Exxon Consortium OKs Iraq Contract Changes

(THE WALL STREET JOURNAL via Dow Jones), Jan. 19, 2010

A consortium led by Exxon Mobil Corp. and Royal Dutch Shell PLC accepted contract amendments made by the Iraqi government to develop an oil field in southern Iraq, a senior Ministry of Oil official said.

"They have accepted the changes, and we are finalizing the deal with them on Jan. 25," Abdul Mahdy al-Ameedi, head of the Oil Ministry's Petroleum Contracts and Licensing Directorate, said Monday.

Exxon Mobil and Shell won the right to develop the the West Qurna Phase 1 oil field following the country's first postwar round of oil bidding in June 2009. The field holds 8.7 billion barrels in proven oil reserves.

The Exxon-Shell consortium signed the deal in November but was awaiting final approval from the Iraqi government.

The government proposed amendments to all the contracts recently awarded to foreign oil companies, though Iraqi oil officials declined to speak about the changes. However, an oil-industry executive said one amendment gives the government the right to change production levels in order to comply with quotas that the Organization of Petroleum Exporting Countries might impose on Iraq.

Exxon Mobil and its partner will be paid $1.90 for each extra barrel of oil the companies extract on top of current production at the field. They pledged to increase output to 2.325 million barrels a day from 279,000 barrels a day. Exxon Mobil has 80% of the venture, with Shell holding the remaining 20%.

Iraq on Monday also finalized a deal with Malaysia's Petroliam Nasional Bhd., known as Petronas, and Japan Petroleum Exploration Co. to develop the smaller Garraf oil field in southern Iraq. Petronas and Shell on Sunday finalized a deal to develop the giant 12.8-billion-barrel Majnoon oil field.

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