Nippon Oil seeks $10-20 billion investment in Iraq

Nippon Oil Exploration is holding discussions with Iraq for investments totaling $10-20 billion that are to include exploration and construction of a 300,000 b/d refinery.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Dec. 5 -- Nippon Oil Exploration is holding discussions with Iraq for investments totaling $10-20 billion that are to include exploration and construction of a 300,000 b/d refinery.

"We submitted a proposal and still discussion is ongoing," said Ryunosuke Onogi, an executive and general manager at NOE, a subsidiary of the Nippon Oil group of companies.

Onogi said the refinery's construction would cost $5-10 billion, with the same amount going toward exploration.

Iraq last month approved the construction of two new refineries, with a total capacity of 300,000 b/d, and earlier approved plans for the construction of two other refineries, together totaling 450,000 b/d.

This week, Iraqi oil minister Hussan Al-Shahrastani expressed the need for assistance from foreign companies to help Iraq stop the decline in oil production at existing fields and to also help with new field developments.

Al-Shahrastani said the next 2 years will be crucial to rebuild the country's oil sector, with the government hoping to increase production to 4.5 million b/d by 2013 and to 6 million b/d by 2018 from the current 2.4 million b/d.

Turkey seeks role
The discussion between NOE and Baghdad follows recent efforts made by Turkey's state-owned Turkish Petroleum Corp. to form a consortium with Japanese firms aimed at bidding for contracts to develop Iraqi oil fields.

During a visit to Japan in October, TPAO Chairman Mehmet Uysal met with executives of several companies, namely Mitsubishi Corp., Inpex Corp., Nippon Oil, and Japan Petroleum Exploration Co., as well as government officials to discuss the possibility of joint development of Iraqi oil fields.

At the time, Uysal urged major Japanese companies, including Nippon Oil and Mitsubishi, to jointly develop the oil reserves of Iraq's Kurdish region, saying that, "There is a good possibility of discovering oil fields in northern Iraq."

Uysal's approach came after the Iraqi government presented details of six major oil fields and two big gas fields in Iraq to 35 international oil companies, among them Inpex, Japex, Mitsubishi, and Nippon Oil.

TPAO snubbed in London
TPAO was not among the companies invited to the Iraqi government's recent presentation in London about the oil and gas licensing round, even though Ankara has been prodding Baghdad to give TPAO a role in the Iraqi upstream sector.

As a result, TPAO is looking to enter Iraq via a partnership with one or more Japanese firms ahead of the bidding.

During his visit to Japan, Uysal expressed a sense of urgency also, telling Kyodo News that "We have to complete the consortium business, best before the end of 2008."

Uysal said he had received a "very positive" response from the Japanese side, and he expressed optimism that an agreement would soon be reached.

"I believe the next meeting (with the Japanese companies) will take place within about one month with a much more clear definition and terms of agreement," Uysal said.

"Partnership possibility with Japanese companies is very high," Uysal said, adding that "What I put on the table about adding value is not easily rejectable for the companies."

Uysal's lobbying of Japanese companies also came after an important meeting earlier in July between Iraqi Oil Minister Hussain Al Shahristani and Japanese Minister of Economy, Trade, and Industry Akira Amari.

At the time, the two men voiced concerns over global oil prices, and they agreed that their two countries would cooperate in a variety of measures aimed at reconstructing Iraq's oil and natural gas industry.

"The two countries confirmed that rebuilding the oil industry and increasing output are important for the stability of crude oil prices, and Japan is ready to fully cooperate to that end," Amari said after meeting with Al Shahristani (OGJ Online, July 10, 2008).

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