Iraq struck a deal with Russian energy giant Lukoil yesterday to develop one of the world’s biggest untapped oil fields as part of efforts by Baghdad to dramatically ramp up its crude output.
The agreement over the West Qurna-2 reservoir with Lukoil, which will share the project with Norwegian energy firm StatoilHydro, comes a day consortiums led by Shell and CNPC were awarded contracts.
Meanwhile, a joint bid by Malaysia’s Petronas and Japan’s Japex was yesterday awarded a contract to work on the Garraf oil field in southern Iraq, Iraqi Oil Minister Hussein al-Shahristani said.
The pair had requested US$1.49 per barrel of oil extracted from the reservoir and projected output at 230,000 barrels of oil per day (bpd). Petronas will take 60 percent, while Japex will take the remaining 40 percent.
The deals reached so far in the two-day auction promise to increase Iraq’s oil production by more than 4.2 million bpd in the coming years as the country seeks to become one of the world’s biggest energy producers and bring in much-needed revenue to rebuild its war-battered economy.
“We can announce that Lukoil has won the contract to develop the West Qurna-2 oil field,” al-Shahristani said at the oil ministry conference hall where the auction was being held.
Lukoil and StatoilHydro requested US$1.15 for each barrel extracted from the giant field and projected output of 1.8 million bpd. Lukoil will take 85 percent and StatoilHydro 15 percent.
West Qurna-2 is one of the world’s biggest undeveloped oil fields, with known reserves of 12.9 billion barrels. It lies west of the equally enormous Majnoon field, which was auctioned on Friday to Anglo-Dutch firm Shell and Petronas.
Shell and Petronas will receive US$1.39 per barrel of oil they extract from Majnoon, which has proven reserves of 12.6 billion barrels, and project that they will produce 1.8 million bpd.
China’s CNPC, meanwhile, led a group comprising Petronas and France’s Total on Friday to capture Halfaya, also in southern Iraq.
The trio requested US$1.40 per barrel and projected production of 535,000 bpd. The field has known reserves of 4.1 billion barrels.
No bids were received, however, to work on either the East Baghdad field, or the cluster of fields referred to jointly as Eastern Fields.
Analysts said companies were concerned by still-common violence in the areas close to Baghdad and in Diyala Province where the fields are situated.
Yesterday morning, Angolan firm Sonangol said it reached agreement with Baghdad over the Qaiyarah field after the company reduced its initial offer.
A day earlier, Iraq had rejected Sonangol’s per-barrel bid as too high.
Iraq relies massively on oil sales for its economic growth and government income. The country wants to boost oil production to 7 million bpd within six years from 2.5 million now. In the longer term, it is targeting 10 to 12 million bpd, making it a potential rival of Saudi Arabia.
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