Big oil to sign Iraq deals soon

This is from UPI. There certainly is little in the press about all this but one passage about sums things up:
"This means that it is pay-off time for the majors that have been running training courses for Oil Ministry personnel, reservoir surveys, drawn up work-plans and given general advice during the past years," said Samuel Ciszuk, Middle East energy analyst for Global Insight. "It is clever."
Everything important is going on behind the public view and with no input from the Iraqi people or even the parliament.






Analysis: Big Oil to sign Iraq deals soon


Published: Dec. 6, 2007 at 2:00 PM
Print story Email to a friend Font size:By BEN LANDO
UPI Energy Editor
WASHINGTON, Dec. 6 (UPI) -- Big Oil's big dreams are close to coming true as Iraq's Oil Ministry prepares deals for the country's largest oil fields with terms that aren't necessarily what companies were hoping for but considered a foot in the door of the world's most promising oil sector.

Iraq's proven oil reserves are only smaller than those in Saudi Arabia and Iran -- and the country is only about 30 percent explored.

Iraq produces about 2.4 million barrels per day, a recent increase from the 2 million bpd post-invasion average, but far below what its reserves could handle. Its oil sector is suffering from decades of Saddam Hussein-era mismanagement, U.N. sanctions and the effects of the current war.

The decision of how to develop a resource that provides for nearly the entire federal budget is political and controversial. To each side's alarm, the national government will rely on a Saddam-era law and Iraq's Kurdish region is signing deals on its own.

Details of negotiations between the ministry and international oil majors are being kept quiet, though media are picking up on pieces of deal-making.

MarketWatch reports executives from BP and Shell were to meet with Oil Minister Hussain al-Shahristani following Wednesday's meeting of the Organization of Petroleum Exporting Countries in Abu Dhabi. The global energy information firm Platts reports top ministry and company officials are to meet in Amman this week.

Shahristani himself dropped hints to United Press International in a recent interview. He said he's moving forward with oil deals despite the lack of a new national oil law, a draft of which has been stalled in negotiations for more than a year.

"This has nothing to do with the national oil law. There is no timeline. Whenever we finish our discussions we'll just sign the contracts," he told UPI on the sidelines of the OPEC heads of state summit last month.

"This is basically technical-support contracts," he said, adding the contracts will not be the result of a bidding process. "Selected companies will offer us technical support that we need to develop our producing fields."

Develop producing fields? "Yes, only."

With the companies who are helping to, who have been studying them, who have been doing this work? "Yes. Exactly. That's right."

How many fields? "We will not be announcing anything until we sign the contracts."

Super giants? "They are the super giants, yes."

Super giant fields are those with at least 5 billion barrels in reserves, and in Iraq include the Kirkuk, Majnoon, Rumaila North and South, West Qurna and Zubair fields. Reserves of the Nahr Umr and East Baghdad fields may also reach 5 billion barrels, and there are many large producing fields rumored to be on the negotiating table.

The world's largest oil companies are keen on entering Iraq, as their own booked reserves decline and a growing bulk of global reserves are under nationalized systems.

Oil company officials met with U.S. officials, including Vice President Dick Cheney, prior to the war and since, to discuss contracts for Iraq's oil. Former top officials of the companies were tasked by the U.S.-led occupation with advising the Oil Ministry.

"This means that it is pay-off time for the majors that have been running training courses for Oil Ministry personnel, reservoir surveys, drawn up work-plans and given general advice during the past years," said Samuel Ciszuk, Middle East energy analyst for Global Insight. "It is clever."

He said forgoing bidding allows the ministry to move quickly, as well as prove wrong critics, such as the Iraqi Kurds.

According to insiders to whom UPI talked recently as well as media reports, Shell, which produced a technical study of Kirkuk in 2005, wants a deal for the field. BP wants one for Rumaila, which it studied last year. Shell and BHP Billiton are angling for the Missan field in the south. ExxonMobil is interested in the southern Zubair field while the Sabha and Luhais fields are being targeted by Dome and Anadarko Petroleum.

ConocoPhillips is talking with the ministry about the West Qurna oil field, officials with Russian major Lukoil told Dow Jones Newswires. Lukoil, of which Conoco is a 20 percent shareholder, had a deal with Saddam Hussein for West Qurna in the 1990s, but it was cancelled prior to the war.

Chevron and Total have teamed up in a bid for the Majnoon field.

Less than 1 percent of Iraq's proven reserves are located in the area controlled by the Kurdistan Regional Government, but limited successful exploration and geological formations have the KRG excited with prospects.

Bolstered by contempt for central control and the sluggish pace of the oil law, the KRG has passed its own regional oil law and signed more than 20 exploration and production deals with international oil firms.

Shahristani has called the KRG deals "illegal" and a dispute is slowly brewing in Baghdad. None of the major companies has signed with the KRG, fearing being blacklisted by Baghdad from the rest of Iraq's bounty.

Shahristani, growing impatient himself, has started his negotiations, though the KRG claims the Saddam-era law is illegitimate. Washington, which maintains an emphasis on approving a new oil law, has given Shahristani its blessing.

