Iraq: Oil Ministry Signs Deals for Oil Field Development
Iraq’s Oil Ministry signed a 20-year service contract Jan. 22 with a consortium comprised of Italy’s Eni, Occidental Petroleum Corp. and Korea Gas Corp. to develop the al-Zubair oilfield in Basra. Under the terms of the deal, the consortium will be paid $2 per barrel for the oil they extract from the field above current production and will pay a 35 percent tax on profits. In place of a signature bonus, the consortium will pay the Oil Ministry $300 million as a refundable five-year loan. Eni plans to invest around $20 billion in this deal over the 20-year period and aims to raise the field’s output from its current 195,000 barrels per day (bpd) to 1.125 million bpd within the next six years.
Iraq’s Oil Ministry has also signed deals with Royal Dutch/Shell and Malaysia’s Petronas to develop the giant Majnoon oil field, and with Petronas and Japan Petroleum Exploration Co. to develop the Garraf oil field in the south. Exxon Mobil and Shell are expected to finalize a contract for the development of West Qurna Phase 1 oil field in the south on Jan. 25 (KK: which they did.) Though Iraq offers a highly uncertain investment environment and slim profit margins for the development of these fields, thus far these energy firms are willing to incur substantial risk in order to stake a foothold in a country with immense energy potential.