Iraq signs deals for Mansuriyah, Siba fields

Source: Reuters 11/14/2010, Location: Middle East

Iraq's oil ministry signed deals with foreign companies to develop its Mansuriyah and Siba natural gas fields, as it tries to boost its energy production and break into global gas markets.

The OPEC member signed a deal with South Korean group Kogas, Kuwait Energy Company, and Turkey's state-owned TPAO to develop the Mansuriyah field near the Iranian border in volatile Diyala province.

It signed a second deal with TPAO and Kuwait Energy for the Siba field in the relatively peaceful southern oil hub of Basra.

It delayed a third contract, for the Akkas gas field in Iraq's western desert, to give winning bidders Kogas and Kazakh group KazMunaiGas more time to study the terms, an Iraqi oil official said, amid a row between the Iraqi government and provincial officials over the deal.

Iraq awarded contracts for development of the three fields on Oct. 20 in its third energy bidding round since the 2003 U.S.-led invasion.

The Manisuriyah consortium won the deal after proposing a plateau production target of 320 million standard cubic feet per day and setting a remuneration fee of $7 per barrel of oil equivalent.

TPAO and Kuwait Energy set a plateau production target for Siba of 100 million cubic feet per day and a remuneration fee of $7.50 per barrel of oil equivalent. TPAO has said the two partners expect to invest $1 billion in the field.

"The first commercial production from the gas fields that should be achieved by the contractor will be 25 percent of the production target within the first three years," said Abdul-Mahdy al-Ameedi, head of the ministry's licensing and contracting office. He said the plateau output targets should be achieved in six years.

The Akkas deal became controversial when authorities in Iraq's western Anbar province, the Sunni heartland where the field is located, said it would not allow the foreign companies to work there.

While Ameedi said the signing of the initial deal for Akkas was delayed until after the Muslim Eid holiday to give the companies more time to look over the contract, he said they were nervous about the dispute after comments made by the governor of Anbar province.

Anbar's provincial council rejected the results of the auction. They have said they wanted the contract to commit companies to sell the gas on domestic markets and process it into value-added energy products that could be sold locally.

The Iraqi government has said the priority for the gas will be domestic consumption, mainly for power generation, but has left open the possibility of allowing exports once domestic needs were satisfied.

More than seven years after the U.S.-led invasion, Iraq's national grid only supplies a few hours of power each day.

Anbar, a former al Qaeda stronghold, had said it would refuse to provide security for foreign firms and threatened to use all means, including "civil revolt," if the government ignored its demands.

Deputy oil minister Abdul Kareem Luaibi denied the signing delay was due to the resistance from Anbar. "We do not have any problems, and, God willing, after Eid, we will sign the Akkas deal," he said.

The Manisuriyah and Siba contracts will be submitted to Iraq's cabinet for approval before the final contracts are signed, Ameedi said.

Nuri al-Maliki was renominated Iraqi prime minister on Thursday after fractious politicians ended an eight-month deadlock. Under Iraqi law, Maliki has 30 days to form a new government.


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