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Iraq celebrates oil licensing success
Successful licensing of seven upstream oil contracts could see Iraqi production hit 12m b/d says oil ministry
Iraq's December licensing round was a success for the oil ministry, which licensed seven of 10 available areas on more advantageous financial terms than expected. The seven areas, which include the Majnoon field and West Qurna phase 2, could reach a combined plateau production of up to 4.765m b/d (PE 12/09 p12). The winners were: Shell; CNPC; Petronas; Total; Lukoil; Statoil; Japex; Gazprom; Kogas; Tpao; and Sonangol. US companies were absent. The winning companies agreed to undertake the work for lower-than-expected fees. Lukoil and Statoil will redevelop West Qurna-2 for a production fee of $1.15/b – much lower than the $1.9/b the government sought in its June licensing round, the first since the 2003 US invasion. The fee for the only award in the June round – under which BP and CNPC will receive $2 per incremental barrel at the Rumaila field – is higher than most of the awards in last month's round. In June, most bidders viewed Iraq's proposed contract terms as too onerous, but now BP and CNPC – which are expected to nearly triple production from the Rumaila oilfield, near Basra, to 2.85m b/d – appear to have secured relatively attractive terms. The outlook for Iraqi production, which amounted to 2.52m b/d in November, according to the IEA, is extremely positive. In addition to the awards made in the June and December rounds, Iraq has agreed two other important upstream deals in recent months. In November, the oil ministry awarded ExxonMobil and Shell a contract to develop phase one of West Qurna, where production is expected to rise to up to 2.1m b/d within seven years, from 270,000 b/d. And Italy's Eni has been awarded rights to develop the Zubair field, in a partnership with the US' Occidental and South Korea's Kogas. The partners are targeting plateau production of 1.125m b/d within seven years, compared with 195,000 b/d at present. The oil ministry says production could eventually reach 12m b/d. But security remains a significant concern, particularly in light of a spate of terrorist attacks in late 2009. 
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