Iraq Oil Ministry: Shell, Iraq Gas JV to Produce 2 Bcfpd

- Iraq Oil Ministry: Shell, Iraq Gas JV to Produce 2 Bcfpd

Tuesday, August 16, 2011
Dow Jones Newswires
AMMAN
by Hassan Hafidh

Iraq's gas deal with Shell to capture and exploit associated gas from its giant southern oil fields is expected to produce two billion cubic feet a day, according to an official agreement summary obtained by Dow Jones Newswires Tuesday.

The Iraqi oil ministry signed in July a final draft deal with Shell and Japan's Mitsubishi to develop gas production in southern Iraq. However, in order to become valid the deal still needs approval from the Baghdad government.

The two sides disclosed few details about the agreement when they signed it in July.

The investment required for the 25-year venture--in which Baghdad has 51%, Shell 44% and Mitsubishi 5%--is $17.2 billion instead of the previously announced $12 billion, the document said.

It said some $12.8 billion would be spent on rehabilitation of existing infrastructure and building new ones, while an additional $4.4 billion is required for an liquefied natural gas facility to be built by Shell and Mitsubishi.

The joint venture, called the Basra Gas Company, or BGC, initially would deliver gas to Iraq's domestic market to fuel-starved Iraqi power plants, but would then export the extra gas after meeting local need. The planned LNG terminal would handle the export of 600 million cubic feet a day.

Baghdad needs to contribute $5.236 billion in the venture, some $1.524 billion of which is existing infrastructure. While Shell and Mitsubishi need to contribute nearly $7 billion, and the remaining money will be financed through the venture's returns, according to the summary submitted by Iraq's oil ministry to the country's parliament.

Shell and Mitsubishi are also offering an optional loan of $1 billion to the Iraqi side in the venture, it added.

The joint venture would sell produced gas to Iraq's state South Gas Company, or SGC, at international standard pricing. The crude and gas linked pricing formula in the agreement summary implies that, at Brent price of $75 a barrel, the BGC joint venture would get $3.22 per million British thermal units of dry gas sold to SGC.

But the SGC would have to sell the gas it buys back from the joint venture at just $1.04/mmbtu to Iraqi power plants and industry, meaning the SGC would pay huge subsidies, which would further increase if world's gas prices rise.

Iraq estimates, however, it should still make around $31.1 billion over the 25 years of the project from taxes, fees and the raw gas sales to the joint venture, the document said.

The BGC would use Shell technology to gather and process gas from the giant southern oil fields of Rumaila, West Qurna Phase 1 and Zubair.

Iraq, which has natural gas reserves totaling 112.6 trillion cubic feet, the tenth largest in the world, produces only around 1.5 billion cubic feet a day, with half of that amount is being flared daily, because of lack of infrastructure to produce and market the gas.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Iraq Oil Ministry Qualifies 41 International Firms for New Bid Round

- Iraq Oil Ministry Qualifies 41 International Firms for New Bid Round

Monday, August 08, 2011
Dow Jones Newswires
AMMAN
by Hassan Hafidh

The Iraqi oil ministry has qualified some 41 international companies to compete for 12 exploration blocks in the next bidding round which is scheduled to be held in January, the ministry said in statement Monday.

Iraq, which sits on the world's third largest oil reserves, has estimated that the new blocks would add some 10 billion barrels of oil to Iraq's current reserves of 143 billion barrels, and some 29 trillion cubic feet of gas to its current reserves of 112.6 trillion cubic feet.

Among the companies qualified by the ministry for the licensing auction are some of the world's oil majors such as BP, Shell, ExxonMobil, Lukoil, Total, China National Petroleum Corp., or CNPC, Eni, Occidental Petroleum Corp. (OXY) and Chevron.

The list also includes nine Japanese firms. They are, among others, INPEX, Japan Oil, Gas and Metals National Corp., or JOGMEC, Mitsui Oil Exploration Co. Ltd, JX Nippon Oil & Gas Exploration Corp., or JX-NOEX, Itochu, Mitsubishi, and Japan Petroleum exploration Co. Ltd, known as Japex.

Two Arab companies are listed by the ministry. They are Mubadala Oil & Gas of the United Arab Emirates, and Kuwait Energy of Kuwait.

The ministry said the chosen companies are among 50 firms who submitted applications and documents to take part in the bidding round, scheduled to be held in January next year.

Many of the listed companies have won deals to upgrade Iraq's vast oil and gas fields. Baghdad has held three bidding rounds in the past two years to auction off 15 of the country's most prized oil and gas fields.

Three of the announced blocks are located in the western Anbar province while two others are shared by the Anbar, Nineveh and Najaf governorates. The sixth is in Nineveh governorate in northern Iraq. These six are believed to contain gas resources, oil ministry officials said.

