BAGHDAD: A group led by Royal Dutch Shell, Europe’s largest oil company, signed an initial deal on Sunday to develop the supergiant Majnoon oil field.
Shell, along with Malaysia’s state-run Petronas, won the rights in an energy auction earlier this month for the field, a major oil prize near Iraq’s southern oil hub of Basra.
Mounir Bouaziz, a senior Shell executive, and Abdul-Mahdy Al-Ameedi, deputy director of the Oil Ministry’s licensing office, signed the initial agreement in downtown Baghdad. It must now be sent to the Cabinet for approval.
Majnoon has reserves of 12.6 billion barrels, making it one of the world’s largest untapped oil fields.
Iraq is hoping a host of deals in the works will turn the country into a major global energy player and increase output capacity to 12 million barrels a day (bpd) in six or seven years.
Oil officials have been in a triumphant mood since the Dec.11-12 auction which awarded seven contracts to foreign firms.
For Majnoon, the Shell group proposed a per-barrel remuneration fee of $1.39 and pledged to increase output to 1.8 million bpd from a current production level of 45,900 bpd. Shell has a 60 percent stake in the consortium, while Petronas holds 40 percent.
Meanwhile, sitting comfortably on strong oil prices, OPEC crude producers are set to hold their output steady at their meeting in Angola on Tuesday while eyeing the rising prospects of Iraq, observers say.
The meeting of the Organization of Petroleum Exporting Countries caps a year of recovery for oil prices which have more than doubled since the cartel set strict quota cuts in the depths of the economic crisis 12 months ago.
Since December 2008 when oil had fallen from a peak of more than $147 per barrel to a low around $32, major economies have emerged from recession and the outlook for world oil demand has strengthened.
With OPEC members enjoying prices between $70 and $80 in recent months, they will now be looking ahead to the impact of Iraq’s developing oil industry on the broader market, as well as the longer-term effect of efforts to reduce carbon emissions to protect the world climate.
OPEC’s leading ministers have said they are happy with current prices and agreed that quotas should remain at their current level of 24.84 million bpd. “Inventories are coming down, the price is perfect, and all investors, consumers, producers are all very happy,” Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi said this month when prices were around $76.