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November 6, 2009

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Exxon, Shell seal US$50b Iraqi oil deal

A consortium grouping United States and European oil giants Exxon Mobil Corp and Royal Dutch Shell Plc yesterday signed a US$50-billion deal to develop one of Iraq's most prized oil fields, as the OPEC nation looks to revamp its battered energy sector.

The deal to develop the 8.6-billion-barrel West Qurna Stage 1 field is the third such agreement in less than a week between a foreign oil consortium and Iraq, which sorely needs foreign company expertise and funding to revive an oil sector hammered by years of neglect, sanctions and, most recently sabotage.

"I am very happy today with this achievement," Iraqi Oil Minister Hussain al-Shahristani said during the signing ceremony yesterday in Baghdad, the Iraqi capital. "Iraq is now on its way to develop its oil industry."

Under the terms of the 20-year contract, the two companies are targeting a more than sevenfold increase in output in seven years - from the current 280,000 barrels per day to 2.325 million bpd, al-Shahristani said, providing a revised production target that is up from the earlier 2.1 million bpd figure.

The companies will receive US$1.90 for every barrel produced, and the contract could be extended for another five years. The agreement must now be submitted to Iraq's Cabinet for final approval.

Al-Shahristani said the companies' total investment in the field, which sits near the southern city of Basra, will be US$50 billion, divided evenly between direct investments and operational costs.

Although Iraq sits on the world's third-largest oil reserve, with at least 115 billion barrels, the country is producing and exporting far below its potential. Daily production has ranged between 2.3 million and 2.4 million barrels, with exports at slightly less than 2 million bpd.


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