The remaining five blocks, believed to contain crude oil resources, are located in other governorates including Basra, Dhi Qar (Nassiriyah), Muthanna (Samawa), Babil, Najaf, Wasit and Diyala provinces, the officials said.

The size of the blocks range from 5,500 square kilometers to 9,000 square kilometers, they added.

Iraq needs to boost gas production and build more gas-fired power plants to increase its power output, currently at 6,500 megawatts, which represent less than half the country's needs.

Although international companies would prefer production-sharing contracts for exploration blocks, Iraqi oil officials said the deals would be based on a service contract, which means winning companies will be paid a flat fee for their services rather than be given a share in the resources. But it would be slightly different from the 20-year service contract offered in the previous three bidding rounds, they said.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Ahmadinejad Nominates Guards Commander for Oil Ministry

- Ahmadinejad Nominates Guards Commander for Oil Ministry

Wednesday, July 27, 2011
Knight Ridder/Tribune Business News
by Farshid Motahari, dpa, Berlin

Iranian President Mahmoud Ahmadinejad on Wednesday nominated a commander of the Revolutionary Guards to head the Oil Ministry, official news agency IRNA reported.

The minister-nominee Rostam Qassemi is on a United States and European Union list of people declared persona non-grata due to their alleged involvement in Iran's nuclear program.

For that reason it is unclear whether the nominee, if approved by parliament next week, would be allowed to attend meetings of the Organization of Petroleum Exporting Countries at its headquarters in Vienna.

Observers said that because Ahmadinejad predicted a parliamentary rejection of the current oil ministry caretaker Mohammad Aliabadi, he appointed an Revolutionary Guards commander to force approval by the lawmakers.

The Revolutionary Guards have become the main military force in the country and are involved in several economic projects such as oil, telecommunications and tourism.

Qassemi has also been involved in economic projects as head of the industrial unit of the Revolutionary Guards.

The Oil Ministry has been subject of a political quarrel between Ahmadinejad and his critics in parliament.

After firing his oil minister Massoud Mirkazemi in May, the president initially wanted to become Oil Ministry caretaker himself and later merge it with the Energy Ministry.

Ahmadinejad's plan failed after parliament rejected both the merger and him becoming caretaker.

Constitutional watchdog the Guardian Council rejected the plan as illegal and said Ahmadinejad could not run the Oil Ministry as caretaker.

Copyright (c) 2011, dpa, Berlin

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Sudan President Agreed to Keep Southerners at Oil Ministry

- Sudan President Agreed to Keep Southerners at Oil Ministry

Thursday, July 07, 2011
Knight Ridder/Tribune Business News

North Sudan president, Omer Al-Bashir, has agreed to retain South Sudanese employees at the country's federal ministry of petroleum for as long as the south's oil is being exported through the north, the country's federal minister of petroleum announced.

North and South Sudan have been evenly splitting proceeds of the country's oil wealth since 2005 when the two sides signed the Comprehensive Peace Agreement (CPA), ending nearly half a century of intermittent civil wars between them.

The South, whose oilfields produce most of the country's daily oil output of 500,000 barrels, is due to declare independence from the north on July 9 in line with the outcome of the CPA-mandated referendum on the region's independence which was held at the start of this year.

The north, however, owns the refinery and pipeline infrastructure necessary to transport the oil to export terminals, leaving the south with almost no other viable option but to maintain oil-cooperation with the north after independence.

Lual Achuek Deng, Sudan's federal minister of petroleum, announced that Al-Bashir had acquiesced to his request of exempting southern employees of the petroleum ministry from dismissal ahead of the south's independence.

Deng, who is a southerner and a member of South Sudan's ruling Sudan People's Liberation Movement (SPLM), broke the news during a farewell party organized for him by the ministry's staff on Tuesday.

According to the outgoing minister, Al-Bashir had agreed that southern employees in the ministry should keep their positions for as long as the south's oil is being exported through the north and until a new oil-sharing deal is reached.

North and South Sudan have been engaged in talks with sluggish progress to strike a new oil-sharing deal, but the two parties failed to seal a news deal and talks will continue after the declaration of South Sudan.

The new deal will substitute the current 50-50 split with an arrangement whereby the south pays fees for using the service of the north's pipeline and refineries.

Deng, who was appointed to his position in 2010, is currently embroiled in a public dispute with the SPLM's secretary-general Pagan Amum who accused him of selling and giving half of South Sudan's oil revenues for the month of July to North Sudan in violation of the CPA which ends the current 50-50 split when the south secedes on July 9.

The minister defended himself against Amum's accusations, saying the July sale was approved by South Sudan's president Salva Kiir.

