BP-Led Consortium Wins Iraq Oil Deal

(AP)  The Iraqi government has approved a deal with a consortium led by British giant BP PLC to develop a prized oil field in the south in a major step forward for the country's oil industry.

BP, which was booted from the country in 1972 when Saddam Hussein nationalized the oil industry, and its partner CNPC of China were the only winners in Iraq's first international oil auction in over 30 years for development rights for the 17.8 billion barrel Rumaila field.

Out of two gas fields and six oil fields offered in the June 30 bidding round, the Rumaila contract was the only success story. Most oil companies rejected the prices Iraq was willing to pay, striking a major blow to Iraq's hopes for an oil-revenue fueled postwar recovery.

Although Iraq sits on the world's third-largest oil reserve, with at least 115 billion barrels, the country is producing and exporting far below its potential because of decades of war, lack of investment, U.N. sanctions, a brain drain and insurgent attacks. The government has been trying to entice foreign investment to boost output.

Government spokesman Ali al-Dabbagh told The Associated Press Saturday that the Cabinet approved the deal late Friday after it was signed initially on Oct. 8 by the Oil Ministry. He did not provide further details.

The BP-CNPC consortium had bid to take $3.99 per barrel produced, but later slashed their price to the $2 per barrel payment sought by the Oil Ministry. They were competing with a consortium led by U.S. giant Exxon Mobil, which refused to amend its offer of $4.80 per barrel.

Daily production from the Rumaila field stands at about 1 million barrels a day, almost half of Iraq's daily output of 2.4 million barrels. BP's targeted production is 2.85 million barrels per day.

BP will hold a 38 percent stake in the venture, while CNPC will have a 37 percent share. Iraq's State Oil Marketing Organization will control the rest.

The latest deal is the second secured by CNPC in postwar Iraq. Last year, CNPC signed a $3 billion deal to develop the al-Ahdab oil field in the south - a deal first signed in 1997 under Saddam and then revived.

But the deal approved Friday marks the return of BP to Iraq after the 1972 oil nationalization pushed out Western oil companies. BP has a long history in Iraq. The company was a shareholder in the Iraqi Petroleum Company when it started drilling Iraq's first oil well at Baba Gurgur just north of the oil-rich province of Kirkuk in June 1927.

BP had a representative office there for many years until Saddam invaded Kuwait in 1990 and they closed their office. It has been a regular buyer, directly or indirectly, of Iraqi crude for many years. In the last few years, BP has worked with the government to provide assistance on reservoir management to help bolster production.

The news comes as a number of consortiums who offered bids during the first round agreed to lower their terms.

Last Tuesday, Oil Minister Hussain al-Shahristani said the ministry was revisiting its first bidding round after three international oil consortiums accepted Iraq's terms for developing two fields and submitted revised offers.

A consortium led by Italy's Eni has agreed to develop the country's 4.1 billion barrel Zubair oil field for $2 per barrel produced based on a target production level of 1.125 million barrels per day, al-Shahristai said.

Two other consortiums, one led by Russia's Lukoil and ConocoPhilips, and another by Exxon Mobil with Royal Dutch Shell, are competing to develop the 8.6 billion barrel West Qurna Stage 1 oil field for $1.9 per barrel, he added.

The Lukoil-led consortium's targeted production is 1.5 million barrels a day, while the other consortium's targeted production is 2.1 million barrels a day, he said.

Eni had previously bid $4.8 per barrel to develop the field, while the Lukoil consortium submitted an earlier bid of $6.49 per barrel and the Exxon Mobil-led consortium was asking for $4 per barrel.

Zubair is currently producing about 230,000 barrels per day, while West Qurna Stage 1 is producing about 280,000 barrels a day.

Al-Shahristani said that the three fields' combined output would exceed 6 million barrels a day in six years with a total direct investment from these firms expected to be about $100 billion.

The two deals could be signed within the coming two weeks.

The overall fall of oil prices since last year has forced the government to slash spending plans for this year from $79 billion to $58.6 billion. The oil sector represents about 65 percent of gross domestic product and its revenues account for 95 percent of Iraq's earnings.

