Iraq seals $20 billion oil deal with Eni-led consortium

January 24, 2010

Iraq's state-owned oil companies South Oil Company (SOC) and Missan Oil Company (MOC) yesterday finalised a $20 billion contract with a consortium led by Italian energy giant Eni SpA with partners Occidental Petroleum Corporation (Oxy) of the US and Korea Gas Corporation (KOGAS) to develop the Zubair oil field near Basra in Iraq.

The deal is one of the several oil deals by Iraq, aiming to transform the war-torn nation into a major oil producer in the world. In October, BP and CNPC jointly signed a preliminary agreement with Iraq to develop the country's largest Rumaila oilfield. (See: CNPC-BP sign agreement to develop Iraq's Rumaila oilfield)

Rome-based Eni is the leader in Middle East region, engaged in exploration, drilling, and also engineering and construction activities. Los Angeles, California-based Oxy is an international oil and gas exploration and production company while Kogas is Korea's public natural gas company.

Under the deal, the syndicate plans to invest approximately $20 billion over a period of 20 years, and boost oil production from the Zubair field by 1 million barrels per day (bpd) to reach 1.2 million bpd from the current level of around 200,000 bpd.

The targeted production is to be achieved in the first 6 years and maintained for 7 years thereafter.

Eni holds 32.81 per cent stake in the venture while Oxy has 23.44 per cent, KOGAS 18.75 per cent and MOC 25 per cent.

The Eni-led consortium will earn $2 per barrel of incremental oil production once production has been increased by 10 per cent from the current level, and will recover its expenses through a cost recovery mechanism.

The partners of the consortium were pleased over the multi-billion contract which is expected to heighten the relationship between their nations and Iraq.

Eni's chief executive officer Paolo Scaroni said: ''The signing of the Zubair contract comes as a result of Eni's commitment to becoming a long-term partner for the development of Iraq's hydrocarbon industry. Our experience in similar environments, the financial and technological strength of our consortium and the deep knowledge of our partner SOC, undoubtedly constitute the building blocks of a successful venture."

Expressing his delight over the deal, Oxy chairman and chief executive officer Ray R. Irani said that his team is pleased to join the Iraqi government, the Iraqi people and the consortium partners in developing one of the world's great oil fields.

Choo Kangsoo, president and CEO of KOGAS commented: ''Through the development of Zubair project, KOGAS hopes to contribute more to the reconstruction and rehabilitation of Iraq and expects to play a bridge role in enhancing bilateral economic relationship between Iraq and Korea."

Zubair field is one of the world's largest discovered oil fields, which when fully developed will become a major contributor to shore up the Iraq's oil revenues, in addition to fostering social and economic development at the region and at national level.

The expansion project will be managed by the Zubair Field Operation Division which will be manned mainly by employees from SOC and expert support from the consortium, to finally transform it into a self-sustained organization.

Source: domain-b.com

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