LONDON, 24 August 2006 — The world’s top oil companies are maneuvering intently to win a stake in their oilfield of choice when Iraq finally opens to multibillion-dollar investment. From a safe distance, multinationals are poring over data from Iraq’s most promising oilfields and some of its older workhorses to gain the edge when the bidding begins.
Iraqi Oil Minister Hussain Al-Shahristani has signaled the race for oilfield deals worth $20 billion could start this autumn. But oilmen, noting a lack of security and investment law, are under no illusion that drilling is imminent. “We’ve been doing a lot of work behind the scenes and are ready to act quickly - but under the right conditions,” said a senior Western oil executive. “At this stage, there is an effective short list of key oilfields and players. It’s been a natural selection.”
Iraqi officials are at pains to insist their country’s oilfields, home to the world’s third largest reserves after Saudi Arabia and Iran, have not been assigned in advance. They want a transparent process where the best bid wins and are fully aware of the desire of the majors — Shell, Exxon Mobil, BP, Total and Chevron among them — for Iraq’s cheap and easy-to-produce oil. “Of course we know what they are interested in,” said a top Iraqi oil official. “The problem is when can it happen?”
Over the past three years, scores of firms have signed up for technical studies and training programs that grant them regular access to oil ministry officials outside Iraq, which is on the brink of civil war. Iraqi officials are using the experience to identify potential partners. A few have not passed muster.
“Those who’ve got acquainted with us will be in a much better position when we open up,” said the Iraqi official. The majors are scrutinizing data on some of the biggest gems in the south, vital to Iraq’s future oil wealth, and have made recommendations on production policy for certain fields.
Some have a wealth of information gathered when Iraq was under a decade of United Nations sanctions. Total was in line for Majnoon and Bin Umar, ENI and Repsol were interested in Nassiriyah and Shell was keen on Ratawi. Their spadework may give them an edge, but Iraqi oil officials say the final competition will be wide open.
When fully tapped, it is these southern fields as well as West Qurna and Halfaya that should boost production by 3 million barrels per day (bpd). Now relentless sabotage and mismanagement following decades of war and sanctions have left Iraq struggling to pump 2 million bpd after reaching close to 3 million bpd prior to the US-led invasion in March 2003. Multinationals are helping to trouble-shoot at the North and South Rumaila oilfields, as well as at other problem fields currently ensuring the country’s production and exports.
“The past three years have not been wasted,” said an executive at an oil major. “But we won’t put our money on the table and our people on the ground until we see more clarity on investment and a vast improvement in security.” Those scouring the globe for oil are willing to wait patiently for an opportunity in Iraq, home to 115 billion barrels of proven reserves. Each company is out for itself, but alliances are expected to emerge.
“Most likely there will be consortia chosen to take care of the big oilfields,” said Shamkhi Faraj, director general of Marketing and Economics.