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Shell among contenders to develop big Iraqi oilfields

Times Online
The Times
January 3, 2009

Robin Pagnamenta, Energy and Environment Editor

A giant oilfield lying beneath suburban Baghdad is among 11 being studied by Royal Dutch Shell and other Western oil companies, after the Iraqi Government opened them up to foreign companies this week.

In a drive to double Iraq’s crude oil output within four years, its Oil Ministry is offering up a second round of long-term contracts to develop some of the country’s biggest oil and gas fields. The batch includes the East Baghdad oilfield, which stretches beneath the outskirts of the capital and is thought to contain more than 9 billion barrels, according to figures from the US Department of Energy. The field’s potential daily production capacity is estimated at about 120,000 barrels per day. Its production before the war was 50,000 barrels per day, but it has not operated since 2003.

The list also includes two even larger fields in the Basra region – Majnoon and West Qurna, which have daily production capacity of 600,000 and 560,000 barrels, respectively.

A spokesman for Shell, which is pursuing a joint venture in Basra aimed at capturing gas that is being flared as a by-product of oil production, said that the Anglo-Dutch oil giant was “very seriously interested” in developing old and new oilfields in Iraq. BP declined to comment on whether it might bid for any of the new fields.

The Iraqi contracts on offer are not the “production-sharing agreements” preferred by Western oil companies. Instead, they are effectively service agreements under which foreign oil companies will be contracted by the Government to operate fields and will not receive an equity stake.

Iraq has the world’s third-largest oil reserves – its major source of revenue – but years of war and political isolation has left its crumbling infrastructure in dire need of investment.

Hussain al-Shahristani, the Oil Minister, said on Wednesday that the 11 new oil and gas fields could boost Iraq’s production by 2.5 million barrels per day within three to four years.

The eight remaining fields include the Siba gas field, also in Basra, Halfaya, in Masyan province, Gharrafa, in Dhi Qar province, Kifil and Mirjan, a group of fields in the Euphrates Valley, Badrah, in Wasit province, and Qayara and Najmah in Nineveh province, as well as Khashm al-Ahmar, Naudoman, Qamar and Gulabat, a group of fields in Diyala province.

Iraq’s oil revenues fell to $2.3 billion in November, from $3.11 billion in October because of the steep fall in world oil prices. The oil was sold at an average price of $43.54 a barrel, down from $58.90 a barrel.

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