Iraq to Give 82% of Proven Oil Reserves to International Oil Companies

Posted by Staff, Iraq Oil Report at 3:02 AM on October 5, 2008.

Iraq’s Oil Ministry Oct. 13 will not only take a major step forward to bringing foreign oil companies into Iraq’s nationalized oil sector. Beyond beginning a bidding process for a handful of key oil and gas fields, the ministry will outline a second group of oil and gas fields up for grabs by International Oil Companies. Petroleum Intelligence Weekly reports the two rounds account for 94 billion barrels of Iraq’s 115 billion barrels of proven reserves.



PIW also has more, including:

- Service contracts will allow companies to book reserves

- Fields in northern areas, Diyala and Kirkuk provinces, could spark rows with the Kurdistan Regional Government

- Winners will have “lowest fees;” will pay a signing bonus based on field’s potential and taxes; pay to the IOC will be “linked to an internal rate of return, with 18 percent considered “acceptable” to Baghdad.”

- Development will mandate a Joint Venture with a state-owned oil company, though what the state will get out of that, and what control it will have, is still unknown.


Premier Oil, the U.K. explorer, has been replaced by state-owned Turkiye Petrolleri AO in the list of prequalified companies bidding for oil contracts in Iraq, Bloomberg reports. “Premier Oil is out because it is too small,” Iraq’s Oil Ministry spokesman Asim Jihad said today by phone from Baghdad. “The Turkish government company is now in the bidding round, and there are a total of 35 companies.”



The official didn’t say why Premier was excluded from the company shortlist, Hassan Hafidh reports for Dow Jones Newswires. Separately, an independent source close to the ministry said Premier was excluded because it was involved through another company in oil deals signed by the Kurdistan Regional Government, or KRG, with international oil firms.

Sinan Salaheddin reports for The Associated Press A ministry official says the company failed to submit documents required for it to compete in a bid due to start next month.


UK’s Premier Oil was dropped for failing to provide the necessary technical and financial documents. One condition set by the ministry was that the output of a company wanting to bid should be above that of the Iraqi field it seeks to operate, International Oil Daily reports. “Premier’s qualification based on the technical and financial criteria does not allow it to participate in the first bid round, which includes mainly giant fields. However, it will be able to participate in the next rounds,” the official said.


A new detachment of Australian sailors from the Royal Australian Navy is being deployed to Iraq to secure oil installation in the Gulf, Sky News reports.



Iraq has approved a $3 billion contract awarded last week by the ministry of oil to Chinese National Petroleum Co. (CNPC) to develop and produce Adhab oil field, Eric Watkins reports for Oil & Gas Journal.


Iraqi and Japanese leaders meeting in New York discussed oil investments, the Japanese Minsitry of Foreign Affairs’ website said. “Prime Minister Aso stated that Japan is eager to develop relations with Iraq in the areas of the economy and business from a long-term perspective, given the economic and socio development of Iraq, and that he hopes that Japanese companies will move into the area of oil as well. To this, President Talabani stated that he acknowledges Japan’s advanced technologies in the area of oil, among other areas, and said that he would like to enhance relations with Japan by such means as asking Japanese experts to be dispatched to Iraq to have consultations with officials at the Ministry of Oil.”


Sterling Energy will reduce its stake in its Kurdistan region production sharing contract to 53.33 percent following a farmout of 33.33 percent to Addax Petroleum and another 20 percent assignemtn of third party interest to the Korean National Oil Corp., a Sterling release said.



Iraq has signed preliminary deals worth billions of dollars with General and Siemens for equipment to almost double electricity generation capacity, Simon Webb reports for Reuters.


Insecurity, a lack of fuel and runaway demand are the biggest challenges to Iraq’s plan to end chronic power shortages by 2012, the electricity minister said, Webb reports in a separate article for Reuters.


The Kurdistan Regional Government is looking for firms interested in investing in new and existing electricity infrastructure. According to a statement from the government, the projects include substations and transmission lines throughout all three KRG provinces.



On the heals of the Transparency International report ranking Iraq the third most corrupt country in the world, the United Nations announced a five-year plan to assist Iraq in anti-corruption efforts,


Basra Province Governor Muhammad Musbeh al-Waeli speaks with Kholoud Ramzi of Niqash about political and security developments in Basra and the importance of the province in the country. He blames political fighting for stalling services in the city and aiming at ousting him because he’s affiliated with the Fadhila Party. He also says his brother’s arrest for oil smuggling is politics as well, with no proof offered.

Basra is one of the most important southern provinces. Those who control Basra control huge potential; it has a unique commercial and strategic location and it possesses huge oil wealth which could play a role in determining the future importance of the southern region. This is the main cause of the conflict between political forces but we stand for imposing law on all parties without exception. …


The security situation is now better than ever. The imbalance was because the emergency committee handling security in Basra kept the local government aside despite its inability to impose the rule of law. The committee was the main reason behind the infiltration of militias into the city and their control over its resources. I admit that the city was about to collapse was it not for the Knights Assault Operation which saved the city and restored security.

A new decision by the Iraqi parliament leaves Iraqi minorities with no representation in the country’s provincial councils as well as the legislature, Nidhal al-Laithi reports for Azzaman. By an overwhelming majority, the parliament early this week revoked paragraph 50 from the constitution under which Iraqi minorities were assigned a set of seats in legislative and municipal councils. The revocation has sparked mass demonstrations in areas where these minorities live, particularly in the northern Province of Nineveh of which Mosul is the capital.


