Iraq awards three gas fields in effort to become major exporter

The Iraqi government, aiming to boost the country’s role in natural gas production, hailed the results of its licensing round after naming winners for the three projects offered.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Oct. 20 -- The Iraqi government, aiming to boost the country’s role in natural gas production, hailed the results of its licensing round after naming winners for the three projects offered.

Thamer al-Ghadhban, the top energy advisor to Iraq's Prime Minister Nouri al-Maliki, said the auction of three gas fields—Akkas, Siba, and Mansuriya—“went very well and we are happy about its results.”

According to oil ministry spokesman Assim Jihad, the auction aims “to increase gas production to supply local needs, generate electricity, fuel factories and place Iraq among the regional and international gas producers and exporters.”

The three fields, which have combined proved reserves of 11.2 tcf of gas, were won by energy consortia led by Korea Gas Corp. (Kogas), Kuwait Energy, and Turkish Petroleum International Co. (TPAO).

The Akkas contract was awarded at $5.50/boe to an alliance of Kogas and Kazmunaigaz Exploration Production, the upstream arm of Kazakhstan's state oil and gas firm. Akkaz lies in Anbar province just west of Baghdad and holds reserves of 5.6 tcf.

Siba, which lies near the border with Kuwait, was awarded to Kuwait Energy alongside TPAO with a bid of $7.50/boe. Siba, the smallest field up for auction, has reserves of 1.13 tcf.

Mansuriya attracted a bid of $7/boe from TPAO, which will work alongside Kuwait Energy and Kogas. Mansuriya field lies in Diyala province, northeast of Baghdad, and has 4.5 tcf of reserves.

A victory for Iraq
Baghdad-based analyst Ruba Husari said the outcome had been a victory for Iraq. She said the agreements mean that Iraq will produce an additional 22.9 million cu m/year of gas in 6 years.

According to Husari, Iraq's current gas production—all of it associated gas from oil wells—is 1.5 million cu m/day, with half of it burned off in flares from oil wells.

However, IHS Global Insight analyst Samuel Ciszuk demurred from that view, saying that the result was less than Iraq had hoped for.

“The consortia winning have significantly less international experience, oil and gas industry experience and technology experience than the Iraqis would have hoped for, Ciszuk said, adding, “The Iraqis have been trying to get the supermajors and the very big midsize countries to be here.”

Caution may have been the watch-word with some of those firms. Of the three gas fields awarded, two in particular, Akkaz and Mansuriyah, lie in provinces where insurgent violence has run high. Neither field received any bid in a previous auction round on June 30.

Oil Minister Hussain Shahristani implicitly recognized the insurgent problem by warning residents of the provinces not to interfere with the development of the gas fields.

“Gas is the sole ownership of the Iraqi people” and “to all the provinces…no individual or party are authorized to claim they are entitled to this wealth,” Shahristani said before the auction.

“The government will be very strong and severely punish everyone who hinders development of these contracts,” Shahristani said.

Contact Eric Watkins at hippalus@yahoo.com.

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