UPDATE: Shell In Talks With Iraq Over Kirkuk Field – Sources
October 16 2009 - 12:03PM
Dow Jones News
Royal Dutch Shell PLC (RDSA) is renegotiating with Iraq about
the Kirkuk oil field, one of Iraq's largest oil producing areas,
after it didn't win access to the field in the country's first
licensing auction held in Baghdad in June, company sources and
Iraqi oil officials said Friday.
"Shell has held talks with the Oil Ministry on Kirkuk recently
and both will meet again soon," one company source said.
Shell didn't accept the Iraqi Oil Ministry payment fees of $2 a
barrel in June's auction. It wanted $7.89 payment fee for each
extra produced barrel.
Shell has asked the Ministry to raise the per barrel fee, Iraqi
oil officials said.
The Oil Ministry needs to get the approval of the Iraqi prime
minister to allow such increase, they said.
The Shell-led consortium, which included China's CNPC and
Sinopec (SHI) and Turkey's TAPO, offered to raise output to 825,000
barrels a day against Iraq's minimum 600,000 barrels a day. Sinopec
is now blacklisted by the Oil Ministry because it bought Addax'
share in a Kurdish oil field in northern Iraq. Baghdad doesn’t
recognize the contracts signed by the Kurds with international
companies.
Kirkuk is among eight fields on offer in Iraq's first post-war
licensing round, when the only award was to BP PLC (BP) and CNPC
for Rumaila.
Companies returned to the negotiating table after contract
terms, especially regarding Iraq's 35% tax rate, were clarified, an
Iraqi oil official said. They were also encouraged by BP's
expectations of a 15%-20% investment return on Rumaila and hope the
two neighboring fields will generate the same profits.
Iraq Tuesday awarded Zubair oil field to Italy's Eni SpA (E) and
is on the verge of awarding a contract for West Qurna-1 after
investors caved in on the Oil Ministry’s payment demands. Both
fields were listed in the country's first bidding round.
Lukoil Holdings (LKOH.RS) and ConocoPhillips (COP) are competing
against ExxonMobil Corp (XOM) and Shell to win West Qurna-1.
Both have agreed to the ministry’s payment fee of $1.90 a
barrel, but each had in June different proposals for production
increase. Lukoil proposed to increase production to 1.5 million
barrels a day from around 260,000 barrels a day, while Shell
proposed to increase to around 2.3 million barrels a day.
Iraq is planning a second bidding round in December when it
would auction 10 groups of giant oil and gas fields.
Iraqi oil officials said crude oil production could reach 7
million barrels a day in six years. Iraq is currently producing
around 2.4 million barrels a day.
-By Hassan Hafidh, Dow Jones Newswires; + 962 799 831831;
hassan.hafidh@dowjones