BAGHDAD (AP) – Iraq on Friday signed a final agreement with a consortium led by Italy’s Eni SpA to develop a promising oil field in the south, another step forward in the nation’s efforts to develop its dilapidated oil sector to bring in sorely needed cash for postwar reconstruction.
Under the 20-year deal, Eni and partners, Los Angeles-based Occidental Petroleum Corp. and South Korea’s KOGAS, will develop the 4.1 billion barrel Zubair field for $2 per barrel produced above the current production.
The deal boosts Iraq’s drive to bring in Western oil technology and raise output. It also marks the first entry by a U.S. oil company to Iraq since the country nationalized its oil industry in 1970.
The consortium plans to boost production from around 200,000 barrels per day to 1.2 million barrels a day within seven years at the field, which was first offered in June in Iraq’s first such oil auction in more than 30 years.
Only one deal was struck in June, but three consortiums later accepted Iraq’s terms for developing two oil fields in the south, including Zubair field. The Eni-led group initially bid $4.80 per barrel produced, but agreed to the lower payout offered by Iraq.
The Iraqi oil minister, Hussain al-Shahristani, hailed the signing as an “important day in the history of the Iraqi oil industry” and noted that production at Zubair was not at a “satisfactory level” despite years of efforts in Iraqi hands.
Eni CEO Paolo Scaroni called the event a “historical moment,” estimating investment of at least $20 billion in the field, located in Basra province, about 340 miles (550 kilometers) southeast of Baghdad.
Basra, Iraq’s second-largest city, was a base for Shiite militia factions until an Iraqi-led offensive in early 2008. The area has been relatively calm in the past two years.
Scaroni said the consortium would probably have both a private security company and Iraqi forces. He didn’t elaborate.
“Yes, we are very pleased to be the first American oil company signing a deal in Iraq,” Occidental’s Executive Vice President, John M. Winterman told The Associated Press on the sideline of the signing ceremony at the Oil Minister in Baghdad.
Iraq has pending deals with six consortiums, which include major firms such as Exxon Mobil Corp., Royal Dutch Shell PLC and China’s CNPC consortium. The deals are scheduled to be wrapped up next week.
Although it sits atop the world’s third-largest proven oil reserves, Iraq produces a comparatively modest 2.5 million barrels per day, with about 1.9 million barrels a day are exported. Crude oil sales account for roughly 90 percent of the government’s budget.