Korea secures rights to oil fields in northern Iraq

Seoul: State-run Korea National Oil Corp (KNOC) has finalised a $2.1 billion (Dh7.7 billion) pact with the Kurdish Regional Government to secure rights to eight oil fields in northern Iraq, the Korean firm said.

Under the deal, KNOC is to operate two oil fields, Qush Tappa and Sangaw South, and own stakes of 15 to 20 per cent in six fields. In return, it will provide $2.1 billion worth of infrastructure in the Kurdish region, it said.

The agreement, first signed as a memorandum of understanding in February, came to a halt after participants in the South Korean consortium proved lukewarm to political risks in the region.

Finance

In return for the stakes in oil fields, South Korean construction companies had to finance the infrastructure projects through domestic financial institutions. The firms would be paid back by the Kurdish government for the projects, and receive additional payments from profits made from the blocks.

But political wrangling between the Iraqi government and the Kurdish regional government dimmed prospects of making profits from the oil blocks.

"We will eventually form a consortium comprising South Korean companies to pursue exploration and production at the Iraq oil blocks, but if that fails again, we will be responsible for doing it on our own," said KNOC's spokesman.

KNOC said it would guarantee $600 million to kick off the project, and would offer another $1.5 billion once crude exports were proven possible from the region.

The eight blocks - five located near Irbil and three others near Sulaymaniyah - have estimated oil reserves of 7.2 billion barrels, of which Korean firms will have the rights to 1.9 billion barrels.