BAGHDAD, (Reuters) – Iraq’s oil ministry opened 11 oil and gas fields on Wednesday to foreign firms in a second round of bidding for long-term development contracts it says could more than double its production within a few years.
“Under service contracts prepared by the oil ministry, 11 oil and gas fields will undergo complete development,” Oil Minister Hussain al-Shahristani told a Baghdad news conference. He named the oil fields as Majnoon, West Qurna Phase II, Halfaya, East Baghdad, Gharrafa, Qayara, Najmah, Badrah, Kifil/West Kifil/Mirjan and a group in Diyala province, as well as the Siba gas field in Basra province.
Shahristani said the new fields could increase production by 2.0 to 2.5 million barrels per day within 3-4 years of the contracts being completed at the end of 2009. That increase is roughly equivalent to what Iraq produces today.
Shahristani said three of the fields were jointly owned with neighbours Iran and Kuwait, and developing them would require bilateral deals with those states, which were not opposed.
In June, Iraq announced a first bidding round for long-term contracts for eight big oil and gas fields.
The oil ministry expects to announce the results of that round by the middle of next year, and Shahristani has said those deals would add 1.5 million barrels per day to the country’s output bringing the total above 6 million bpd within years.
Iraq has the world’s third largest oil reserves but its oil infrastructure is creaking after decades of war, sanctions and neglect and is in need of massive investment to boost production.
By allowing international firms to help raise output at its key fields, the Iraqi government is breaking with the policy of neighbours such as Saudi Arabia, Kuwait and the United Arab Emirates where state firms keep tight control of oil. However, the proposed Iraqi deals take the form of service contracts, in which Iraq owns the oil and foreign firms are paid for their work, rather than the production-sharing agreements foreign firms prefer, which give them a share of the output.
In September, Iraq’s cabinet approved a $3 billion oil service contract with the Chinese National Petroleum Company (CNPC), restoring a deal originally signed in 1997. And Royal Dutch Shell is finalising details of a multibillion-dollar joint venture with an Iraqi state-run firm to capture gas produced as a by-product of oil production in southern Iraq, for export and domestic power generation.
Oil is Iraq’s main source of income and boosting output is key to earning the cash the country needs for reconstruction, especially as plummeting oil prices continue to shrink existing revenues, starving Iraq’s treasury of badly-needed funds.
Iraq is a founding member of the Organization of the Petroleum Exporting Countries, but unlike other OPEC states it is not bound by requirements to cut production which the cartel has imposed in a bid to halt the slide in prices.