Amman (Platts)--7Jul2009

Iraq's Nassiriya oil field development, being negotiated exclusively with
Italy's Eni and Japan's Nippon oil, is likely to be implemented in three
phases, starting with initial production of 50,000 b/d and rising to 1 million
b/d after 12 years, up to three times initial estimates, industry sources said
this week.

The three-phase development plan emerged after months of negotiations
between the Iraqi oil ministry and the foreign oil companies, which originally
included Spain's Repsol.

One of the companies, believed to be Eni, has been asked to re-submit an
engineering, procurement and construction (EPC) bid after its initial offer
was rejected by the ministry. Repsol has dropped out.

The Nassiriya oil field was tendered exclusively to the three companies
in the fourth quarter of 2008 to be developed by the winner on an EPC basis.
The field was not included in either the first or second bidding rounds
launched by Iraq last year.

The plans as they now stand would see initial production of 50,000 b/d,
rising to 400,000 b/d and then to a plateau of 1 million b/d after 12 years,
the sources said.

Iraqi oil minister Hussein al-Shahristani has adopted three different
approaches for the further development of Iraq's oil and gas resources. The
international bid rounds, the first of which resulted in the award of only one
contract, direct negotiations with foreign oil companies selected by the
ministry to bid for specific fields, and an accelerated production scheme
being carried out by Iraqi state-run regional companies.

The contract for Nassiriya is now in the hands of the oil ministry, which
has said a decision would be made after the first bid round awards, which were
held on June 30.

Nassiriya contains 4.4 billion barrels of proven reserves and Iraq said
initially that the field was capable of sustained production of around 300,000
b/d. The plan also includes a 300,000 b/d refinery and power station that is
being negotiated with Nippon Oil with Eni taking the lead on the upstream
development of the field in southern Iraq.

Eni CEO Paolo Scaroni, whose company has conducted technical studies on
Nassiriya, said recently he believed the field could produce more than 500,000
b/d.

Iraq appears to have raised the bar for Nassiriya after seeing production
targets submitted by bids for the first round, which had far higher numbers
for plateau production from the six oil fields on offer than the ministry had
calculated.

In the single award which went to a joint venture of BP and China's
state-owned CNPC for development of the giant Rumaila oil field under a
20-year service contract, the bidders set plateau production from Rumaila,
currently producing just under 1 million b/d, at 2.85 million b/d. This was
far higher than the ministry's target of 1.7 million b/d.

ExxonMobil, which withdrew its bid after refusing to accept lower
remuneration, had set a target of 3.1 million b/d for Rumaila.

It was CNPC's second win in Iraq. It snagged the first uncontested
contract for the development of the al-Ahdab oil field, an emended version of
a 1997 production-sharing contract awarded by the Saddam Hussein government
now converted into a service contract.

There are now unconfirmed reports that another Chinese state-owned
company, China National Offshore Oil Corporation (CNOOC), might team up with
Eni for the upstream portion of the Nassiriya development, valued at $2.5
billion.

Tokyo has also offered to provide funding of $10 billion to be led by the
state-owned Japan Bank for International Cooperation to help develop the
field, build the refinery, a power station and other infrastructure over 20-30
years beyond the two-year EPC contract, industry sources familiar with the
project said.

Japan is to host a Japan-Iraq investment seminar on Friday in Tokyo,
where senior Iraqi officials are expected to present investment opportunities
in their country, including energy projects, to local industry
representatives, government sources told Platts last week.

Shahristani has been invited to attend the seminar.
--Faleh al-Khayat, newsdesk@platts.com
--Takeo Kumagai, takeo_kumagai@platts.com