UPDATE: Iraq Initially Inks Deal With Kuwait Energy-Led Group - Official

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By Hassan Hafidh

Iraq's oil ministry Monday initialed a deal with Kuwait Energy-led group to explore for gas and oil at an exploration block in southern Iraq, an Iraqi Oil Ministry official said.

If the contract is given final approval, the consortium will have a five-year exploration phase to determine the oil prospects of block 9, which spans 900 square kilometers in Basra province. If block 9 is found to be commercial during this phase, the consortium may apply to the Iraqi government to continue developing the block over a 20-year period.

The initial contract was signed in Baghdad Monday by head of the Petroleum Contracts and Licensing Directorate at the Iraqi Oil ministry Abdul Mahdy al-Ameedi and a senior executive for Kuwait Energy.

The contract, however, is pending the approval of the government, the official said.

Kuwait Energy and its partners state-owned Turkish Petroleum Corp., or TPAO, and United Arab Emirates-based Dragon Oil PLC (DRS.DB) were awarded block 9 located near the Iranian border at Iraq's fourth bidding round held in May this year.

Baghdad signed Sunday a deal with Pakistan Petroleum to explore block 8 located in Diyala and Wasit governorates in central Iraq. Russia's OAO Lukoil Holdings (LKOH-RS) and its partners will sign block 10 Tuesday July 17.

Kuwait Energy has a 40% stake in the consortium, Dragon Oil, and Turkey's TPAO, have 30% each.

The deal signed Monday is one of three the Iraqi Oil Ministry awarded to international companies at a licensing auction in May. A fourth exploration block was awarded to Russia's Bashneft (BNSFF) and U.K.-based Premier Oil PLC (PMO.LN) last month after the two firms accepted an Iraqi Oil Ministry's remuneration fee of $5 a barrel.

The Oil Ministry during its fourth bidding round rejected an offer by a consortium consisting of Premier Oil, Bashneft and PetroVietnam to explore block 9 in southern Iraq for $9.85 a barrel. PetroVietnam is believed to be out of the consortium, Iraqi oil officials said.

These deals will contribute to the already booming Iraqi petroleum industry that has seen Iraq become the second largest oil exporter in the 12 member Organization of Petroleum Exporting Countries.

Iraq, holder of the world's third largest oil reserves, has signed over the last two years several oil deals with international companies that are expected to bring the country's output close the world's largest oil exporter Saudi Arabia.

This is the third petroleum concession awarded to Kuwait Energy in Iraq. In the country's third bidding round in October 2010, Kuwait Energy was awarded two 20-year development contracts for Siba and Mansuriya gas fields. Kuwait Energy is the operator of the Siba gas field with a 60% working interest, and holds a 30% working interest in Mansuriya gas field which is operated by TPAO.

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