A sign showing the price of a gallon of gas is seen in front of a Shell gas station in La Jolla, California on June 11, 2008. Oil traded as high as $138.30 a barrel today on the New York Mercantile Exchange before closing at $136.38. The high price of oil, which reaches as much as $139.00 a barrel last week, has put a strain on the economy affecting food, consumer goods and travel. (UPI Photo/Kevin Dietsch) |
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BAGHDAD, Oct. 14 (UPI) -- The Iraqi Oil Ministry says it's near to finalizing a $12 billion natural gas contract with Royal Dutch Shell as Baghdad prepares to auction three major gas fields in its accelerating drive to become one of the world's top energy producers.
Oil Minister Hussein al-Shahristani said Wednesday in Vienna, where he was attending a meeting of the Organization of Petroleum Exporting Countries, that the Cabinet was ready to sign the deal as soon as the ministry submits the paperwork.
Under the deal, Shell will have a 44 percent stake in the joint venture with Mitsubishi Corp. of Japan holding 5 percent, ministry officials say. Their Iraqi partner, the Iraqi South Gas Co., will hold a controlling 55 percent.
Baghdad has seen its oil production steadily improve since foreign companies secured 20-year production contracts in two auctions in 2009.
Now it wants to repeat that process for natural gas, which Baghdad is pushing to develop to provide fuel to generate electricity and for export, particularly to the European Union, which wants to reduce its dependence on Russian gas.
Al-Shahristani said that 13 foreign companies, most of which qualified for the two rounds of auctions for 10 of Iraq's major oil fields in 2009, have tendered bids for the Oct. 20 gas field auction.
It has been delayed twice, apparently because the companies didn't find the terms favorable enough. The companies involved reportedly include Total of France, TNK-BP Holding of Russia, Kogas of South Korea and Eni of Italy.
The ministry is reported to have made its conditions more attractive by scrapping "signature bonus" payments amounting to several hundred million dollars by those companies who secured deals in earlier auctions.
On offer next week are the Akkas, Mansouriya and Siba fields, which hold combined reserves estimated at 11.23 trillion cubic feet of gas.
Akkas, in Anbar province near the Syrian border in the northeast, holds an estimated 5.6 trillion cubic feet of gas.
Mansouriya, with reserves of 4.5 trillion cubic feet, is in the violence-plagued province of Diyala north of Baghdad. It could become a problem if the insurgency flares again because of the political upheaval that has gripped Iraq since a stalemated parliamentary election in March.
Siba, the smallest of three with 1.1 trillion cubic feet of reserves, is in Basra province in the southeast.
Iraq has an estimated 111 trillion cubic feet of natural gas but industry analysts say that much more is likely to lie in desposits that have never been fully explored or exploited.
Only 20 percent of Iraq's oil fields have been developed so far but the foreign companies are expected to open new reserves.
Earlier this month, Baghdad raised its oil reserves from 115 billion barrels to 143 billion. That was an increase of 24 percent, the first declared for two decades.
That made Iraq's reserves of conventional, recoverable oil the third largest in the world after Saudi Arabia and Venezuela. It also catapulted Iraq past its age-old adversary and neighbor Iran.
Not to be outdone, Tehran announced Monday that the Islamic republic's oil reserves had risen by 9 percent to 150.31 billion barrels. Iranian Oil Minister Masoud Mirkazemi declared that figure "will definitely go up" by the end of the Iranian year in March 2011.
In the natural gas sector, an even smaller percentage of Iraq's reserves have been developed.
The infrastructure is so neglected from decades of war and political upheaval that large amounts of gas produced in the oil fields are flared off rather than being stored or utilized through domestic consumption. That means an estimated $70 million a year in revenue is literally going up in smoke.
Baghdad clearly plans to change that. It appears ready to play a key role in the Nabucco pipeline project that will carry natural gas 2,000 miles from the Caspian Sea basin through Turkey to Austria to feed energy-hungry Europe and break Russia's stranglehold.
The European Union signed a memorandum for a strategic energy partnership with Iraq in Baghdad in January. European energy experts believe Iraq could provide between 5 billion and 10 billion cubic meters of gas a year.
Iraqi Prime Minister Nouri al-Maliki announced in July 2009 that Iraq could provide up to 15 bcmy by 2015. That's half the pipeline's planned capacity.
