Iraq to Sweeten Contract Terms for 3 Gas Fields

ISTANBUL (Dow Jones Newswires), Aug. 2, 2010

Iraq must invest in natural gas processing and transport infrastructure before awarding contracts for three major gas fields, company executives said here on the sideline of a two-day Oil Ministry roadshow.

"The export term of the licensing auction is confusing," a company executive told Dow Jones Newswires.

Iraqi oil officials believe they are enticing companies by allowing them to export half of the produced gas, while participating firms view this as a "negative condition."

The huge amount of gas expected to be produced from these fields, estimated at 900 million cubic feet a day, may prove a major obstacle for the successful companies as Iraq lacks the infrastructure to treat, process, store, transport and export gas.

"We don't know which market we would export the gas to," another company executive said.

The three fields on offer are Akkas in Anbar province, which the Oil Ministry puts at 5.6 trillion-cubic feet; Mansouriya in Diyala with 4.5 trillion-cubic-feet of reserves; and Siba in Basra with 1.13 trillion-cubic-feet reserves.

Iraq currently produces only 1.65 billion cubic feet a day, of which some 700 million cubic feet is flared and the rest goes to meet domestic consumption.

Gas from Akkas can be exported through Syria, which is only 40 kilometers away, but Iraq hasn't built yet the infrastructure to facilitate this.

Siba is near Kuwait, which is currently importing more costly gas from global companies. Privately-held Kuwait Energy has been pre-qualified by the Iraqi Oil Ministry to take part in the bidding round, and many expect it to be interested in Siba.

Mansouriya would be used to meet local consumption, according to people familiar with the situation.

Copyright (c) 2010 Dow Jones & Company, Inc.


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