subject: World Stage Next Stop For Iraqs Oil Industry [print this page] When coordinated bomb blasts killed more than 120 people in Baghdad in December, days before a scheduled auction of Iraqi oil field development rights, the carnage raised fears that major oil companies might be deterred from showing up for the bidding.
An earlier auction attempt, in June, the first since Iraq nationalized its oil production in 1972, had already fizzled when the majors balked at Iraq's tough bargaining stance. Yet, amid extraordinarily tight security, they did show up: and more important, they were in a mood to gamble. The two-day event turned into the biggest oil field auction in history.
"The terrorists tried to send a message to the oil companies through the bombings," the oil minister, Hussain al-Shahristani, declared on Iraqi television. "But this message was not delivered." After three decades of decline, sanctions and war, Iraq's oil industry now appears poised to recover its place among the world's leading producers - and perhaps even to challenge Saudi Arabia for the top spot by the end of the decade.
If all the companies participating in the industry's revival "are reasonably successful in delivering on the commitments we've made, it is quite likely we will see Iraq increase its production to around 10 million barrels per day within about 10 years," Tony Hayward, chief executive of BP, told the World Economic Forum at Davos, Switzerland, last month. Iraq now produces about 2.4 million barrels a day and ranks below the top dozen producers.
Saudi Arabia produced about 10.7 million barrels a day in 2008, but reduced output slightly in 2009. It has a capacity of about 12.5 million barrels a day, but could increase that to 15 million.
The Saudis, with 266 billion barrels in proven reserves, have far more oil than anyone. Iraq ranks fourth, behind Canada and Iran, with 115 billion proven barrels: but that figure dates from the 1970s. Most oil experts believe that, with new technology, it has a lot more oil to be found and that these reserves will not be particularly difficult to develop.
Royal Dutch Shell and the state-run company Petronas in Malaysia were among the biggest apparent winners. They will jointly develop the giant Majnoon field, with proven reserves of 12.5 billion barrels and are expected to increase daily output to 1.8 million barrels, from 46,000 barrels now. Lukoil, of Russia, and Statoil, of Norway, will develop the similarly sized West Qurna 2, with reserves of 13 billion barrels. Other companies that came away with major prizes included Gazprom, of Russia, China National Petroleum, Sonangol, of Angola, and Total, of France.
The successful bidders will sign service contracts that will pay them a fee ranging from $5.00 to $1.15 a barrel for each barrel they produce above an agreed minimum.
