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Kuwait-led consortium gets nod in Iraq energy bids

Associated Press

BAGHDAD (AP) – A consortium led by a Kuwaiti energy company has won the rights to search for oil and gas in southern Iraq.

Kuwait Energy and its partners, Turkey’s TPAO and the UAE’s Dragon Oil, will be paid $6.24 for each barrel of oil equivalent they find in a 900-square-kilometer (350-square-mile) area in Iraq’s oil-rich southern Basra province.

The Basra-area exploration block is the first to be awarded of 12 that are up for bidding in Iraq’s fourth postwar energy auction that started Wednesday. Three dozen foreign companies are involved.

The government is seeking foreign investment to build up an energy sector hit by years of neglect and violence. Iraq holds the world’s fourth largest oil reserves and hopes to develop its natural gas industry.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

BAGHDAD (AP) _ Iraq opened on Wednesday its fourth postwar bidding round for oil and natural gas exploration, with 39 foreign energy companies registered to compete for exploration rights in a dozen areas of the country.

The government is seeking foreign investment to build up an energy sector hit by years of neglect and violence. Iraq holds the world’s fourth largest oil reserves and oil revenues make up nearly 95 percent of the country’s budget.

In an opening speech, Iraqi Oil Minister Abdul-Karim Elaibi said exploration of the areas up for bidding will increase Iraq’s oil reserves and help the country enter the natural gas industry. He promised that his ministry will “spare no efforts to help and support the companies as partners to achieve the common interests.”

Still, conditions for bidders are less attractive than in the three previous rounds held since the 2003 overthrow of Saddam Hussein.

Only areas with undetermined hydrocarbon resources are on offer, while previously the rights to known big and medium oil and gas fields were being auctioned off. Operating costs for energy companies could be high because most of the 12 exploration blocks are in remote and unsafe areas and lack infrastructure.

The government also added a clause for the first time that prevents companies from signing deals with regional authorities without the approval of the central government in Baghdad. Companies that violate the clause will have their contracts terminated, said Sabah al-Saidi, the deputy head of the Oil Ministry’s Licensing and Petroleum Contracts department.

The new clause came in response to Exxon Mobil’s bold move last year to sign six deals with Iraq’s northern self-ruled Kurdish region without Baghdad’s approval. In return, Baghdad banned the Texas-based company from taking part in the current bidding, but kept a deal to develop the 8.6-billion-barrel West Qurna Phase One oil field in the south.

Wednesday’s auction started with no one bidding for an 8,000-square-kilometer (3,100-square-mile) block in northwestern Iraq with presumed natural gas fields.

Still, the current bidding round poses an opportunity for energy companies because the exploration blocks are in “fertile and easy-to-extract areas,” said Kuwait-based independent analyst Kamel al-Harami.

The Iraqi Oil Ministry approved 47 international energy companies to participate in two days of bidding on Wednesday and Thursday, but only 39 companies paid the participation fee.

Top among the approved companies are the Anglo-Dutch Royal Dutch Shell, UK’s BP, Chevron and Occidental of the U.S., China’s CNOOC and CNPC, Japan’s Japex, Russia’s Lukoil and others.

The blocks are expected to add about 29 trillion cubic feet of natural gas to the current 126.7 trillion cubic feet in reserves, and about 10 billion barrels of oil to the current proven 143.1 billion barrels of proven reserves.

Nearly 70 percent of them hold natural gas and the rest a combination of oil and gas.

Five of the blocks are in Iraq’s western Anbar province or shared between Anbar and neighboring provinces; two are in the northern Ninevah province; one is shared between central Diyala province and neighboring Wasit province while the rest are scattered throughout southern Iraq.

The bidders are vying for service contracts in which they will be paid a flat fee, rather than the more lucrative production-sharing contracts in which they receive a share of the hydrocarbons found.

Since 2008, Iraq has awarded 15 oil and gas deals to international energy companies, the first major investments in the country’s energy industry in more than three decades.

The goal was to boost daily production from about 3 million barrels now to 12 million barrels by 2017. But Iraq is mulling whether the target should be revised downward to fewer than 10 million barrels, considering a possible drop in demand on oil in the international market and infrastructure bottlenecks.

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