Business | Oil & Gas
Iraq's pacts with global majors could be delayed
Iraq and five oil majors are unlikely to sign service deals to boost output from some of the country's largest fields before June after a slowdown in negotiations, oil executives said on Monday.
- Reuters
- Published: 00:01 April 2, 2008
Dubai: Iraq and five oil majors are unlikely to sign service deals to boost output from some of the country's largest fields before June after a slowdown in negotiations, oil executives said on Monday.
Baghdad is expected to pay up to $2.5 billion for the firms to help raise the country's output by nearly a quarter, in what would be the largest foreign involvement in Iraq's oil sector for decades.
Iraqi officials had hoped to clinch the deals this month or in early April, but talks had slowed over payment and the majors' desire to link the short-term contracts with long-term oilfield development.
Slowing down
"I would be surprised if anything was signed before mid-year," said one executive whose oil company is involved in the negotiations. "Talks have slowed down but not stopped."
Despite the complications, deals may be concluded by the end of the second quarter, another executive said.
Iraqi oil officials met representatives of Chevron, Royal Dutch Shell, Total last month in Jordan to discuss some of the deals.
But negotiators from BP and ExxonMobil were unable to make the last round of talks, and will next meet Iraqi officials in the second half of April, another executive said.
The same team of Iraqi negotiators is holding parallel discussions for five separate technical service contracts with the oil majors. This was contributing to the delays, executives said.
"That's a daunting task for them," said one of the executives. "They have never negotiated deals like this before. That's a lot of work and not a lot of people to do it."
The oil majors have jockeyed for position for years to gain access to Iraq's oil reserves, the world's third-largest.
An oil law that would set the framework for investment in Iraq has been stalled in parliament for over a year. The service contracts are part of stop-gap measures to boost output in the absence of the law.
Even so, majors want to see a link between the service contracts and future involvement in the fields before they go ahead.
Iraq wants each of the two-year contracts to result in a boost of 100,000 barrels per day, adding 500,000 bpd to current output of 2.27 million bpd.
The target was ambitious but possible, executives said.
Shell was negotiating for a contract at the northern Kirkuk field and along with BHP Billiton, for another contract at the southern Maysan fields.
The other three contracts were all for southern oilfields. Chevron and Total were in discussions as partners for West Qurna. BP was looking for a contract for Rumaila, while Exxon was eyeing Zubair.
The majors will be unable to send staff to work in Iraq due to a lack of security and will work through Iraq's state-run operating companies to boost output at the fields. Majors will also procure equipment for the developments.
For years, international oil companies have provided field studies, technical assistance and training to Baghdad as they look to position themselves for future oil and gas contracts.
More from Oil & Gas
More from Business
Business Editor's choice
-
Saudi-Bahraini economic ties hit new high
Whilst press reports continue speculating on a possible new political structure defining ties between Saudi Arabia and Bahrain, facts on the ground confirm ever- stronger economic ties between the two neighbours
-
Cupid targets the Fed with early tweets
Declarations range from pure romance to cute overtures and racier fare
-
Do unemployment figures flatter to deceive?
Jobseekers and recruiters give out mixed signals ranging from optimism to downright despair even as official data show recovery
