Iraq in deals to boost energy exploration

Iraq signed an initial deal with a Kuwait-led consortium Monday and a contract was awarded to a Russia-led group to drill for energy, part of Baghdad's efforts to strengthen its role as a major producer. The two deals are among four that are in the process of being finalised with international firms to boost already-plentiful oil reserves and increase production of much-needed gas to help fill the country's power shortfall. "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 on Sunday, and set to agree a preliminary contract with a consortium led by Lukoil on Tuesday. Monday's exploration contract was for a 900 square kilometre (350 square mile) 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 kilometre (3,000 square mile) block which lies across the western desert of Iraq's Muthanna and Najaf provinces and is believed to hold oil. The 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." He added: "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 labelled a failure by analysts as eight of the 12 blocks on offer received no bids whatsoever, including two that were offered twice. The Bashneft-Premier Oil deal, which was awarded after the auction closed, is the fourth such exploration contract awarded. The bid round, the fourth public auction of Iraqi energy contracts since mid-2009, came amid progress in ramping up oil exports, which account for the vast majority of government income, and as Baghdad eyes higher gas production to increase woefully inadequate electricity supplies. Iraq has proven reserves of 143.1 billion barrels of oil and 3.2 trillion cubic metres (111.9 trillion cubic feet) of gas, both of which are among the highest such deposits in the world.