Kuwait Energy, Turkiye Petrolleri, Dragon Sign Iraq Oil Deal

Kuwait Energy Co., Dubai-based Dragon Oil Plc and Turkiye Petrolleri AO signed an agreement to explore for crude in southern Iraq along the Iranian border.

The companies won rights to explore block 9 in a May auction, bidding a fee of $6.24 a barrel. Kuwait Energy will be the project’s operator, holding 40 percent, while Turkiye Petrolleri and Dragon Oil will each have 30 percent, the Kuwaiti company said today in an e-mailed statement.

The service contract is one of three that the Iraqi Oil Ministry awarded at the auction. Pakistan Petroleum Ltd. signed an agreement yesterday to search for natural gas in block 8 in eastern Iraq. Russia’s OAO Lukoil and Inpex Corp. of Japan are due to sign an agreement tomorrow for crude exploration rights in block 10 in southern Iraq, for a fee of $5.99 a barrel.

The contracts contribute to an energy-industry resurgence that has raised Iraq into second place among the 12 members of the Organization of Petroleum Exporting Countries, nine years after the U.S.-led invasion that toppled the former president Saddam Hussein. Iraq holds the world’s fifth-largest crude reserves, according to data from BP Plc that include Canadian oil sands, and the Middle East’s fifth-biggest gas deposits.

First Exploration

The auction on May 30 and May 31 was for exploration rights at undeveloped sites, Iraq’s first such sale in three decades, Abdul Mahdy Al-Ameedi, director general of the Oil Ministry’s licensing department, said yesterday. In its three previous auctions since 2003, the ministry awarded licenses for fields already discovered or in operation.

The Kuwait Energy-led group holds exploration rights to its area for five years and will have 20 additional years to develop any oil it may find, according to the Kuwait Energy statement. Iraq’s cabinet must approve the agreement before a final accord can be signed, Abdul Mahdy Al-Ameedi, director general of the ministry’s licensing department, said at today’s ceremony in Baghdad.

The government made no awards for nine of the 12 energy blocks it tried to auction in May. The ministry agreed later to sell rights to one of the unawarded areas to Russia’s OAO Bashneft, for a fee of $5 a barrel.

Bashneft will partner with London-based Premier Oil Plc to explore for oil in block 12 in southern Iraq, Al-Ameedi said yesterday. Bashneft will hold a 70 percent stake, and Premier the rest. The ministry will sign an initial agreement with Bashneft within two weeks, Al-Ameedi said today.

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