Iraq-Nippon Talks on Nassiriya Oil Field Deadlocked

(Dow Jones), Mar. 1, 2010

The Iraqi Oil Ministry has suspended talks with a consortium of Japanese companies led by Nippon Oil Corp. to develop the giant Nassiriya oil field and could hold a new licensing auction to upgrade the field, a senior Iraqi oil official said Monday.

"The talks reached a deadlock and we aren't going to meet again," Abdul Mahdy al-Ameedi, head of the ministry's petroleum Contracts and Licensing Directorate, told Dow Jones Newswires.

A Japanese consortium led by Nippon Oil Corp. and including energy producer Inpex Corp. and plant maker JGC Corp. (1605.TO) was in talks with Iraq for months. Last time they met was in January but they didn't reach an agreement.

Iraqi officials had previously said that the biggest hurdles for not reaching an agreement with the Japanese companies were how Iraq would pay back the costs the firms would incur for developing the field and also handling the security and safety of the companies' staff.

A decision hasn't been made yet on what to do with Nassiriya, in southern Iraq with estimated proven reserves of 5 billion barrels, but Ameedi said the ministry could hold a "special bidding round" for the field later this year when it would invite a number of international companies to submit bids including Nippon.

Ameedi also said that the field, which currently produces only 50,000 barrels, could be also developed by the ministry through national efforts.

Talks on Nassiriya, which ranks among Iraq's second largest oil fields, were held separately from two licensing auctions held last year which saw 10 oil fields awarded to international oil companies, including the majors such as Royal Dutch Shell PLC (RDSA), Exxon Mobil Corp. (XOM), Italy's ENI SpA (E) and Russia's second-largest firm in terms of production, Lukoil Holding (LKOH.RS).

Iraq aims from these deals to quadruple its current production of 2.5 million barrels a day in six to seven years from now.

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