Global bids to be invited for 10 Iraq oilfields
06 May 2008
Iraq intends to invite international bids to develop 10 of its oilfields as the Arab Opec producer is pushing ahead with plans to rehabilitate its war-damaged hydrocarbon sector, according to Iraq's former oil minister.
Thamir Abbas Ghadhban, who now heads a high-level committee that advises the Iraqi prime minister on energy issues, said technical agreements to be signed with a number of international oil companies (IOC) would add around 500,000 barrels per day to Iraq's crude output this year.
But the former minister appeared to be opposed to granting production-sharing contracts to IOCs for oilfields that have been already discovered and are producing, saying "no one of sane mind" would favour such contracts.
In an interview with the April issue of the Paris-based Arab Oil and Gas magazine, Ghadhban said nearly 70 IOCs had responded to an invitation by the Iraqi Oil Ministry to apply for permission to operate in Iraq as part of a multi-phase programme aimed at reviving the country's energy sector.
"It is a programme that is being implemented in several phases. The first stage is the negotiation of technical assistance contracts - technical service agreements (TSAs) - with at least five large international oil companies for the purpose of obtaining advice, technical support and the procurement of equipment outside Iraq... the Oil Ministry hopes this assistance will result in incremental production of around 500,000 bpd between now and the end of 2008 and the maintenance of that gain in 2009," he said.
"The second stage relates to some 10 fields. They are to be offered in an initial international tender in which 70 or more companies will be able to participate if they are effectively prequalified by the ministry.
"These fields are in production... service contracts are due to be awarded for the full development of these oilfields and the corresponding contracts will probably be concluded by the end of 2009. The third stage would be a second tender that would cover fields that have been discovered but not yet developed."
Ghadhban said he believed IOCs would accept services rather than production-sharing contracts (PSCs) for discovered oilfields on the grounds they are producing fields and have low production costs.
"In the case of already discovered fields, I think no one of sane mind would recommend PSCs, especially in Iraq. This type of contract was conceived for projects carrying a risk, which is not the case here," he said.
"These fields are simple and have been extensively studied and evaluated. The technical risks are very low, and the fields have a long production history. Furthermore, they are located close to existing infrastructure. I am certain IOCs will accept service contracts for our already discovered fields, in view of their geological characteristics, their very great potential, their low production costs and the current and future level of oil prices."
Iraq, a founding member of the 13-nation Organisation of Petroleum Exporting Countries (Opec) has the world's third largest proven oil resources after those of Saudi Arabia and Iran. But its output capacity has largely eroded because of conflicts over the past three decades.
Iraq had pumped in excess of 3.5 million barrels per day before its 1990 invasion of Kuwait but its current sustainable capacity is just above two million bpd. Officials hope development programmes could lift capacity to six million bpd and also boost its recoverable crude reserves. Last year, Iraq approved a controversial bill that regulates the oil sector in different areas but it has yet to be passed.
"I think there is still the possibility of a compromise on the text of the bill. There is certainly a great deal at stake, and the strained relations between the federal government and the Kurdistan Regional Government (KRG), and especially between the Iraqi Oil Ministry and the KRG's Ministry of Natural Resources, have made things even more difficult," Ghadhban said.
He said the decision by the KRG to sign several production-sharing contracts and the threat of the Iraqi Oil Ministry to place firms that have signed agreements with the KRG on a blacklist have complicated the problem.
But he remained optimistic. "The differences between the two sides are not huge in the end. I personally believe it would be easier to find a solution to this problem if agreements were concluded on other issues, such as the status of Kirkuk."
"The future oil law gives the planned Iraqi National Oil Company sufficiently broad powers for taking decisions about the type of relationship to be established with IOCs, and I hope these relations will be very professional. One must not politicise what should not be politicised."
