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U.S. companies are eager to strengthen bilateral cooperation with Iraq in all industry sectors, especially in oil and gas, the Iraqi Ministry of Oil said on Thursday after U.S. Ambassador to Iraq, Douglas Silliman, met with Iraq Oil Minister Jabbar Al-Luiebi.
Al-Luiebi invited U.S. companies to take part in tenders called by the Iraqi oil ministry, and said that Iraq was preparing more favorable work conditions for foreign companies investing and doing business in Iraq.
The two U.S. supermajors, ExxonMobil and Chevron, already have operations in parts of Iraq. Exxon signed an agreement in 2010 with Iraq’s South Oil Company to redevelop and rehabilitate the West Qurna I oil field in southern Iraq. In 2013, Exxon signed agreements with PetroChina and Pertamina for participating interest in the West Qurna I project. In October 2011, Exxon signed six Production Sharing Contracts (PSCs) covering more than 848,000 acres in the Kurdistan Region of Iraq.
Chevron, on the other hand, has operations in the Kurdistan Region. Chevron operates and holds an 80-percent stake in the Sarta production-sharing contract (PSC) and the Qara Dagh PSC. The two blocks cover a combined area of 279,000 net acres.
Following the Kurdistan region’s independence referendum and Iraq’s federal government backlash against Kurdistan, Chevron temporarily suspended drilling in the region.
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In southern Iraq, Chevron is one of the major foreign companies—alongside France’s Total and Petrochina—that could form a consortium to take over the operation of the Majnoon field from Shell, which has said it wants out of the project. Currently, Shell is the operator and holder of 45 percent at Majnoon, with Malaysia’s Petronas owning 30 percent, and Iraq’s Missan Oil Company holding the remaining 25 percent.
At the end of December, Iraq said that it had formed a management team to take over operations from Shell after the Anglo-Dutch major exits the field by the end of June. Iraq wants to raise production at Majnoon from the current 235,000 bpd to around 400,000 bpd in the “coming years”.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
Iraq is coming out of a long and bitter set of wars starting with the 2003 US invasion and ending with the defeat of ISIS and finally the taking back of the Kirkuk oilfields from the Kurds. It is looking forward to some form of peace and rebuilding of the country. Good for oil majors.
What needs to be remembered is that Prime Minister Haider al-Abadi has quietly aligned Iraq with the emerging Levant from Iran to Lebanon, including Hezbollah. While PM al-Abadi, nor any of the other Levant leaders, have any sinister plans against Israel, none of them accept the country. With the US easily issuing new sanctions all the time, there are still risks involved,
Despite its long history as a producer, Iraq is largely untapped as far as oil development is concerned. Of more than eighty oilfields discovered in the country, only about twenty-one have been partially developed. Given this state of underdevelopment, it is realistic to assume that Iraq has probably 200 billion barrels (bb) of oil more than the 153 bb officially documented so far. These numbers make Iraq the fulcrum of any future equilibrium in the global oil market. Moreover, Iraqi oil production costs are the cheapest in the world at around $3-$4/barrel.
US oil companies could expand their current presence in Iraq by reaching an agreement with the Iraqi government to take over from the Shell oil company the development of the super-giant Majnoon oilfield in the south of the country with potential reserves of 17 bb.
With investment and technical assistance and also political stability, Iraq could raise its oil production from almost 5 million barrels a day (mbd) currently to 6-7 mbd by 2020/21.
The rewards for US oil companies and Iraq will be huge.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London