Iraq produces 2.5 million b/d in first week of July: minister

Iraq produces 2.5 million b/d in first week of July: minister

Baghdad (Platts)--9Jul2006

Iraq produced 2.5 million b/d of crude oil in the first week of July,
roughly stable on the previous month's level with exports running at an
average 2 million b/d though pumping through the northern pipeline has been
halted since July 6, oil minister Hussein al-Shahristani told a press
conference Sunday.
The country hoped to raise production to 4.3 million b/d by 2010 with the
help of foreign oil companies, Sharistani said though he appeared to rule out
traditional production sharing agreements with multinationals.
"We hope during the life of this government to put an end to the fuel
shortages, and lift refinery production to the country's needs, and to lift
the production ceiling to 4.3 million barrels per day," he said.
Once Iraq achieves that target, exports would exceed 3.5 million b/d, he
added.

PUMPING TO CEYHAN HALTED SINCE JULY 6
Commenting on the stoppage of oil flow to Iraq's exports from the Turkish
port of Ceyhan on July 6, Shahristani said this was due to a leakage in the
pipeline inside Iraqi territory.
"There was a leakage in the pipeline from the Iraqi side," he said. 'It
was attributed to technical reasons rather than a terror act."
Shahristani said his ministry needed time to fix the leakage before
resuming pumping of Kikruk crude to storage in Ceyhan. Iraq resumed pumping of
Kirkuk oil to Ceyhan last month, allowing it to hold its first sales tender in
nearly a year.
Iraq has been unable to raise production beyond pre-war levels because of
a relentless campaign of sabotage against its oil installations with the
northern pipeline system the target of persistent attack by insurgents.
Foreign oil companies have stayed away because of the security situation and
the absence of a petroleum investment law in the post-Saddam era.
Shahristani, asked to comment on the matter, said a new investment law
would not include the upstream sector, which would remain the preserve of the
Iraqi oil ministry.
"The new law bars any party, even Iraqis, from investing in Iraq's oil
and gas wealth. Only the oil ministry is allowed to do that. No company should
come and extract and sell oil," he said.
"The new investment law to be put before the National Assembly for
approval shall not include the extracting sector which will be confined to
the federal government," he said.
As for existing production-sharing agreements, the minister said the
government was studying contracts to see which of them would bring the
highest benefit and revenue for the Iraqi people. The ousted government of
Saddam Hussein had signed production-sharing agreements with French, Russian
and Chinese oil companies for development of the biggest of Iraq's known
oilfields but all contracts were put on hold by post-war governments pending a
review.
"We shall enter into deals with the major oil companies to develop Iraqi
oilfields which will be owned only by the state and revenues of these fields
shall go to the state budget. These are not foreign investments," Shahristani
said.

OIL MINISTRY TO RETAIN CONTROL OF THE UPSTREAM
He explained that the proposed investment law would allow foreign
companies to invest in an oil or gas development project and receive profits
from the oil sold on the market. It was not clear what type of equity stake,
if any, the foreign investor would be given in a specific development project
or whether Iraq sought only technical assistance from the foreign oil firms.
Companies would be offered contracts where they would develop oilfields
and put them under the disposal of the Iraqi oil ministry.
Shahristani said a priority for the new government was to end the fuel
shortages that have delayed a return to normal life in Iraq. He blamed the
shortages on the shutdown of refineries and on military operations in Turkey
against Kurds in the south.
He said electricty outages last week had put a strain on refineries and
taken 10 million liters of refined products out of the local market. The
military operations in southern Turkey had also prevented tankers from
crossing the border into Iraq, denying the country of badly needed imported
products.
Bad weather at the southern port of Basra, the country's main oil export
outlet, and refinery maintenance in Kuwait meant Iraq was not getting all the
products that it needs through imports.
In the meantime, Iraq and the US plan to hold extensive talks to look
into means to develop and rehabilitate the oil sector, Shahristani said.
President George W. Bush said June 14 he has asked Energy Secretary
Samuel Bodman to travel to Iraq to meet with his Iraqi counterparts to
identify ways the US can provide additional support to boost Iraqi oil and
electricity production.
"There is a wish that the US energy secretary to visit Iraq. There will
be a visit by Iraq's Prime Minister Noori al-Maliki to the United States to
discuss some oil affairs," Shahristani said.
He did not say if Maliki's visit would come before or after Bodman's
visit, for which no date has been set.
"There will be a flurry of visits to a number of countries which can
really contribute in the reconstruction of Iraq and develop its oil
potentials," he said.
Asked about recent reports about the possible rehabilitation of a
pipeline through Syria to boost Iraq's export capabilities, Shahristani said
that Syria had asked Iraq to use the disused pipeline but that Iraq wanted
Damascus to help in protecting the pipeline.
"There is a request by Syria to re-pump from the oil pipeline. The line
is disused for a long time and it needs a costly rehabilitation," he said. "In
principle we have no objection to resume pumping from any outlet to export
oil. But we have to enter into negotiations and agreements with the Syrian
government to secure enough protection to this pipeline and to know the cost
of rehabilitating this pipeline."

NEEDS $20 BILLION TO RAISE PRODUCTION CAPACITY
Iraq needs $20 billion to raise production to 6-8 million b/d by
developing new oilfields and this requires foreign investments, he said.
"Iraq has the money to rehabilitate the current oil establishments but
what Iraq needs is funds to develop discovered oilfields and lift production
up to enable it produce 6-8 million barrels per day."
The minister also said that decisions to develop oilfields in the north
should be taken after agreements with Baghdad though he stopped short of
saying that oil development deals already signed by the Kurdish autonomous
region should be scrapped.
"Our understanding to the constitution is that development of oilfields
all over the country should be within a unified policy agreed upon and
executed by the oil ministry in Baghdad," he said. ? 'Any field development
should be within the framework of a national oil policy."

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