Iraq signs $3.55 billion agreement with SK Corp.

South Korea's President Lee Myung-bak and visiting Iraqi President Jalal Talabani have signed a $3.55 billion reconstruction agreement, which also includes rights to develop Iraqi oil reserves.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 24 -- South Korea's President Lee Myung-bak and visiting Iraqi President Jalal Talabani have signed a $3.55 billion reconstruction agreement, which also includes rights to develop Iraqi oil reserves.

"With this agreement, our side can now acquire rights to develop oil reserves in Iraq's Basra region, where most Iraqi oil is produced," Lee's office said, adding that, in return, Seoul will help build infrastructure such as power plants.

"President Lee also requested that South Korean businesses be allowed to take part in Iraq's $550 million project to buy new generators and another project to design a new oil refinery, worth $84 million," the presidential office said.

The agreement apparently lifts SK Corp.'s blacklisting from the bidding for oil and gas assets in Iraq, which Baghdad had imposed as a result of SK's investments in the Kurdish region of northern Iraq.

Iraq banned exports of oil to SK Corp.'s subsidiary SK Energy in January 2008, calling illegal an agreement the company had signed with the Kurdish Regional Government to develop the Bazian oil field.

SK Energy resumed oil imports from Iraq in January 2009 and, according to industry observers, participated in the second prequalification screening on condition that it did not continue in the Kurdish oil exploration projects.

The decision to take SK Corp off the blacklist suggests that SK Energy will be able to apply for prequalification for Iraq's second licensing round, with results expected sometime in April.

In connection with the licensing round, Bechtel Corp., has been selected to carry out the site inspections of eight oil and gas fields put up for bidding to international companies by Iraq last June.

The inspections are necessary so that bidding companies can acquaint themselves with fields on the ground, their locations, and installations before bidding on them.

The San Francisco-based Bechtel will sell its findings to the international oil companies (IOCs) bidding for six of Iraq's oil producing fields and two untapped gas fields, according to a senior Iraqi oil official, who said that 16 companies have so far accepted Bechtel's offer.

Altogether, 38 IOCs have registered with the Iraqi oil ministry to bid on 16 oil and gas fields that Baghdad will auction Dec. 31.

The ministry stopped receiving qualification documents from companies as of the closing deadline on Feb. 15 and said it will announce a list of new qualified companies by the end of March.

Contact Eric Watkins at hippalus@yahoo.com.

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