The Special Representative of the United Nations Secretary General for Iraq Staffan de Mistura has also raised concerns over this omission.


Many refugees who ventured to return home following reports of relative quiet in the country were forced to flee once again. The restive Province of Diyala of which Baaquba is the capital has seen most of the violence directed at returning refugees. Azzaman correspondent in the city says factional militias are active in the city and their attacks have even forced the heavily armed pro-U.S. Sunni militiamen to flee.



The commander of the Sunni-led Awakening movement in Baghdad says that attacks by the Iraqi government and government-allied militiamen against Awakening leaders and rank-and-file members are likely to spark a new Sunni resistance movement. That resistance force will conduct attacks against American troops and Iraqi army and police forces, he says. “Look around,” he says. “It has already come back. It is getting stronger. Look at what is happening in Baghdad,” Robert Dreyfuss reports for The Nation. The commander, Abu Azzam, laid out a scenario for a new explosion in Iraq, one that would shatter the complacent American notion that the 2007-08 “surge” of American troops in Iraq has stabilized that war-torn country. Although the greater US force succeeded in putting down some of the most violent sectarian clashes, it was the emergence of the Awakening movement in 2006 that crushed Al Qaeda in Iraq and brought order to Anbar and Baghdad.


The US presidential candidates are not the only ones scrambling to put together a credible interpretation of the situation in Iraq these days.The Pentagon released its latest report to the US Congress, entitled “Measuring Stability and Security in Iraq,” Reidar Visser writes in historiae.org. There are two very basic problems in the report. The first concerns “the fundamental nature of the conflict in Iraq”. On p. viii the report bombastically asserts, “while security has improved dramatically, the fundamental character of the conflict in Iraq remains unchanged – a communal struggle for power and resources”. That is a about as wrong as one can be in describing the political dynamics of the past year. … The second main problem in the report has to do with the Pentagon’s take on Iranian influences in Iraq. The Department of Defense simply refuses do deal open-mindedly with the possibility of pro-Iranian influences inside the current Iraqi government. … When these basic questions are not addressed in a nuanced way, it is very hard to ascribe much significance to the predictable succession of graphs and statistics and acronyms that take up the subsequent pages of the Pentagon report. These things all collapse if the underlying assumptions about the “fundamental nature of the conflict in Iraq” and Iran’s channels of influence are inaccurate.


An Iranian firm based in the United Arab Emirates has won a deal to construct a cement factory in the southern Province of Dihqar, a senior official said, Azzaman reports. Mohammed al-Hindawi, the head of reconstruction and investment bureau in the province, said the factory is designed to produce 3,000 tons of cement per day. He said the provincial authorities have allocated a lot of land as a site for the company. However, he declined to give details on the value of the contract.



Kurdistan’s press pays for tackling corruption, Anna Fifield reports for The Financial Times.


Municipal authorities in the southern city of Basra have mounted a campaign to clean up the Jewish cemetery there, Azzaman reports. The cemetery is seen as one of Basra’s ‘cultural landmarks’ and the authorities want to keep it clean and tidy, said Ahmad al-Yasseri who heads the cleaning-up campaign. There are no Jews left in the city which used to house a sizeable Jewish community of tens of thousands before the creation of Israel in 1948.


The Baathist Supreme Command for Jihad and Liberation (SCJL) has announced that it is preparing to launch the “Battle of Baghdad.” The SCJL is a coalition of at least twenty-two insurgent groups headed by Izzat al-Douri, the leader of the banned Iraqi Baath Party, Pascale Combelles Siegel writes in The Jamestown Foundation’s Terrorism Monitor. The August 9 statement is the third in a series since July from the group’s “Sharia fatwa-issuing commission.” In these documents, the SCJL looks beyond a U.S. withdrawal from Iraq and promises a final showdown with the Iraqi government that will lead to the “liberation” of Iraq and the establishment of a new political system.



Biden and Obama: both wrong on Iraq. Reidar Visser, editor of the Iraq-focused website historiae.org and research fellow at the Norwegian Institute of International Affairs, analyzed the Democratic Party candidates’ Iraq assertions during both the presidential and vice presidential debates.

Shiites and Sunnis have coexisted in Iraq since they crystallised as two distinctive religious communities in Baghdad in the tenth century AD, when the struggle for power between various factions of the Islamic caliphate that had been going on since the seventh century became transformed into a theological one with the (Shiite) doctrine of the imamate. In the subsequent centuries, there was certainly tension between these two communities at times (not least because the rivalling ruling elements of the caliphates chose to cultivate links with particular communities to further their own power struggles), but outbreaks of violence on a large scale were extremely rare. In fact, not more than three cases stand out before the late twentieth century, and these were all related to invasion by foreign forces rather than to internal sectarian struggles between the Iraqis.

While there is sectarian violence right now, it stems more from the lack of an immediate reconciliation process following the overthrow of the equal-opportunity but Sunni identified oppressor Saddam Hussein, coupled with the U.S.-orchestrated governance process in immediate post-Saddam Iraq that brought in partisans largely living outside of Iraq in recent decades and then the evolution into an electoral process that segregated by religious sect. The U.S. managers of post-Saddam Iraq where so misinformed they worried foremost about sectarian fighting, they didn’t realize the extent of inter-sectarian relationships (neighbors, marriages, friendships).


While there have been incidents of violence between Sunni and Shiite, like instances of violence between different groups within cultures and societies, it is nothing short of ignorance and racism – and not very presidential – to assert that these two groups must fight each other.

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