Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20
AMD is KILLING Intel as Ryzen Zen 3 Takes Gaming Crown, AMD Set to Achieve CPU Market Dominance - 13th Oct 20
Amazon Prime Day Real or Fake Sales to Get Rid of Dead Stock? - 13th Oct 20
Stock Market Short-term Top Expected - 13th Oct 20
Fun Stuff to Do with a Budgie or Parakeet, a Child's Best Pet Bird Friend - 13th Oct 20
Who Will Win the Race to Open a Casino in Japan? - 13th Oct 20
Fear Grips Stock Market Short-Sellers -- What to Make of It - 12th Oct 20
For Some Remote Workers, It Pays to Stay Home… If Home Stays Local - 12th Oct 20
A Big Move In Silver: Watch The Currency Markets - 12th Oct 20
Precious Metals and Commodities Comprehensive - 11th Oct 20
The Election Does Not Matter, Stick With Stock Winners Like Clean Energy - 11th Oct 20
Gold Stocks Are Cheap, But Not for Long - 11th Oct 20
Gold Miners Ready to Fall Further - 10th Oct 29
What Happens When the Stumble-Through Economy Stalls - 10th Oct 29
This Is What The Stock Market Is Saying About Trump’s Re-Election - 10th Oct 29
Here Is Everything You Must Know About Insolvency - 10th Oct 29
Sheffield Coronavirus Warning - UK Heading for Higher Covid-19 Infections than April Peak! - 10th Oct 29
Q2 Was Disastrous. But What’s Next for the US Economy – and Gold? - 9th Oct 20
Q4 Market Forecast: How to Invest in a World Awash in Debt - 9th Oct 20
A complete paradigm shift will make gold the generational trade - 9th Oct 20
Why You Should Look for Stocks Climbing Out of a “Big Base” - 9th Oct 20
UK Coronavirus Pandemic Wave 2 - Daily Covid-19 Positive Test Cases Forecast - 9th Oct 20
Ryzen ZEN 3: The Final Nail in Intel's Coffin! Cinebench Scores 5300x, 5600x, 5800x, 5900x 5950x - 9th Oct 20
How Soon Will We See Stock Market SPX 4000? - 8th Oct 20
Stock Market Spy ETF Testing March Price Peak – What Do the Charts Say? - 8th Oct 20
5 Consequences of US Debt at $50 Trillion - 8th Oct 20
Long Term Cycles Suggest Stock Price Reversion Pending & Gold Price About To Explode High - 8th Oct 20
AMD Zen 3 Ryzen 5000 Launch - Performance, Prices Skews, Cinebench r20 Scores, 5800x, 5900x, 5950x - 8th Oct 20
Gold vs. Silver – Absolutely No Comparison - 8th Oct 20
Gold: Why You Should Be Wary of the "Consensus" - 8th Oct 20
UK Covid-19 Hospital Admissions and Deaths Since Testing Positive in 28 days Analysis - 7th Oct 20
Amazon Prime Day 2020 Sales Top Tips of How To Get Big Savings! - 7th Oct 20
Want To Win Big In Forex Trading? Leverage Is Your Friend - 7th Oct 20
Why I am Voting for Donald J. Hitler - 6th Oct 20
Markets Chop & Grind: Gold, Stocks & Commodities - 6th Oct 20
Silver Price Great Buy Spot Ahead of Second Big Upleg - 6th Oct 20
Forget RTX 3080 Get Zen 3 Ryzen 5900x / 5950x - GPU vs CPU - PC Bottlenecking - 6th Oct 20
How to Get Budgies / Parakeets to Eat Vegetables for the First Time - 6th Oct 20
How to Pick a Reputable Double Glazing Window Company - 6th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Oil Companies that Won Iraq Crude Oil Bids

Commodities / Oil Companies Dec 16, 2009 - 06:48 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleJason Simpkins writes: Iraq has auctioned off more proven oil reserves in the past six months than are collectively held by the United States, Mexico, and the United Kingdom.

But U.S. oil companies have signed surprisingly few development contracts – foreign rivals have swooped in to scoop up major deals.


Take last weekend, when Iraq wrapped up the biggest oil-field auction in history. Major new deals were announced by Europe's Royal Dutch Shell PLC (NYSE: RDS.A , RDS.B), OAO Gazprom (OTC ADR: OGZPY), Lukoil (OTC ADR: LUKOY), China's China National Petroleum Corp. (CNPC), and Malaysia's Petroliam Nasional Berhad (Petronas).

The U.S. oil majors – ExxonMobil Corp. (NYSE: XOM), ConocoPhillips (NYSE: COP) and Chevron Corp. (NYSE: CVX) – were nowhere to be seen.

In fact, of the more than 40 companies to take part in the licensing round, only seven firms present at the auction were American and only one actually entered a bid.

"We haven't really seen U.S. companies, and that is because of intense competition," said Thamir Ghadhban, a prime ministerial adviser and former oil minister. "The issue is financial and technical and not at all political. This confirms Iraq can manage its oil policy and activities without politicization."

