The first post-war contract to study Iraq's oilfields is due to be awarded next month, as Iraq's oil wealth tempts foreign firms to bid for relatively small deals on offer despite the country's political turmoil.
Iraq's oil ministry will at the end of September award a contract to study Iraq's Kirkuk and Rumaila fields, which account for most of the country's exports, said reservoir and field development chief Hazem Sultan on Tuesday.
Around a dozen companies, including oil majors Royal Dutch/Shell and BP, have bid for the tender, which was by invitation only. "We are making progress towards awarding the tender at the end of next month," Sultan said.
While not the major oilfield development deals they long for, the modest contracts on offer will mark Iraq's first agreements struck with foreign oil firms by the post-Saddam Hussein government.
The reservoir study will measure the recovery potential of the two fields, which have reserves of over 10 billion barrels each, and compare it with present production, which has been in decline for years.
A deal could also give multinational companies an advantage in Iraq, which has the biggest oil reserves after Saudi Arabia and Iran, if conditions improve and an elected government offers large oil fields for development.
Iraq's persistent post-war unrest has prevented much progress in developing its energy industry, and full oilfield development deals are not expected before 2006. Iraqi officials ultimately hope to double oil production capacity to six million barrels per day (bpd).
Decades of economic sanctions and wars have prevented Iraq from assessing its oilfields using modern techniques such as three-dimensional seismic mapping. Wells and surface facilities also need overhaul.
By the end of November, engineering and supply contracts - worth about $500 million in total - to rehabilitate three oilfields will be awarded, said Ahmed Shamma, the oil ministry's head of projects.
"Such arrangements will help foreign companies overcome fears about security in Iraq," he said.
The fields up for tender are the one billion barrel Khurmala Dome in the north, the 2.2 billion barrel southern Suba-Luhais and the smaller northern Himrin field, which is not developed.
The tenders have been delayed many times, but officials say they are confident the process is coming to a conclusion. The study will take up to two years and cost several million dollars.
The projects include rehabilitating flow lines, building gas separation stations and measures to stop water emerging from wells with oil. The ministry's digging division will dig new wells, Shamma said.
The overhaul project would raise Khurmala Dome's output by 25 percent to 100,000 barrels per day (bpd) and Suba-Luhais from 100,000 bpd to 180,000 bpd, he added.
Production from these projects would offset the natural declines in Iraq's big oilfields, he said. Iraq produces around 2.4 million barrels per day, compared to 2.8 million bpd before the US invasion.
Among the bidders for the projects are Ireland's Petrel, Dome, a UAE company, and EverAsia from Turkey, according to people familiar with the tenders.
Royal Dutch/Shell said it had turned down the chance to win the Khurmala Dome contract, saying the terms on offer were not good enough. Shamma said the contract was simply too small for Shell, which usually goes for bigger fields.
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