LONDON Jun 29, 2007 (Dow Jones Newswires)
Iraq's northern autonomous Kurdish government on Friday said it's planning to offer 40 new oil blocks to foreign companies in a sign that it said, reflects its confidence Iraq is close to reaching a final deal on the country's long-delayed hydrocarbons law.
"We wouldn't be announcing details of these blocks if we were not confident that things are moving ahead with the oil law in Baghdad," Kurdish Oil Minister Ashti Hawrami told Dow Jones Newswires by telephone from Erbil, the Kurdish capital.
"The time has come for Kurdistan to move forward with its oil plans," he said.
Baghdad and Erbil recently reached agreement on how Iraq's oil revenues will be shared and distributed, a key stumbling block, although other barriers remain to a final deal - which must be approved by Iraq's parliament - such as how much authority Iraq's national oil company will have.
Hawrami said the Kurdish oil blocks will be formally opened to competitive bidding once the Kurd's own petroleum law is approved by the Kurdish parliament. Hawrami said the parliament could meet in the next month or two to take up the Kurdish petroleum law.
The Kurds will hold conferences in the coming months in Erbil, London and possibly Houston to tell investors about the tendering of the oil blocks, some of which lie next to the Turkish and Iranian borders. Hawrami said priority in the awarding of blocks will be given to companies that can quickly organize themselves and start the oil exploration process.
The Kurds are targeting oil production from the Kurdish region of 200,000 barrels a day in 2008 and a lofty 1 million barrels a day in five years time. Iraq currently produces around 2 million barrels a day.
Hawrami said Baghdad and the Kurdish government were still in discussion over certain matters of Iraq's hydrocarbons law, such as how much of Iraq's oil reserves will go into the hands of the Iraq National Oil Company, or INOC, but said he was "confident these issues will be resolved soon."
"We are quite comfortable giving INOC as much oil as it can cope with, but we need a commitment in law that such authority abides by certain principles," Hawrami said. "We don't want oil blocks going undeveloped because they can't do the work," he said, declining to elaborate.
Baghdad has said it wants to give Iraq's new company INOC almost 93% of the country's proven petroleum reserves, which are among the biggest in the world.
Iraq and the U.S. hope the country's oil law, once approved, will provide a pathway toward Iraq's physical reconstruction and reconciliation between the country's warring factions.
While all major energy companies are eager to win exploration licenses in Iraq, nearly all have said they won't start any work on the ground until security improves. Erbil and Baghdad have made substantial progress on reaching agreements on other big elements of the draft law, like how oil revenues will be distributed, but lingering dissent over the oil law remains.
This week, the State Shura Council, which consists of Iraq's top judges, rejected some clauses in the draft oil and gas law and urged Iraq's Cabinet to amend provisions.
The council said the Cabinet did not provide them with models of contracts that were mentioned in the draft oil and gas law.
The Kurds already have five existing contracts with some relatively small foreign companies although none of those firms, which include Norway's DNO ASA (DNO.OS), is allowed to produce and export any oil commercially until Iraq's hydrocarbons law is in place.
Hawrami said he was confident the production-sharing contract model to be offered under the Kurdish petroleum law would meet international standards and comport with Iraq's hydrocarbons law.
Some of the terms of such contracts would include an initial exploration license term of five years, renewable on annual basis for up to seven years, 10% royalties on oil production, and cost recovery for producers of no more than 45% on oil projects and 60% for natural gas projects.
The Kurdish government's participation in projects with foreign companies can vary from 10% to 25%, according to the Kurdish draft law.
Copyright (c) 2007 Dow Jones & Company, Inc.
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