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BAGHDAD — A consortium grouping and Norway's Statoil on Sunday signed a final deal to develop one of Iraq's biggest oil fields, capping an auction process key to the country's plans to boost output and generate sorely needed reconstruction revenues.
The 20-year deal on West Qurna Phase 2 — a 12.9 billion barrel supergiant field in Iraq's south — is the last of the 10 fields that Iraq awarded last year during two international licensing rounds.
Iraq is looking to revamp an oil sector battered by years of sanctions, neglect and, most recently, postwar violence and political bickering. The signing Sunday also offers some much-needed political capital for Iraqi officials as they head into elections in March.
"These contracts will bring in cash to Iraq, and move ahead plans to develop the infrastructure," said Oil Minister Hussain al-Shahristani, adding that the deals afforded Iraqis the chance to "look toward a bright future."
Although it sits atop the world's third-largest proven reserves of conventional crude, Iraq only produces about 2.5 million barrels per day, far below its pre-2003 war output. Officials say international companies like LUKoil and Statoil are key to raising that output to more than 12 million bpd in about six years.
Such production — viewed by analysts as unrealistic in that time frame — would rival Saudi Arabia's. The kingdom produces more than 8 million bpd but has an overall output capacity in excess of 12 million bpd.
The fields that saw the most active bidding and interest were the least expensive to develop in the relatively stable, Shiite-dominated south. In all, the fields awarded hold more than half of Iraq's proven reserves.
Under the agreements, the contracts can be extended for another five years.
But instead of the more lucrative production sharing contracts, the companies will get a set amount for each barrel of oil produced, with the compensation ranging from $1.9 to $6 per barrel.
West Qurna Phase 2 was a coup for LUKoil. With known reserves of 12.88 billion barrels, it was the biggest among the 15 fields offered during the last bidding round in December. LUKoil had been granted the development rights in 1997 by Saddam Hussein, only to see the $3.7 billion contract rescinded by the dictator five years later.
Statoil, which has a 25 percent stake in the firms' side of the venture, has said it would invest $1.4 billion over four to five years. LUKoil put the investment "in the billions." They will partner with an Iraqi state oil firm.
The consortium clinched the contract with a proposed remuneration of $1.15 per barrel and a plateau production target of 1.8 million bpd, roughly equal to the entire output of LUKoil's fields in Russia.
(AP, Bloomberg, Reuters)