Copyright (c) 2011, Sudan Tribune

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China Ministry Held First Shale Gas Block Auction Monday -Official

- China Ministry Held First Shale Gas Block Auction Monday -Official

Tuesday, June 28, 2011
Dow Jones Newswires
SHANGHAI
by Jing Yang

China's Ministry of Land and Resources held its first shale gas block auction Monday, a ministry official said Tuesday, marking a move to exploit on a large scale the new source of the cleaner-burning fuel.

There are serious concerns about contamination of ground water during hydraulic fracturing--known as fracking, the process by which shale gas is extracted from wells drilled deep into relatively impermeable rock beds--but the country's massive estimated reserves could help to slow its increasing reliance on imported energy.

The auction results will likely be announced in mid-July, and the firms that win blocks will be allowed to work with foreign companies, said the official, who didn't wish to be named.

PetroChina, China Petroleum & Chemical Corp., CNOOC, Shaanxi Yanchang Petroleum Group, China United Coal Bed Methane Co. and Henan Provincial Coal Seam Gas Development and Utilization Co. participated in the auction, the official told Dow Jones Newswires.

The auction covered four blocks in southwestern Guizhou province and Chongqing city, covering an area of 11,000 square kilometers, the state-controlled Xinhua News Agency said.

The ministry is expected to hold at least one more auction later this year, which could allow more companies, such as China Sinochem Group Corp. and China Zhenhua Oil Co., to participate.

Technical advances allowing the development of shale gas have transformed the U.S. energy sector in recent years, prompting a wave of merger-and-acquisition activity and sharply reducing reliance on gas imports.

Earlier this year, CNOOC Ltd. bought into several shale oil and gas leases in the U.S. owned by Chesapeake for $570 million in cash, following a similar deal in October.

The U.S. Energy Information Administration estimated in a report that China holds 1,275 trillion cubic feet of technically recoverable shale gas reserves, the largest in the world.

Beijing has invited U.S. and European companies into its tightly controlled onshore gas acreage in order to gain technical know-how.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Ahmadinejad to Run Oil Ministry Despite Legal Ban

- Ahmadinejad to Run Oil Ministry Despite Legal Ban

Monday, May 23, 2011
Knight Ridder/Tribune Business News
by Farshid Motahari, dpa, Berlin

Iranian President Mahmoud Ahmadinejad will run the Oil Ministry despite a legal ban, his legal deputy said Sunday.

Ahmadinejad last week dismissed oil minister Massoud Mirkazemi and took over the ministry himself, which would have also made him rotating chairman at June's OPEC meeting in Vienna.

But Iran's constitutional watchdog, the Guardian Council, rejected the plan as illegal and said that Ahmadinejad could not run the Oil Ministry as caretaker.

The president's legal deputy, Fatemeh Bodaghi, told ISNA news agency that the decision has already been made, as the Guardian Council could only decide on decisions to be made but not on those already been made. Therefore, Ahmadinejad would remain caretaker of the ministry, she said.

Ahmadinejad had argued that he planned to trim the cabinet, and one of his decisions was to abolish the Oil Ministry and merge it with the Energy Ministry. The plan led to wide-spread criticism in Parliament.

Ahmadinejad is involved in a row with Iran's clergy and conservative factions over his reform plans, which include reducing the cabinet from 21 to 17 ministries.

As caretaker of the Oil Ministry, Ahmadinejad would also chair the OPEC meeting next month in Vienna, where protests against the Iranian president are reportedly being planned.

Copyright (c) 2011, dpa, Berlin

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Iran Constitutional Watchdog Says President Cannot Run Oil Ministry

- Iran Constitutional Watchdog Says President Cannot Run Oil Ministry

Friday, May 20, 2011
Deutsche Presse-Agentur (dpa)

Iran's constitutional watchdog, the Guardian Council, has said that President Mahmoud Ahmadinejad cannot run the Oil Ministry as caretaker, the Fars news agency reported Friday.

Ahmadinejad last week dismissed his oil minister Massoud Mirkazemi and took over the ministry himself, which would have also made him rotating chairman at June's OPEC meeting in Vienna.

The president argued that he planned to trim the cabinet and one of his decisions was to abolish the Oil Ministry and merge it with the Energy Ministry.

The decision caused widespread criticism in Iran and eventually the Guardian Council, which overseas the compliance of governmental and parliamentary decisions with the constitution, rejected the plan as illegal.

Ahmadinejad is involved in a row with the country's clergy and conservative factions over his reform plans, which include reducing the cabinet from 21 ministries to 17.

But the main reason for the disputes is the president's s chief of staff, Esfandiar Rahim-Mashaei, whose daughter is married to Ahmadinejad's son.

Mashaei is said to oppose the clergy-dominated framework of the Islamic republic's establishment and favors of a more nationalist approach to running the country.

Ahmadinejad has also been criticized for having so far supported Mashaei and effectively joined him in undermining the Islamic system.

