By James Rickman, SVS
Major global energy firms including BP, LukOil, ExxonMobil (NYSE: XOM), China National Petroleum, ENI SpA (NYSE: E) Italy have agreed to Iraq's conditions for investment in two major oilfields in the south of the country, Baghdad announced on Tuesday as it prepares to dramatically ramp up oil output from Rumaila and West Qurna oil fields.
Iraqi Oil Minister Hussein al-Shahristani told a news conference including reports from Morning Star Financial sources that the aim is for crude production to be increased to between 10 and 12 million barrels per day within six years -- up from the current level of around 2.5 million bpd.
The announcement came two months before a second round of auctions on oilfields that Baghdad hopes will ease a budget crunch and rebuild a moribund economy and dated infrastructure wracked by decades of war and sanctions. All the oil revenue received will be allocated for the reconstruction and rebuilding of Iraq.
Combined with investment in Rumaila, Zubair and West Qurna 1 oil field deals represent a total of $100 Billion would be ploughed into Iraq's oil industry by global energy firms. Around 86% of Iraq's government revenues are from oil sales, and the country's various rebuilding projects, from defense to infrastructure, are facing a crunch because of limited funds.
Expectations from the first bid round (June) and what was hope for from the second round (early December) is that Iraqi production will be between 10 to 12 million bpd, making Iraq equal to the world's biggest oil producers, according to The U.S. Energy Information Administration’s Iraqi Oil Field Interactive Map Analysis.
Iraq originally offered eight oil and gas fields to foreign energy companies at the June auction, but only Britain's BP and China's National Petroleum Corporation reached agreement with Baghdad on the giant Rumaila field at the time.
Today, Iraq announces that a consortium led by Italian energy giant ENI has agreed to Baghdad's offer of two dollars for each extra barrel of oil it extracts on top of current production at Zubair oilfield in southern Iraq.
Zubair produces around 227,000 bpd, according to oil ministry figures released earlier this year, and has reserves of around four billion barrels. Iraqi leaders have indicated their desire to increase oil production at the Zubair oil field by 1.125 million bpd within six years.
The consortium interested in Zubair is made up of ENI, China's Sinopec, Occidental Petroleum Corporation of the United States and Korea Gas Corporation of South Korea, will be taxed on its profits.
Iraqi Oil Minister Hussein al-Shahristani told a news conference including reports from Morning Star Financial sources that the aim is for crude production to be increased to between 10 and 12 million barrels per day within six years -- up from the current level of around 2.5 million bpd.
The announcement came two months before a second round of auctions on oilfields that Baghdad hopes will ease a budget crunch and rebuild a moribund economy and dated infrastructure wracked by decades of war and sanctions. All the oil revenue received will be allocated for the reconstruction and rebuilding of Iraq.
Combined with investment in Rumaila, Zubair and West Qurna 1 oil field deals represent a total of $100 Billion would be ploughed into Iraq's oil industry by global energy firms. Around 86% of Iraq's government revenues are from oil sales, and the country's various rebuilding projects, from defense to infrastructure, are facing a crunch because of limited funds.
Expectations from the first bid round (June) and what was hope for from the second round (early December) is that Iraqi production will be between 10 to 12 million bpd, making Iraq equal to the world's biggest oil producers, according to The U.S. Energy Information Administration’s Iraqi Oil Field Interactive Map Analysis.
Iraq originally offered eight oil and gas fields to foreign energy companies at the June auction, but only Britain's BP and China's National Petroleum Corporation reached agreement with Baghdad on the giant Rumaila field at the time.
Today, Iraq announces that a consortium led by Italian energy giant ENI has agreed to Baghdad's offer of two dollars for each extra barrel of oil it extracts on top of current production at Zubair oilfield in southern Iraq.
Zubair produces around 227,000 bpd, according to oil ministry figures released earlier this year, and has reserves of around four billion barrels. Iraqi leaders have indicated their desire to increase oil production at the Zubair oil field by 1.125 million bpd within six years.
The consortium interested in Zubair is made up of ENI, China's Sinopec, Occidental Petroleum Corporation of the United States and Korea Gas Corporation of South Korea, will be taxed on its profits.
Meanwhile, competing consortiums led by US energy giant ExxonMobil and Russia's Lukoil had submitted bids that meet Iraq's conditions for the West Qurna 1 field. After a major effort from the oil ministry, a price was accepted of $1.9 per additional barrel. The West Qurna 1 produces around 279,000 bpd and has reserves of around 8.5 billion barrels, according to oil ministry figures.
Both consortiums accepted the price -- Exxon Mobil, which proposed an additional 2.1 million barrels a day and Lukoil, which offered 1.5 million barrels a day.
The Iraqi minister stated the deal with ENI would be finalized within two weeks, while a decision would be made between the Exxon and Lukoil-led consortiums in the same timeframe.
ExxonMobil's consortium includes Anglo-Dutch energy firm Shell, while Lukoil is in partnership with ConocoPhillips (NYSE: COP) of the United States.
The June auction was the first opportunity for energy companies to plant a foot in Iraq since the now banned Baath party nationalized the Iraq Petroleum Company in 1972. The global energy firms awarded deals will have to partner with Iraqi government-owned firms and will be paid a fixed fee per barrel, not a share of the profits.
About The Writer - CEO
As the founding director of SVS, LLC (Hillsboro, Oregon USA); Mr. Rickman has over 30-years of entrepreneurial success. A noted new media writer/graphic designer - founding member of Artel Software, Lumisys/IMAGRAPH Corp., AVID Technologies and Interactive MicroSystems, Inc. Recognized as expert in sustainable (wind, solar, biofuel, hydro, electric energy, clean water, agricultural, healthcare, consumer retail sales/marketing, technology) industries, financial, technical analysis and R&D strategies. Mr Rickman is a sought after published evangelist - innovative thinker recognized worldwide including COMDEX (Consumer Electronics), Asian Institute of Technology, United Nations Sustainable Global Development, ChinaInvestor News, SiloBreaker, BusinessWeek, Forbes, WSJ, FT.com, Seeking Alpha Global Financial News and the (NAB) National Association of Broadcasters. Mr. Rickman holds advanced business and technical degrees. Call (503) 621-4953 or visit www.sustainablevirtualbiz.com
