Business

Iraq signs pipeline deal

Wednesday, October 24, 2012    

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BAGHDAD — Iraq inked a multi-million dollar deal with South Korea's KOGAS that will set in motion the building of two key gas pipelines in the country's north — the latest step by Baghdad to develop dilapidated infrastructure to meet growing energy needs.

The US$127.5-million ($11.5-billion) deal stipulates that state-run KOGAS would construct two 110 kilometre- (68 mile-) long pipelines to link oil-rich city of Kirkuk and the industrial city of Beiji to transport liquid and dry natural gas. The lines are to be completed by September 2014.

KOGAS has played a major role in Iraq's energy sector. It is developing a promising western gas field near the Syrian border and it is teaming up with Turkey's TPAO and Kuwait Energy to develop another gas field in eastern Iraq.

Since 2008, Iraq has awarded 15 oil and gas deals, but developers have been complaining about infrastructure bottlenecks due to decades of war, sanctions and insurgent attacks.

Iraq is now producing about 3.4 million barrels a day, up from nearly 2.4 million a day in 2009, and its daily exports averaged 2.6 million barrels a day last month. It plans to raise production to between five to six million barrels per day in 2015 and between nine to 10 million barrels per day by 2020, a level that could be sustained for 20 years.

The signing in Baghdad came as Iraq's oil shipments from the country's main oil export terminals on the Persian Gulf restarted after being halted earlier in the week due to bad weather.

Deputy Oil Minister Ahmed al-Shamaa said the shipments resumed but didn't say how much oil was being shipped. Before the stoppage on Sunday, oil exports averaged 2.3 million barrels a day.

Asked about recent media reports that the US oil giant Exxon Mobil Corp. plans to pull out of its deal to develop the 8.6 billion barrels West Qurna Phase 1 in the southern province of Basra, al-Shamaa said the ministry has no knowledge about any such plan and that the company has not informed the government of such a plan.

Exxon has irked Iraq's central government when it bypassed Baghdad and signed late last year oil deals with the northern self-ruled Kurdish region to search for oil in six areas there. Baghdad and the Iraqi Kurds are at loggerheads over the right to develop natural resources, with the government maintaining that deals signed unilaterally by Iraqi Kurds with oil companies are illegal. The Iraqi Kurdish authorities argue that the constitution allows them to do so.

Exxon has not commented on the possibility that it might leave West Qurna. It declined to comment again yesterday when contacted by The Associated Press.

In another development, Iraq's Oil Ministry invited international oil and refinery companies to bid for developing the 4.4-billion-barrel Nasiriyah field in southern Iraq and for the construction of a 300,000-barrel per day refinery nearby.

The field is located in Thi Qar province, about 320 kilometres (200 miles) south of Baghdad.

The deadline for interested companies to submit their documents is December 13. The companies that qualify will be announced at the end of January 2013 and the deal is to be awarded by the end of next year.

Iraq sits atop of 143.1 billion barrels of proven oil reserves. Oil exports make up nearly 95 per cent of the budget.

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