| 2007: Oil companies mapping strategies for dynamic Iraqi situation |
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August 13, 2007 International oil companies have been waiting patiently for the new Iraq oil law to be enacted and they now believe that there could be progress when parliament resumes next month. At the same time, the deadline nears for the US military commander in Iraq to report on the country's political progress. These two events are forcing oil giants to forge alliances to develop the country's prized fields. The US has been pushing Iraq to speed up passage of the oil law and other legislation, seen as vital to curbing sectarian violence in the country. The Iraq goverment approved the draft law but it also needs to be passed by the parliament. "With the oil law potentially around the corner, the sense among big oil companies is they have to do something," said one oil company executive in an interview for Reuters. "Although the reality with the security situation is that they can't do anything on the ground." Oil companies have been manoeuvring for years to win stakes in Iraq's oilfields. Iraq has the world's third-largest oil reserves, and companies hope the new law will allow them a rare opportunity for access to the Middle East's energy resources. Russia's Lukoil is counting on government pressure to revive a US$4 billion Saddam-era deal to develop the huge West Qurna oilfield. Moscow was expected to press for a bigger role in Iraq's oil industry in return for writing off US$10 billion of debt during a visit by Iraq's Oil Minister Hussain Al Shahristani. US major ConocoPhillips, which has a 20% stake in Lukoil, has said it wants to be an active partner in West Qurna if security and legal conditions allow. Other companies have forged partnerships in the race for Iraqi oil, including US major Chevron and French energy company Total. For Total, teaming up with Chevron allays concerns it will be at a disadvantage if US companies get preferential treatment at the negotiation table, oil industry sources said. Chevron benefits from Total's knowledge of the huge Majnoon and Bin Umar fields. Total had negotiating rights for those fields under Saddam. Royal Dutch Shell is working together with Australia's BHP Billiton on studies for the Missan area. Shell was also working on a master plan for development of Iraq's gas reserves with Japan's Mitsubishi. Other alliances were likely to form, and buyouts of smaller companies already operating in Iraq were also possible once the security situation improved, industry sources said. "It's a dynamic situation," said another oil company executive to Reuters. "Most companies are keeping their powder dry regarding partnerships. What if you pick the wrong one? Some companies may be positioning to buy others or sign deals once things change in the south." Dozens of companies looking for future contracts have signed memorandums of understanding with Iraq since the US led invasion in March 2003, providing field studies, technical assistance and training for Iraqi officials. The Kurdish region's parliament passed its own legislation earlier this week. "This might provide the extra push to get things moving in the central government,"said Colin Lothian, senior analyst for the Middle East at global consultancy Wood Mackenzie. The Kurds have clashed with Baghdad on the content of the federal law, although the region's government says its own law is in line with the emerging federal legislation. Regardless of whether the federal law passes, the KRG would likely sign new deals over the next few months, Lothian said. The region's top energy official Ashti Hawrami has said he intends to award contracts for all its oil and gas exploration blocks by the end of this year. Hawrami has targeted output of one million barrels per day (bpd) within five years, from around 200,000 bpd. Iraq's total output is stuck at around two million bpd after decades of wars, sanctions and underinvestment. Source: Iraq updates |