Baghdad inks exploration deal with Turkey despite new row

BAGHDAD - Agence France-Presse

The Iraqi government is struggling to boost the country’s fuel production capacity with international cooperation in oil search and developing its old technology facilities. REUTERS photo

Iraq signed an initial deal with a Turkey-Kuwait consortium and awarded another contract to a Russia-led group to drill for oil and natural gas yesterday as part of Baghdad’s efforts to strengthen its role a major energy producer.

The deal comes amid fresh tension between Turkey and Iraq over Turkish Tüparş’s making direct purchases of crude from the Kurdistan Regional Government (KRG) despite strong opposition from the central Iraqi government.

The two deals are among four that are in the process of being finalized with international firms to boost Iraq’s already-plentiful oil reserves and increase production of much-needed gas to help fill the country’s power shortfall.

Lukoil deal on the pipeline
“The representatives of the consortium of three companies have signed the initial contract with the Iraqi oil ministry,” spokesman Assem Jihad said, referring to the group made up of Kuwait Energy, Dubai-based Dragon Oil and Turkey’s TPAO. The preliminary deal was the second in as many days, with Baghdad having inked another initial deal with Pakistan Petroleum over the weekend, and set to agree a preliminary contract with a consortium led by Lukoil today. Yesterday’s contract was for a 900-square kilometer block in the southern province of Basra thought to contain oil, with the three companies agreeing to a remuneration fee of $6.24 per barrel of oil equivalent eventually extracted.

Jihad added that Russia’s Bashneft and Britain’s Premier Oil had joined together to explore an 8,000-square kilometer block which lies across the western desert of Iraq’s Muthanna and Najaf provinces and is believed to hold oil. That consortium will be paid $5 per barrel of oil equivalent extracted. A consortium including Bashneft had originally bid $9.85 per barrel during the May 30-31 auction.

“A few days after the bid round, Bashneft agreed to the price set by the Oil Ministry for Block 12,” Jihad said. “Premier Oil joined them with a 30 percent stake in a consortium. … We will set a time to sign an initial contract, and then it will be transferred to the Cabinet to be approved.”

The May auction, which ended with three blocks awarded to foreign firms, was labeled a failure by analysts as eight of the 12 blocks on offer received no bids.

The latest deal is the second warm step in Baghdad-Ankara ties in one week, as Turkey unveiled plans on July 10 for a technical investigation in Iraqi leading up to negotiations on a Basra-Kirkuk pipeline project agreement, which aims to boost Iraqi fuel exports to Turkey via the existing Kirkuk-Yumurtalık line. Last week, however, Iraqi officials declared Turkey’s oil purchases from Arbil illegal. Turkey has played down Iraq’s objections, with Energy Minister Taner Yıldız saying there had been no violation of the law.