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Eni, Mitsubishi to Bid for Iraqi Natural-Gas Contracts

Eni SpA is among international companies interested in bidding to develop natural-gas fields in Iraq, while China National Petroleum Corp. and others reported progress producing oil there, officials and executives said.

Italy’s Eni and Mitsubishi Corp. of Japan are two of 13 companies to have registered to bid on gas contracts that Iraq is preparing to auction next month, Abdul Hadi al-Hassani, vice chairman of the oil and gas committee of the country’s parliament, said today. Together with a dozen oilfield contracts awarded last year, the bidding round for gas rights planned for Oct. 20 marks a step forward in Iraq’s campaign to boost the output of its most valuable commodities.

Iraq, home to the world’s fourth-largest oil reserves, wants to more than double its current crude production of 2.4 million barrels a day. The government hopes to pump 12 million barrels a day within as little as six years.

To meet this goal, the country will need to refurbish oil fields and installations that have suffered from decades of war and under-investment. Iraqi officials and company executives gave updates on their efforts at a conference in Istanbul.

“Iraq will see an increase in its current oil production capacity of several-fold in the next decades,” said Thamir Ghadhban, the government’s oil adviser. A “sophisticated” system for supplying water and injecting it into underground oil reservoirs will help Iraq achieve “a huge ramp-up” in output of crude and gas, Ghadhban said.

Adding Pumps

CNPC increased its monthly production at the Rumaila oil field in southern Iraq, the company’s Basra-based director Zheng Xiaowu said in an interview. By adding pumps and perforating wells to capture more oil, CNPC pumped 1.09 million barrels a day compared with less than 1 million barrels a day last month, Zheng said.

Royal Dutch Shell Plc has started to remove war refuse and unexploded munitions at the Majnoon oil field, as part of a plan to develop the Iraqi reservoir and raise production there to 175,000 barrels a day in two years, said Mounir Bouaziz, the company’s vice president for the Middle East. Majnoon produced 45,000 barrels a day in March, Bouaziz said at that time.

“We started de-mining, clearing the location and the access roads, because the area was a battlefield,” he said today. “We are waiting for the approval of the Iraqi oil ministry for the drilling contracts and the facilities.”

Lost Pressure

Crude output at the West Qurna 1 field may increase as much as 10-fold, said James Adams, Exxon Mobil Corp.’s head of operations in Iraq, speaking at a separate industry event today in Doha, Qatar. West Qurna 1 is producing between 200,000 to 250,000 barrels a day, down from a peak of 400,000 barrels in 2004 due to a loss of pressure inside the well, he said.

Exxon Mobil wants to restore pressure by injecting water into the field. Iraq’s government has asked the company to help build a water-injection facility that would also serve other fields in the country’s south. Upon its expected completion after three years, the injection unit could pump as much as 15 million barrels of seawater a day, Adams said.

Exxon Mobil is “still evaluating” whether to participate in the October natural-gas round, he added. Bidders will be vying to develop the Akkas, Mansouriya and Siba gas fields.

As international companies intensify their efforts, Iraq’s the government is seeking to upgrade export and storage facilities.

‘Megapipeline’ Plans

Among its planned projects is construction of two offshore “megapipelines” and three single-buoy moorings where tankers can load crude, said Ghadhban, chairman of the prime minister’s advisory committee. Each mooring could add 900,000 barrels a day in offshore loading capacity. The oil ministry will seek government approval within two weeks for plans to build these facilities, he told the Istanbul conference.

Ghadhban told reporters that Iraq’s Council of Ministers has already approved a “grand master plan” to build out the country’s pipeline network. The government aims to lay pipelines to Syria and connect oil fields and the port of Basra in southern Iraq to the pipeline network in the country’s north.

Security remains a problem at many of Iraq’s oil installations, notably the pipeline that transports crude from northern oil fields near Kirkuk to an export terminal in Ceyhan, Turkey. Insurgents continue to target the pipeline for attack; authorities halted the flow of crude for four days after a bombing on Aug. 20.

The inability of Iraq’s political parties to form a new government after parliamentary elections on March 7 poses another challenge. The deadlock has coincided with an upsurge in violence, leading some investors to delay projects in the country.

The political deadlock “really hasn’t affected the pace of decisions or approvals” relating to Exxon Mobil’s activity at West Qurna 1, Adams said.

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