Iraq's oil sector was fully nationalized in 1972 and power was concentrated in the hands of the Iraqi National Oil Company. INOC is temporarily defunct, and its role has been incorporated into the ministry.

The ministry can sign the service contract deals on its own, though it may need to get Cabinet approval first.

But if it were to sign any risk or concession contracts, such as production-sharing contracts like the KRG

Iraq voids Russian Oil Contract with US support.

This is from the NYtimes. It is not surprising that the US lawyer would advise the Iraq govt. to void the contract. The Russian govt. in turn though may decide not to forgive Iraqi debts!

Iraq, With U.S. Support, Voids a Russian Oil Contract


By ANDREW E. KRAMER
Published: November 4, 2007
BAGHDAD, Oct. 29 — Guided by American legal advisers, the Iraqi government has canceled a controversial development contract with the Russian company Lukoil for a vast oil field in Iraq’s southern desert, freeing it up for potential international investment in the future.

In response, Russian authorities have threatened to revoke a 2004 deal under the Paris Club of creditor nations to forgive $13 billion in Iraqi debt, a senior Iraqi official said.

The field, West Qurna, has estimated reserves of 11 billion barrels, the equivalent of the worldwide proven oil reserves of Exxon Mobil, America’s largest oil company. Hussain al-Shahristani, the Iraqi oil minister, said in an interview that the field would be opened to new bidders, perhaps as early as next year.

The contract, which had been signed and later canceled by the Saddam Hussein government, had been in legal limbo since the American invasion. But the Kremlin remained hopeful it could be salvaged until this September, when Mr. Shahristani traveled to Moscow to inform officials there that the decision to cancel it was final, he said.

The Russian government, newly emboldened in international affairs by its expanding oil wealth, is still backing Lukoil’s claim and protesting what it considers selective enforcement of contracts in Iraq.

“We will defend our interests,” Dmitri S. Peskov, the Kremlin spokesman, said in a telephone interview. “It is the government’s obligation to defend the interests of our companies in foreign countries.”

One Iraqi official, speaking on condition of anonymity because he was discussing a confidential diplomatic exchange, described Russia’s response as, “If you do the deal, we can muster the political muscle to forgive the debt.”

West Qurna, mapped by Soviet geologists in the 1980s but mostly untapped, is one of a dozen or so supergiant oil fields in the world. They are known in the industry as “elephants,” fields so large they can tip the fortunes of companies or countries.

The field will produce one million barrels of oil a day after four to five years of development, according to both Iraqi oil officials and Lukoil; that is the approximate equivalent of the current output of the North Slope in Alaska.

In Lukoil’s 1997 production-sharing agreement, Saddam Hussein’s government awarded the company development rights to the 11 billion barrels of oil for a paltry signing bonus of $10 million. The deal, concluded when Iraq was seeking Russian support in a failed effort to lift United Nations sanctions, allotted 9.6 percent of the output to Lukoil.

The contract presented a quandary for the United States, which has been accused by some critics of invading Iraq for its oil. There is little evidence to date that the war effort has given American oil companies an inside track to Iraq’s reserves, and the Lukoil deal is the only one involving a major oil company to be reversed since the start of the war.

But as a cornerstone of its foreign policy, the United States has argued vigorously for countries to honor petroleum contracts. In that light, condoning the cancellation of the Lukoil contract could be seen in some quarters as evidence of a double standard.

“From the Russian government perspective, Iraq is seen as occupied and its administration directed by Washington, particularly when it comes to oil,” Vladimir I. Tikhomirov, chief economist at the Russian bank UralSib, said in a telephone interview.

“The Russians see the cancellation of their contract in Iraq as part of the U.S. drive to keep control over the major oil fields there,” he said.

The Russian president, Vladimir V. Putin, has raised the issue with President Bush several times since the 2003 invasion. In an interview with the BBC in June 2003, Mr. Putin said Mr. Bush had gone as far as offering assurances.

“At our last meeting,” Mr. Putin said, “Bush directly and clearly said, ‘We do not have any goals of pressuring Russian companies out of Iraq and we are ready to create the conditions for working together there.’ I have no reason not to believe him.”

The legality of the Lukoil contract remains murky. It is Iraq’s stated policy, as laid out in a draft oil law now before Parliament, to honor contracts signed by the Saddam Hussein government. It is doing just that with contracts with Chinese, Vietnamese, Indonesian and Indian oil companies.

But the Iraqis note that it was the Saddam Hussein government that canceled the Lukoil contract. The government’s spokesman, Tariq Aziz, said at the time that the government believed the Russians were negotiating with the Americans to secure the contract in event of an invasion.

Early in the American occupation, the question arose whether the Hussein government’s decision was valid, said Michael Stinson, the former chief adviser to the Iraqi Oil Ministry. The answer was supplied by the principal American legal adviser to the ministry at the time, Robert Maguire, who Mr. Stinson said was then working for the Defense Department. Mr. Maguire drew on pre-Hussein-era law to justify the cancellation, Mr. Stinson said.

James Glanz contributed reporting.

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