SK to Proceed with Iraqi Oil Devt Deal Despite Minister's 'Ban'

SEOUL (Dow Jones Newswires), Apr. 3, 2009

South Korea expects a $3.55 billion oil development agreement signed with Iraq in February to proceed without a hitch despite the Iraqi oil minister saying that two Korean firms are banned from joining tenders in Iraq, an official at the Ministry of Knowledge Economy Friday.

A South Korean working-level delegation is slated to visit Baghdad early this month to discuss details of the bilateral agreement, said the official, who didn't want to be named.

"We expect to discuss the issue during the visit. For us, it will be difficult to exclude major local oil firms like KNOC in the latest oil development project in Iraq," said official. "If we explain that well, we expect the situation to improve."

Iraq's oil minister Hussein al-Shahristani told Korean ambassador Ha Tae-yun Thursday that state-run oil developer Korea National Oil Corp., or KNOC, and South Korea's top refiner by capacity SK Energy Co. aren't allowed to bid on tenders after agreeing to a $2.1 billion deal with Iraq's northern autonomous region in June, AFP reported.

SK Energy failed to qualify in the second round of oil bidding in Iraq, while KNOC couldn't participate in the bidding, company officials said Friday. A spokesman at SK Energy said the company wasn't informed why it failed to qualify.

SK Energy resumed oil imports from Iraq early this year after Iraq suspended its crude oil sales to the refiner a year ago when it signed, along with a consortium, a contract to develop the Bazian oil field in Kurdistan, which is locked in a struggle with Iraq's federal government in Baghdad for control of the autonomous region's massive oil resources.

Earlier this week, Iraq's Oil Ministry said it had selected nine out of 38 companies to compete in a second oil bidding round.

In February, South Korea and Iraq signed a memorandum of understanding on a $3.55 billion project to develop oil fields in Basra region. As part of the agreement, South Korean companies will build infrastructure, including a power plant, in Iraq. Details of the agreement haven't been decided yet.  

Copyright (c) 2009 Dow Jones & Company, Inc.


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