Iraq's second bidding round that must still be ratified, including Halfaya, which was won by China National Petroleum Company, Total and Petronas. Halfaya, in southern Iraq, has estimated reserves of 4.1 billion barrels.

Badrah, a 100 million barrel reservoir, is another. Badrah went to Russia's Gazprom, Turkey's TPAO, Kogas and Petronas.

Last but not least is West Qurna Phase Two, which was won by Russia's Lukoil and Norway's Statoil. The supergiant field has reserves of 12.9 billion barrel.

After the deals were initialled, the government said it was seeking a number of technical or operational amendments to the contracts.

"Sonangol was the first company to accept the proposed amendments followed by the other companies whose contracts were approved today by the cabinet," said Sabah Abdul Kadhim, head of the legal and commercial section of the Petroleum Contracts and Licensing Directorate.

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