Iraq is offering 10 oil projects in its second bidding round, which is planned to be finalized in mid-December. Forty-five international oil companies will take part.
By Associated Press Writer Sinan Salaheddin

[worldunite10]

The world runs on power and money. If you follow this axiom you will find the truth. Most everything else is propaganda.

[nycsense]

Anyone who still thinks that we went into Iraq to "free the Iraqi people from the tyranny of Saddam Hussein" is seriously naive, or has had their head up their arse for the past 8-9 years. I don't think that its a conspiracy since the acts of the previous administration were so blatantly criminal and unconstitutional that it fails to be a conspiracy altogether.

[skepticalJM]

By the way, why did the price of Oil in America go through the roof right after Katrina, and never go down even though the effects of Katrina and the price of Oil per barrel went back to pre-Katrina levels?
Conspiracy?

No, the real cause of the recession -- Oil profits.

[lmartink]

A year ago, the huge spike in prices was caused by oil speculators. These were people who live near you, but in very upscale houses, on huge country estates, who do not have jobs, but who do have huge yachts, and jet airplanes. They deliberately bid the prices sky high. And they made tremendous profits off of people like you and me.

Another big factor, is that we are in a phenomenon known as "Peak Oil". It's not that we are running out of oil, but global demand is beginning to outstrip the supply. This means the price of oil could fluctuate wildly, up one year, down the next, but with the overall trend upwards. Job exports have created millions of jobs overseas, at the expense of weakening our economy. All of those folks in India, and China want their own cars and high-energy use lifestyles.

And even if we exploited every source of domestic oil we have to maximum production, we cannot produce more than 5-6% of the oil we use everyday. And if you watch the Oil Industry's ads with their lies and propaganda, that is your guarantee that American oil will be very, very expensive, and never cheap again.

The cheap-energy party in this country is over. It's over. And it is very important for this country to embrace the Alternative Energies, and say goodbye to countries like Venezuela, Russia, Iraq, Iran, Nigeria, and Saudi Arabia. And that is to say nothing of the incredibly high costs to our environment.

Our situation is frightening.

[sjc_1]

Our trade imbalance went from $100 billion per year to $700 billion per year under Bush, mostly from the run up in the price of oil. Sure we still have Chinese junk at Wal-Mart and Japanese cars, but by far most of it was oil to the tune of $500 billion per year with a declining dollar. Add speculation and futures options, increased demand in India and China, to make a volatile brew from here on out.

[skepticalJM]

Now, finally we see the real reason for the Gulf War emerge!!!

OIL!

Enough is never enough!
Now we see who the real enemies of humanity are!

[sjc_1]

But Dick Cheney told everyone on TV that it was "not about oil", so that is that. The VP from Halliburton has spoken and all the people can believe every word he says.

[sjc_1]

We spend $1 trillion and way too many lives in Iraq and China gets the oil. Well, there you have it folks. This is not the only deal, Exxon and Chevron got their slice too. The deal was for the world's oil companies to get the oil and Iraq gets put on an allowance. The deal of the century.

[lmartink]

And don't forget that Bush put all of the costs on a credit card. That way we can fight wars on credit, and make easy monthly payments.

[culturechang]

Well the families of dead military service personnel should now be happy that thier sacrafice provided this for BP.

[reality42]

USSA should never have invaded Iraq--enough said

[fedup12]

He who has the most oil wins.

[1badgirl]

it was bout oil. stopping the flow of it so the prices would hit 120 a
bbl
follow the money.Saudi money

[fedup12]

Again America is left out in the cold... Brute force didnt work under W Bush, and now it appears Diplomacy is not working under Obama.

America loses---- end of story.

[wyodutch]

BP likewise has a long history in Iran.
.
back in 1952 when their Democratically elected Prime Minister had the unmitigated gall to believe that the Iranian people, rather than British petroleum should benefit from Iranian oil... British and American operatives engineered the overthrow of the Iranian government... the installation of the Shah as our puppet and of course... the re-entry of British Petroleum as the chief parasite of Iranian oil.
.
And the rest... as they say... is history.

[fedup12]

BP likewise has a long history in Iran.
by wyodutch October 17, 2009 11:28 AM EDT
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I may be dense but isnt this story about Iraq?

[stuart-johns2]

by fedup12 October 17, 2009 11:32 AM EDT

Yeah....lol.... just goes to show that wyodutch has no clue.