Tuesday, December 28, 2010

Iraq Lauds Licensing Auction After Awarding Three Fields

by Hassan Hafidh, The Wall Street Journal (WSJ) , October 20, 2010
The Iraq Oil Ministry Wednesday touted the results of its natural gas licensing round, after it named winning bidders for three natural gas projects. ...

The three natural gas fields—Akkas, Siba and Mansouriya—were won by energy consortia led by respectively, Korea Gas Corp., or KOGAS, Kuwait Energy and Turkish Petroleum International Co., or TPAO.

The Iraqi natural gas bidding, however, didn't draw anywhere near the same fierce competition as the two previous petroleum rounds held ... last year. ...

Some 13 international companies registered for the auction including Russia's TNK-BP, Italy's Eni and Norway's Statoil, but only five submitted bids.

The three fields have estimated combined proven reserves of 11.2 trillion cubic feet, about 10% of Iraq's total 112 trillion cubic feet of proven natural gas reserves. [See my remarks, below - D.R.]

Gas fields are less sought-after than oil fields because the process of gas extracting is more difficult, with crude being easier to market and transport, according to petroleum industry analysts.

KOGAS and [Kazakhstan's] KazMunaiGas, who bid against a consortium of Total SA and TPAO, set a remuneration fee of $5.50 a barrel of oil equivalent for Akkas and proposed a production plateau target of 400 million standard cubic feet a day [MMSCFD]. South Korea's government said total investment in the project would reach $4.4 billion.

Kuwait Energy in partner with TPAO proposed a remuneration fee of $7.50 a barrel of oil equivalent for Siba and its plateau output target was 100 million cubic feet a day of gas. TPAO said the group would invest $1 billion in the project.

TPAO and its partner Kuwait Energy [and KOGAS - D.R.] also won the Mansouriya gas field with estimated proven reserves of 4.5 trillion cubic feet after the group agreed to lower its fee. ...

Siba project is the first large Kuwaiti investment in Iraq after the two Arab countries became enemies following Saddam Hussein's invasion of the tiny emirate in 1990. "We hope that our work (in Siba field) will help to bring the Iraqi-Kuwaiti relationship back to where it used to be," said Mansour Aboukhamseen, chairman of Kuwait Energy.

Iraq, which this month raised its figure for proven oil reserves by nearly a quarter to 143.1 billion barrels [See Platts article in this blog, here]—the world's third largest, aims to use its three fields to fuel its power stations, generating much needed electricity.

The prime minister's adviser, Thamer Al- Ghadhban, said on the sideline of the auction, that his country wouldn't rule out exporting gas once domestic needs, which he put at 5 billion cubic feet a day, were met. ...

(See the two previous licensing rounds: David Rachovich, Iraq's Oil Sector: Present, Past and Future, pp. 26, 39-40, 41, here. For gas exports see, idem, pp. 24-25. Akkas, discovered in the western Anbar province in 1998, holds 5.6 trillion cubic feet of gas and has six wells. Mansuriya, discovered in the eastern Diyala district in 1979, potentially holds 4.5 trillion cubic feet of gas and has four wells, while Siba, found in 1968/1969 in Basra, has 1.1 trillion cubic feet of gas and three wells. All three fields are non-associated gas fields. Akkas and Mansuriya were among the fields offered in the first international bidding round last year. No investors bid for Mansuriya then, and the oil ministry rejected the sole offer for Akkas made by a group of five companies led by Italy’s Edison SpA. Baghdad initially included Siba in the second round then withdrew it because the oil ministry decided that “Siba was small enough for Iraq to develop on its own.” Iraq's third bid round, held on October 20, 2010 attracted mainly smaller oil companies. A relative lack of interest on the part of the majors reflects reluctance to invest in riskier Iraqi gas when a world is awash in natural gas, as well as other concerns. - D.R. See also "Iraq's Anbar Authorities OK Kogas Group To Upgrade Akkas Field," Dow Jones Newswires, December 27, 2010, here. - D.R.)

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