At a time when concerns about the long-term viability of the world's oil supplies have started to escalate, some industry observers had feared that the underlying goal of U.S.-led invasion of Iraq was to gain control of that Middle Eastern country's oil reserves. But Lukoil, Petronas, Shell, and Norway's Statoil Hydro ASA (ADR NUSE: STO) – not U.S. Big Oil – were the big winners when the bidding closed Saturday.

Lukoil and Statoil will redevelop West Qurna-2 for a production fee of $1.15 per barrel. That's significantly lower than the $1.90 a barrel the government sought in its June licensing round, which was the first since the 2003 U.S. invasion.

West Qurna-2 is believed to hold more than 12 billion barrels of oil reserves. At current rates of consumption, that's about how much oil the United States uses in a 600-day period.

"We are going to make a profit out of West Qurna Phase 2," said Torgeir Kydland, Statoil's senior vice president for international exploration and production in the Middle East. "We're glad we won the field."

Meanwhile, the rights to develop Majnoon, a similar-sized oil field, were awarded to Royal Dutch Shell and Petronas. Petronas, Malaysia's state-owned oil company, is headquartered in the world's tallest twin buildings, the Petronas Twin Towers in Kuala Lumpur. In addition to the Majnoon field, Petronas will be cooperating with other global oil companies on the Halfaya, Garraf, and Badra fields.

Malaysia isn't the only Asian player making a splash in Iraq's energy sector either. Petronas will join France's Total SA (NYSE ADR: TOT) and CNPC on the Halfaya field, which has proven reserves of 4.1 billion barrels.

CNPC in the first licensing round in June joined British oil giant BP PLC (NYSE ADR: BP) as the first companies to win an Iraqi oil contract in more than three decades. The two oil giants signed a deal giving them the rights to Iraq's Rumaila field, one of the nation's largest 17.7 billion barrels of proven reserves.

Under terms of the 20-year contract, BP and CNPC have six years to boost the field's production to 2.85 billion barrels per day (bpd).

Some analysts have suggested that Western oil majors have not been active in Iraq because they aren't satisfied with the terms being offered. That is, foreign oil majors will be paid a fixed fee per barrel of oil produced, as opposed to sharing in the profits of the oil's sale. And that fee will only be paid when the operated field reaches a production quota set by the government.

CNPC and BP, for instance, will be paid $2.00 for every barrel of oil they produce beyond current levels.

On the other hand, ConocoPhillips (NYSE: COP) reportedly wanted $26.70 per barrel to work the Bai Hassan oil field, but the Iraqi government only offered the company $4.00 per barrel.

Security is also an issue. Some Western oil companies are more reluctant to put their money, or their employees, in a politically volatile nation.

"Politics – international, domestic, ethnic and party-based – has dominated every aspect of discussions of Iraq's post-invasion oil development," the Middle East Economic Survey (MEES) said in its weekly newsletter. "Given the size of the potential revenues at stake this was probably inevitable. But in the end the oil development itself and by extension that of Iraq's economy, will probably suffer."

Ethnic feuds, political strife, underdeveloped infrastructure, and a lack of domestic support have left most Western oil majors "unimpressed" by the prospects awaiting them in Iraq, MEES said.

However, smaller oil companies in fast growing emerging markets aren't quite so particular. Many of them are state-owned – and thus influenced by government policy objectives – and they are running out of places to find accessible oil reserves.

Exploration costs have more than quadrupled since 2000, as oil producers have been forced to take on more complex projects, and the costs of both labor and materials have skyrocketed.

But for all its shortcomings, Iraq offers the world's third-largest oil reserves with about 115 billion barrels of black gold bubbling within its borders.

Additionally, many analysts believe Iraq will soon leapfrog Iran, which has about 137 billion barrels of proven reserves.

While the country boasts proven petroleum reserves of 115 billion barrels, the Energy Information Administration (EIA) estimates that up to 90% of the country remains unexplored. Only 2,000 wells have been drilled in Iraq, versus approximately 1 million in the state of Texas alone. Iraq could easily have another 100 billion barrels of oil buried beneath its uncharted territories.

Indeed, the nation that currently produces just 2.5 million barrels of oil a day hopes to be pumping 12 million barrels daily within the next few years, said Hussein al-Shaharistani, Iraq's oil minister.

After the recent bidding round, which Shahristani described as "very successful," the Iraqi oil minister underpinned his optimism by acknowledging his country would soon be willing to discuss compliance with the quotas set by the Organization of Petroleum Exporting Countries (OPEC).

Iraq, which is a member of the crude cartel, has been exempt from oil production quotas as it rebuilds its political and economic infrastructure. But as it takes its place back among the world's top oil producers, the country will have to make the transition back into OPEC compliance.

"Iraq is a very active member of OPEC," said Shahristani. "We will be coordinating with its effort to make sure Iraq and all other countries can maximize the revenues from oil sales."

Source: http://moneymorning.com/2009/12/16/iraq-oil-companies/

Money Morning/The Money Map Report

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules