Martin Chulov, Baghdad
November 7, 2009 - 12:05AM
November 7, 2009 - 12:05AM
AMERICAN energy giant ExxonMobil and Europe-based Shell have won the right to develop one of the world's most prized untapped oil reserves.
The $US50 billion ($A55 billion) deal will place them among the largest players in postwar Iraq.
The energy companies were awarded the contract to extract oil from the West Qurna reservoir near Basra in Iraq's south in an extended tender process that has seen the Iraqi Government partner foreign companies in a bid to get its reserves of oil out of the ground as quickly and cheaply as possible. West Qurna was considered the jewel among the nine Iraqi oil and gas fields up for grabs, with verified reserves of 15 billion barrels and a strong chance that exploration will reveal significantly more.
Oil Minister Hussain Shahristani said the contract stipulated a $US25 billion investment and $US25 billion more in operating fees. It is expected to yield up to 100,000 jobs in the impoverished deep south of the country that has been heavily blighted by insurgency in the past five years.
''Iraq will get great benefits from developing the sector and providing services for the people,'' Mr Shahristani said in Baghdad. ''After decades of oppression and tyranny, Iraq is getting back its riches for this generation and for the next.''
ExxonMobil, the world's largest publicly traded oil company, has agreed to increase oil production from current levels of 270,000 barrels a day to 2.25 million barrels a day within seven years, after which a licence fee of $US1.90 a barrel will be paid by the Iraqi Government. In the opening round of oil contracts in July, BP and CNPC won the rights to develop the Rumaya oilfield, also near Basra. Oil is seen by most in the Government as Iraq's meal ticket.
Iraq has verified reserves of about 115 billion barrels, which are widely seen as enough to restart its brittle economy and potentially transform the services-deprived south and north of the country into economic strongholds.
But the country's oil infrastructure is about 50 years old and does not have the capacity to extract oil at sufficient daily levels to compete with neighbouring producers. The deals it is striking with foreign companies allows them to get the oil out of the ground and pays a licence fee once efficiencies are reached. However, Iraqi officials have been at pains to insist that they still control the country's oil sector.
ExxonMobil was awarded 80 per cent of the West Qurna contract, with Shell. A second licensing round in December puts contracts to develop up to five more fields up for grabs.