A fire erupted Dec. 7 on the pipeline carrying oil from the Kirkuk fields to the Baiji refinery north of Baghdad. The state-run Northern Oil Company said the reason was unclear. In September, the pipeline burst in a suspected bomb attack. (Gulf News via Iraq Updates [2], Dec. 7) There have been 576 pipeline attacks in Iraq since March 2003, along with 69 attacks on refineries, 508 attacks on tanker trucks, six on maritime tankers and one on a train tanker car. At least 635 oil workers have been attacked—killed, wounded, kidnapped or subject to an attempted kidnapped. At least 1,211 workers in Iraq's power sector have also been targeted, and there have been 651 attacks on distribution and transmission lines and towers, 66 attacks on thermal power stations and five on hydroelectric power stations and 13 on power substations. Iraq's northern pipeline has been the major target. It was built with a total capacity of around 1.7 million barrels per day, but frequent attacks since the war have kept is largely out of commission. Recent repairs and a new security plan have allowed it to resume working, part of the reason Iraq has increased production from a little more than 2 million bpd to nearly 2.4 million. (UPI [3], Dec. 6)
Corporate scramble
UPI energy editor Ben Lando writes on his Iraq Oil Report [4] blog that that "Big Oil's big dreams are close to coming true as Iraq's Oil Ministry prepares deals for the country's largest oil fields with terms that aren't necessarily what companies were hoping for but considered a foot in the door of the world's most promising oil sector."
With proven oil reserves second only to those in Saudi Arabia and Iran—but only about 30% explored—Iraq produces about 2.4 million barrels per day. This is a recent increase from the 2 million bpd post-invasion average, but far below what its reserves could accommodate.
Negotiations between the ministry and international oil majors are being kept quiet, though media are picking up on pieces of deal-making. With the new oil law stalled, the national government is for now relying on a Saddam-era law, while the Kurdish region is signing deals on its own.
MarketWatch reports executives from BP and Shell were to meet with Oil Minister Hussain al-Shahristani following the recent OPEC meeting in Abu Dhabi [5]. The global energy information firm Platts reports meetings between top ministry and company officials are slated for Amman.
Shahristani himself told UPI he's moving forward with oil deals despite the lack of a new national oil law. "This has nothing to do with the national oil law. There is no timeline. Whenever we finish our discussions we'll just sign the contracts," he told UPI on the sidelines of the OPEC heads of state summit last month.
"This is basically technical-support contracts," he said, adding the contracts will not be the result of a bidding process. "Selected companies will offer us technical support that we need to develop our producing fields."
Develop producing fields? "Yes, only."
With the companies who are helping to, who have been studying them, who have been doing this work? "Yes. Exactly. That's right."
How many fields? "We will not be announcing anything until we sign the contracts."
Super giants? "They are the super giants, yes."
The "super giant" fields are those with at least 5 billion barrels in reserves, including the Kirkuk, Majnoon, Rumaila North and South, West Qurna and Zubair fields. Reserves of the Nahr Umr and East Baghdad fields may also reach 5 billion barrels, and there are many large producing fields rumored to be on the negotiating table.
Former top officials of the companies were tasked by the US-led occupation with advising Iraq's post-Saddam Oil Ministry—and their efforts may now be bearing fruit. "This means that it is pay-off time for the majors that have been running training courses for Oil Ministry personnel, reservoir surveys, drawn up work-plans and given general advice during the past years," said Samuel Ciszuk, Middle East energy analyst for Global Insight. "It is clever."
UPI reports that Shell, which produced a technical study of Kirkuk in 2005, is now seeking a deal for the field. BP is seeking one for Rumaila, which it studied last year. Shell and BHP Billiton are angling for the Missan field in the south. ExxonMobil is interested in the southern Zubair field while the Sabha and Luhais fields are being targeted by Dome and Anadarko Petroleum.
ConocoPhillips is talking with the ministry about the West Qurna oil field, officials with Russian major Lukoil told Dow Jones Newswires. Lukoil, of which Conoco is a 20 percent shareholder, had a deal with Saddam Hussein for West Qurna in the 1990s, but it was cancelled prior to the war.
Chevron and Total have teamed up in a bid for the Majnoon field.
The Kurdish question
Less than 1 percent of Iraq's proven reserves are within the area controlled by the Kurdistan Regional Government, but recent explorations have the KRG excited with prospects. Bolstered by contempt for central control and the political deadlock in Baghdad, the KRG has passed its own regional oil law [6] and signed more than 20 exploration and production deals with international oil firms.
Shahristani calls the KRG deals "illegal." None of the major companies has signed with the KRG, fearing being blacklisted by Baghdad from the rest of Iraq's oil. Oil Minister Hussain al-Shahristani and KRG Natural Resources Minister Ashti Hawrami have both been called to an emergency session of parliament [7] to address the dilemma.
Towards de-nationalization
Iraq's oil sector was fully nationalized in 1972 , with control of the industry concentrated in the hands of the Iraqi National Oil Company, whose functions have now been assumed by the Oil Ministry. The Northern Oil Company (NOC) and Southern Oil Company (SOC), initially established as autonomous companies under INOC, continue to function as independent entities overseen by the Ministry. (See "Major Oil Companies Operating in the Gulf Region," Petroleum Archives Project [8])
The Ministry can sign "service contract" deals on its own, but "risk contracts"—for actual concessions or production-sharing, such as those now being offered by the KRG—would require parliamentary approval under the Saddam-era law.
Supporters of the nationalized structure in Iraq are led by the powerful oil unions, and are against risk contracts.
Hassan Jumaa Awad, president of the Iraqi Federation of Oil Unions, told UPI in London that service contracts bringing new technology and training will suffice—but the oil itself must remain under state control. "National expertise and resources," he said, "are capable of enhancing production in the oil industry." (UPI [9], Dec. 6)
See our last posts on Iraq [10] and the oil scramble [11].
