Mar 05, 2007 (Dow Jones Newswires)
Iraq's draft hydrocarbon law, the centerpiece in the development of the country's shaky oil industry, details dozens of untouched oil fields loaded with proven reserves and scores of exploration blocks that may prove a magnet to international oil companies, according to a document seen by Dow Jones Newswires.
Development of the long-delayed draft law has suddenly picked up pace in recent weeks, with hopes that it may be approved by lawmakers later this month. It is expected to open the country's 115 billion barrels of proven oil reserves, the world's third largest, to foreign investors.
In the latest draft, the law lists some 51 oil fields in various parts of Iraq that are ready for development, and 65 exploration blocks.
The potential oil wealth of the country is broken down into four appendices.
The first details the 27 fields already in production, including the South and North Rumala fields and Majnoon in the south, which is in need of further development.
The second names 25 fallow oil fields with proven reserves positioned near those that already pump crude. On paper, they are the easiest to develop because of their proximity to existing infrastructure. They include Rattawi, Siba and Howzah in southern Iraq, Mansouriyia, Nahrawan and Himreen in the center and Ismail, Makhmour and Qarah Jwaq in the north.
An Iraqi oil expert familiar with the details of the draft law said the Iraqi National Oil Company, yet to be established, would control all the oil fields listed in these first two appendices. It can either develop the fallow fields itself or can negotiate with foreign companies to bring them on stream.
The third appendix lists 26 fields scattered across the country, which aren't close to producing fields, making them a costlier challenge to develop. They are found in the provinces of Muthanna, Anbar, Suleimaniya, Kirkuk and Najaf, among others.
Within this appendix, the Iraqi oil expert said the Kurdistan Regional Government can negotiate and sign preliminary contracts with foreign companies to develop oil fields located in its own territory, while the oil ministry in Baghdad does the same for fields elsewhere. These contracts will need to be approved by a federal oil and gas council.
The fourth names 65 blocks to be explored, with the majority in the Western Desert within the Sunni-held and strife-torn Anbar province northeast of Baghdad.
If the blocks are located within the three northern Kurdish provinces of Suleimaniya, Erbil and Dohuk, they would be controlled by the KRG, with Baghdad controlling the rest.
According to a cabinet document attached to the proposed law, Iraqi officials must first agree to the framework of contracts to be used when negotiating with foreign oil companies by March 15 if the country's draft hydrocarbons law is to be submitted to parliament for its approval.
Under the government of Saddam Hussein only four minor contracts were signed, but U.N. embargoes at the time prevented any work from starting.
The new draft law calls for reviewing and renegotiating these contracts. They include a contract signed by what is now Lukoil Holdings (LKOH.RS) in 1997 to develop the West Qurna oil field but subsequently canceled by Iraq. China National Petroleum Corp signed in the same year a contract to develop al-Ahdab field and Russia's Stroitransgaz won the right to explore for oil at blocks in Iraq's Western Desert.
The Kurdish government signed five contracts with foreign oil companies before 2005, including oil and gas companies such as Norway's Det Norske Oljeselskap (DNO.OS) and Canada's Addax Petroleum Corp. (AXC.T).
According to the new draft law these contracts would be reviewed by the Kurdish authorities and they need to be approved by an independent consultant appointed by the federal oil and gas council, to be established by the draft law.
Copyright (c) 2007 Dow Jones & Company, Inc.
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