Iraq Studying New Exxon, Lukoil West Qurna Bids

Source: Reuters 10/11/2009, Location: Middle East

Iraq's Oil Ministry is considering revised offers from Exxon Mobil and Lukoil for West Qurna, one of several oilfields for which Iraq failed to secure a developer in a June auction. The auction was the centrepiece of Iraq's efforts to revive its lucrative but crumbling oil sector, battered by years of war and sanctions. Of eight fields offered, only one deal was signed after firms balked at the Oil Ministry's stiff payment terms.

"The Iraqi Oil Ministry is studying new offers from Exxon Mobil and Lukoil for West Qurna phase 1," Abdul-Mahdy al-Ameedi, deputy director of the ministry's contracts and licensing directorate, told Reuters on Sunday.

Iraq also expects an offer from France's Total for West Qurna, and says it has received another bid from Italy's ENI for Zubair, which also went unawarded in June.

West Qurna phase 1 has reserves of 8.7 billion barrels while Zubair's reserves are estimated at 4 billion barrels. "We have had talks with ENI on Zubair (and) ENI has submitted a new offer," he said.

It was unclear whether Iraq had sweetened the original contracts to lure back bidders. The country relies on oil sales for almost all its income and desperately needs to boost revenues to rebuild its dilapidated infrastructure. The only long-term service contract awarded in June went to Britain's BP and China's CNPC, who agreed to a remuneration fee of $2 per barrel to develop super-giant field Rumaila.

Ameedi said that Exxon and Lukoil had agreed to a remuneration fee of $1.90 per barrel for West Qurna, but that negotiations over other terms were ongoing.

Iraq aims to offer another 10 oilfields to oil majors in December, and has said the signature fee for those contracts -- a payment to secure the right to develop the block -- would be less than the $500 million charged for Rumaila, although, unlike the Rumaila terms, the money would not be returned.

Iraq expects to make a final decision on the revised West Qurna and Zubair bids next month, Ameedi said. Exxon is also expected to make a new offer for Zubair, he said, but would first wait to see the results of its Qurna bid. Investment in Iraq's oil sector has been dogged by a lack of updated hydrocarbon laws, whose passage has been hampered by a spat between Baghdad and Iraq's semiautonomous Kurdish region over the right to sign oil deals and a host of other issues.

Oil Minister Hussain al-Shahristani said that foreign firms' investment in West Qurna phase 1, Zubair and Rumaila would bring Iraq $100 billion, according to an Oil Ministry spokesman. The minister also forecast that three fields' combined output would reach 7 million barrels a day in six years, the spokesman said.


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