Iraq to allow higher stakes for IOC's in drilling projects

In an effort to attract investment, Iraq has reversed earlier plans and will let international oil companies hold as much as 75% stakes in oil drilling projects.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 20 -- In an effort to attract investment, Iraq has reversed earlier plans and will let international oil companies hold as much as 75% stakes in oil drilling projects.

"There is no option for us but to do that in order to attract [IOCs] to start developing these fields," said an official of the Iraqi oil ministry, marking a change in plans unveiled last October.

At the time, government plans for the country's first oil licensing round since the end of the US-led war in 2003 would have allowed IOCs' minority stakes of up to 49% in any joint-venture with the government.

However, even under the new dispensation, IOCs still will not be allowed to book oil reserves—a sign the government intends to reserve close control over the nation's oil and gas.

The change of policy came after a 3-day meeting last week in Istanbul between Iraq oil ministry officials and executives of 32 IOCs, among them Chevron Corp., Royal Dutch Shell PLC, and BP PLC.

The meeting came amid Iraqi government hopes of having several agreements with IOCs in place by June for the development of six oil fields and two gas fields, with work to start by yearend.

The policy reversal also coincided with an announcement by Norway's DNO that it is preparing for increased production as tie-in operations near completion on the link between Tawke oil field, in Iraq's Kurdistan region, and the country's northern pipeline system.

"As a result of the good progress made on the Tawke development during 2008, we are now preparing for increased production at low cost from a substantial reserve base, without further investments," said DNO managing director Helge Eide.

The Kurdistan Regional Government (KRG), following talks with the Iraqi oil ministry last year, informed DNO that oil exports from Tawke oil field could begin during the first quarter.

That decision also represented a change of policy by Baghdad, which previously had said contracts awarded by KRG without federal government approval were illegal.

DNO holds a 55% stake in Tawke field in a production-sharing agreement with KRG.

Contact Eric Watkins at hippalus@yahoo.com.

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