Iraq Tightens Grip on it’s Oil Assets
(MEBG) - Iraq’s new model for upstream oil development deals provides her a tighter grip on its oil assets, while not scaring off potential foreign investors, queueing for the time when U. N. sanctions are lifted: but Baghdad will be flexible an iraqi official said, reported Rueters on July 17.
A development production contract (DPC), more akin to the buy-back terms offered in neighbouring Iran, will replace Iraq’s former production development contract, which in all but name was a generous production sharing contract.
An Iraqi oil official said that Iraq has a developed and sophisticated oil sector. It lacks cutting-edge technology due to the sanctions, but has the manpower to operate its oil fields.
The new DPC cuts the foreign company’s life span to 12 years versus 23 years in Iraq’s previous development contract. Its scope has an explicit commitment to achieving target production within a set period.
Companies will have to wait for the United Nations to lift the embargo before they can start work when Baghdad will need foreign assistance to achieve its ambitious output goal of six million bpd within 10 years.
Before the new DPC was conceived, production sharing deals for 11 of Iraq’s most coveted oilfields had been the centrepiece of an ambitious $20 billion upstream development programme.
But on that front, Western oil executives may be fighting a losing battle.
“Buy-backs are fashionable these days,” admits one. “But companies want the long-term access to reserves and flexibility in operations offered by a production sharing contract.”
The new model might draw interest for Iraq’s smaller oilfields which are not expected to cost much more than a few million dollars to develop.
On larger fields which require huge investments, oil companies will want to book the reserves, yet according to the new Modle it is not allowed.