The president denied the accusation in a televised interview but observers believe that the crisis would continue as long as Mashaei acts as the president's close adviser.

Since the 1979 Islamic revolution, Iran has been ruled under the Vali Faqih system, in which one senior cleric at ayatollah level has, according to the constitution, the final say on all state affairs and can even veto decisions by the president.

The supreme leadership has been in the hands of Ayatollah Ali Khamenei since 1989. Ahmadinejad has been criticized by several some clergy for allegedly having disobeyed Khamenei's order over reinstating the country's intelligence chief who was fired by the president.


Copyright 2011 dpa Deutsche Presse-Agentur GmbH

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Iran's President to Be Caretaker of Oil Ministry

- Iran's President to Be Caretaker of Oil Ministry

Monday, May 16, 2011
Xinhua News Agency
by Xiong Tong

Iranian President Mahmoud Ahmadinejad said he will run Iran's Oil Ministry as a caretaker following his move to remove some ministers and to merge some ministries, the local satellite Press TV reported Monday.

"The Iranian government and Majlis (Parliament) have consensus on the Oil Ministry merger... I am the caretaker for the Oil Ministry," Ahmadinejad was quoted as saying.

Last Monday, the cabinet ministers announced Ahmadinejad government's downsizing plan to merge ministries of roads and transportation with housing and urban Development, energy with oil, industries and mines with commerce, and welfare and social security with labor and social affairs.

The decision to merge ministries was made based on a "legal duty" and "structural obligation," said the Iranian president on Sunday, according to Press TV.

In three separate decrees on Saturday, Ahmadinejad dismissed Welfare and Social Security Minister Sadeq Mahsouli, Minister of Industries and Mines Ali-Akbar Mehrabian and Oil Minister Masoud Mir-Kazemi from their posts, according to the 53rd article of the country's Fifth Five-Year Development Plan.

According to the plan, the Iranian government is obliged to reduce its ministries form 21 to 17 to officially improve the efficiency of state administration.


Copyright (c) 2011 Xinhua News Agency

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Iraq, Shell Resolve Last Obstacle to $12B Gas Deal -Official

Iraq, Shell Resolve Last Obstacle to $12B Gas Deal -Official

Tuesday, March 29, 2011
Dow Jones Newswires

by  Hassan Hafidh

 

The Iraqi Oil Ministry and Shell have removed the last obstacle preventing them from signing a long-awaited $12 billion joint-venture deal, a senior Iraqi oil official said Tuesday.

The main dispute was over the rights of export. Shell, along with its partner Japan's Mitsubishi, wanted to handle exports, while under current Iraqi hydrocarbon laws the Iraqi State Oil Marketing Organization should do so.

"The issue is nearly resolved," Ali H. Khudhier, head of the state-run South Gas Company told Dow Jones Newswires in an interview in his office in Zubair, south of Basra.

"Shell wanted to handle exports, but now it is agreed that SOMO would handle export," he said. Shell, however, has asked for further discussions as it needs to install an export mechanism, he said.

Last week, the energy committee at the Iraqi council of ministers asked the Oil Ministry to review the Shell draft deal which aims to capture and exploit millions of cubic feet a day of gas flared from four super-giant oil fields near Basra.

The gas project is crucial to Baghdad's ambitious oil expansion that will also boost much-needed power generation in Iraq.

"Once the energy committee approves the recent changes, we need to sit with Shell to adjust these changes in the draft contract," Khudhier said. He preferred not to give a specific date for signing the deal, but he said it could happen in a matter of weeks.

The joint venture--Basrah Gas Co, or BGC--will process associated gas produced from three supergiant Iraqi fields--Rumaila, West Qurna 1 and Zubair--all located in Basra. The three fields are being developed by international oil companies.

"We are expecting these three fields to produce up to 3 billion cubic feet a day in the coming six to seven years," Khudhier said.

In total, the three fields are currently producing some 1.05 billion cubic feet a day, but only 450 million cubic feet a day are utilized while the rest is flared, he said.

The project is vital to Shell's strategy of positioning itself as a leading gas supplier and producer in the Middle East. After domestic needs are met, an LNG terminal will be built in the Gulf to handle the export of 600 million cubic feet a day.

"The extra gas will be exported to East Asia and Gulf states including Kuwait and the United Arab Emirates," Khudhier said.
He also said Iraq could revive a disused pipeline to export gas to Kuwait. "If the Kuwaitis want to import gas from us, we are ready to supply them," he said. Iraq used to export an average of 200 million cubic feet a day gas to neighboring Kuwait, but sales were suspended when Iraq invaded its neighbor in 1990.

Iraq is home to 126 trillion cubic feet of gas, but produces only around 1.5 billion cubic feet a day--of which 700 million cubic feet a day are burned for lack of infrastructure.