Seoul (Platts)--24Feb2009

South Korea signed a preliminary accord with Iraq Tuesday that gives it
the right to develop oil fields in southern Iraq in return for providing $3.55
billion worth of infrastructure to the war-torn country, the energy ministry
said.
The oil for infrastructure deal was signed in Seoul between South Korean
president Lee Myung-Bak and his Iraqi counterpart Jalal Talabani Tuesday.
"With this agreement, our side can now acquire rights to develop oil
reserves in Iraq's Basra region, where most Iraqi oil is produced," the
ministry said in a statement. In return, Seoul will help build social
infrastructure such as power plants.
"It is a comprehensive deal that gives South Korea rights to develop oil
fields in the Basra region and opportunities to develop crude reserves in
other Iraqi regions," the statement said. "This accord will pave the way for
more oil for development deals across Iraq."
The $3.55 billion deal would include the construction of power plants and
an oil refinery, but officials could not disclose further details.
"The two countries will sign a final deal by June," a ministry official
said. South Korea will dispatch a high level delegation to Iraq to finalize
the deal, he added.
Lee asked Talabani at the summit to allow South Korean companies to join
in more oil and gas development projects in central and southern Iraq, where
the world's third-largest crude oil reserves are located.
South Korea's top refiner SK Energy is seeking to take part in Iraq's
second round of bidding for oil fields, according to local industry sources.
The results of the assessment will be announced in April.
SK Energy and state-run Korea National Oil Corp. failed to join the first
licensing round last year after their oil projects with the Kurdistan Regional
Government sparked controversy.
The Iraqi government was upset the two companies signed a production
sharing contract for the Bazian block with the KRG. It branded the deal
illegal without the central government's consent and halted crude exports to
SK Energy in retaliation.
South Korea's energy ministry said Tuesday's agreement between Lee and
Talabani showed the tension had been resolved.
"The summit deal provides critical momentum for South Korean companies to
join oil projects in Iraq," a ministry official said.
South Korea deployed about 3,600 non combat troops in northern Iraq
2004-2008 to assist with reconstruction efforts and provide medical
assistance. It was the third largest foreign deployment in the US-led
coalition that toppled Saddam's regime in 2003. Talabani thanked Lee at the
summit for Seoul's contribution to helping rebuild Iraq.
Talabani is the first Iraqi leader to visit South Korea since the two
countries established diplomatic ties in 1989.
--Charles Lee, newsdesk@platts.com