Wednesday, May 26, 2010

12th Oil Deal Signed By Iraq

On May 16, 2010 Iraq’s Oil Ministry announced that it had signed the 12th oil deal with foreign companies since 2003. The new contract with the China National Offshore Oil Corporation (CNOOC) and the Turkish Petroleum Corporation (TPAO) was for the Maysan oil field. It has 2.5 billion barrels of reserves, and straddles the Iran-Iraq border. In December 2009, one of the wells was taken over by Iranian troops that led to a short standoff between the two countries. As part of the new agreement, CNOOC and TPAO have promised to increase production from the current 100,000 barrels a day to 450,000 barrels in six years. They will be paid $2.30 per barrel after reaching a set production level. The contract is for 20 years, with an option to add five more years.

In June 2009 CNOOC and China’s Sinochem first bid on the field, asking for $21.40 for each extra barrel that they produced, while the Oil Ministry offered only $2.30. Negotiations continued between the two sides for the next several months, with Sinochem eventually dropping out, and being replaced by TPAO

The CNOOC-TPAO deal is only the latest in a series of agreements signed by the Oil Ministry recently. Beginning in 2008, the Ministry inked its first foreign oil contract since the U.S. invasion with the China National Petroleum Corporation (CNPC) for the Ahdab field in Wasit. In 2009, Iraq held two bidding founds, which resulted in ten deals. Those were made with British Petroleum, CNPC, Malaysia’s Petronas, France’s Total, Royal Dutch Shell, Angola’s Sonangol, Russia’s Gazprom and Lukoil, South Korea’s KoGas, TPAO, India’s ONGC, and Norway’s Statoil Hydro. All together, the Ministry is hoping that these new contracts will increase production to 3.2 million barrels a day by the end of 2011, and eventually reach 12 million barrels a day within six years. In 2010, Iraq is averaging 2.38 million barrels a day in 2010, which is down from 2.40 million barrels in 2009. There are still major barriers to the country’s plans, but any increase will be welcomed since petroleum accounts for 90% of the government’s revenue. They need as much money as they can get to pay for services that do not meet demand, and to hopefully develop other parts of the economy.

SOURCES

Agence France Presse, “Iraq to boost oil output ‘above 3 mln bpd in 2011,’” 5/15/10

DPA, “Iraqi official: Iraq to sign contract developing 3 new oil fields,” 5/16/10

Hafidh, Hassan, “2nd UPDATE: Cnooc, TPAO Sign For Iraq Missan Oil Fields Deal,” Dow Jones Newswires, 5/17/10
- “Sinochem quits Iraq oil field consortium,” Market Watch, 5/16/10

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