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Iraq to Auction New Oil Licenses, Sign Akkas Gas Deal

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Jan. 2 (Bloomberg) -- Iraq, seeking fresh investment to help rebuild its energy industry, announced plans to auction additional licenses to explore for oil and gas, in what would be the fourth such offering since the ouster of Saddam Hussein.

An agreement to develop the Akkas gas field, delayed from the government’s last auction in October, would be signed this month, officials said today.

Iraq, home to the world’s fifth-biggest oil reserves, wants foreign funding and expertise to help it boost the energy exports needed to pay for modernizing an economy stunted by years of conflict and sanctions. Crude production in particular has suffered in recent years from insufficient spending and insurgent attacks.

Iraq’s oil output rose to 2.7 million barrels a day by the beginning of January, while crude exports increased to 2 million barrels a day from 1.95 million barrels in December, Oil Minister Abdul Kareem al-Luaibi told a news conference in Baghdad. The increases were due both to improved Iraqi efforts and investments by international companies that have signed contracts to develop Iraqi fields, he said.

Oil output hovered at around 2.4 million barrels a day after the U.S.-led invasion of 2003. The government has awarded 12 licenses for oil developments and three for gas, and oil ministry experts will hold meetings “within days” to prepare a preliminary draft for contracts to be auctioned in a fourth licensing round, al-Luaibi said.

New Areas

The ministry is considering offering exploration contracts in 12 areas of the country, al-Luaibi said, without disclosing further details of the auction’s timing or scope. The government wants to produce gas as fuel for power plants, which have been unable to meet domestic demand. Officials also hope to develop gas reserves for export.

The agreement for the Akkas gas field, one of three licenses awarded in October, will be signed later this month, Abdul-Mahdy al-Ameedi, an oil ministry official, said at the news conference.

The ministry had planned to sign an agreement for Akkas on Nov. 14 with Korea Gas Corp., known as Kogas, and KazMunaiGaz National Co., Kazakhstan’s state fuel producer. Authorities in al-Anbar province, where the field is located, had been concerned that all of the gas from Akkas would be exported and had worried they might not benefit from it, al-Luaibi said.

“There are no more problems with al-Anbar province,” the minister said. Kogas and KazMunaiGaz have agreed to produce 400 million standard cubic feet of gas a day at Akkas, at a price of $5.50 for every barrel of oil equivalent produced.

Pipeline Consultant

The government also plans to hire an international consultant to advise it on planned pipelines projects by the end of June, al-Luaibi said.

Iraq and neighboring Syria announced a plan in September to build two oil pipelines and Iraq’s first international gas pipeline. The networks, which would give the Iraqi government new options for marketing its most valuable commodities, would originate at oil fields near Kirkuk in northern Iraq and terminate at Syria’s port of Banias on the Mediterranean Sea.

Iraq sells much of its oil to customers in Asia, shipping it through the Persian Gulf from a terminal south of Basra. The planned pipelines through Syria would provide Iraq with an additional export outlet to markets in Europe and the United States and complement its only operational cross-border pipeline, an aging artery from Kirkuk to Ceyhan, Turkey.

The ministry will prepare documents “within days” for seeking interested bidders to advise it on drawing up contracts for the Iraqi-Syrian pipelines, al-Luaibi said.

To contact the reporter on this story: Nayla Razzouk in Amman at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Inal Ersan at iersan@bloomberg.net

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