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November 11, 2009

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Iraq backs deal with Europeans, Americans

IRAQ'S government yesterday announced it had approved a major oil deal with a consortium grouping United States and European oil giants Exxon Mobil Corp and Royal Dutch Shell Plc to develop a prized field in the country's south.

The two firms will develop the 8.6-billion-barrel West Qurna 1 field, where they plan to boost production nearly tenfold from 280,000 barrels per day to 2.325 million barrels within seven years.

They will receive US$1.90 per barrel produced.

The agreement marks the return of Exxon Mobil and Shell to oil-rich Iraq, which expelled the international majors after it nationalized the sector in the 1970s.

The Iraqi Oil Ministry is expected to finalize the 20-year service contract soon.

Prime Minister Nouri al-Maliki also said that his government was still discussing a second deal with a consortium led by Italy's Eni SpA to develop the 4.1-billion-barrel Zubair field. A decision on that deal is expected in coming weeks.

The Cabinet's approval of the Exxon-Shell deal comes a week after Baghdad finalized a contract with China National Petroleum Corp and Britain's BP Plc to develop the country's biggest field, the 17.8-billion-barrel giant at Rumaila in the south.

CNPC and BP will be paid US$2 per barrel produced to raise production from 1 million barrels a day to 2.85 million.

Iraq has the world's third-largest known oil reserves, and crude exports are its most important source of revenue. But Iraq's daily output is far below its potential.

The country's oil industry has been hampered by years of wars, crippling sanctions and sabotage by insurgents.


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